NASDAQ 100: US Tech Market Can Still Reach Record Highs

In our technical analysis released last February 12th, we commented on the long-term sequence that NASDAQ 100 was developing. In our study, we observed that the US stock market moves in an incomplete wave (5) of Intermediate degree. This sequence is presented in the following chart.

We also noted that due to the price advance beyond the upper-line of the long-term ascending channel, it was likely a corrective move. On the other hand, the extreme bullish sentiment boosted by corporative earnings surpassing the analysts' expectations increased the probability of a correction.

Last Thursday, 20th, the NASDAQ 100 reached a record level of 9,756.1 pts, from where the price started a corrective move that led to the tech-heavy index to lose over 10%.

The following chart presents the NASDAQ 100 in its daily timeframe. From the figure, we observe that the price action unfolds in its fourth wave of Minor degree labeled in green.

The current bullish cycle that seems incomplete began at the Christmas rally of 2018 when the price found fresh buyers at 5,802.4 pts.

In the 4-hour chart, we distinguish a clear corrective sequence that was triggered by the bearish sentiment over concerns about a potential coronavirus pandemic.

At the same time, the chart illustrates a first sharp bearish leg that found support at 8,866.4 pts reached on Tuesday's 26th session, from where the price started to bounce.

In our analysis, the current upward movement corresponds to the development of the wave (b) of the Minuette degree in blue. According to the Alternation Rule, given that wave (a) was developed sharply, the current three-wave sequence should require more time than the first bearish leg for its completion.

 In consequence, considering that the current sequence corresponds to the fourth wave of Minor degree, the end of this wave should give way to the beginning of a new bullish movement, which would correspond to the fifth wave of Minor degree, belonging to the fifth wave of Intermediate degree. 

The fifth wave of Intermediate degree will likely be completed at the end of 2020 boosted by the presidential US election.

Elliott Wave Summary

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