Nasdaq 100 rally continues as Elliott Wave points to 24770-25570

In our late August update, we observed that, when zooming out, the NASDAQ100 (NDX) was, according to the Elliott Wave (EW) Principle, in an impulse (five-wave) move up from the early April lows. See Figure 1 below. Back then, we found that

“… the gray Wave-iii slightly exceeded its ideal target (23969 vs. 23720), and W-iv may have bottomed last week, falling short of its ideal target (22959 vs. 22144). Therefore, we don’t yet know if W-iv has bottomed out, …. A move above the gray W-iii high will confirm this, whereas a move below last week’s low indicates the low 22000s are first before we see the gray W-v to ideally 24092-24694.”

That move lower never materialized, and instead, the index broke above the W-iii high, indicating that the W-v to ideally 24092-24694 was in progress. Fast forward to today, and the index is trading around 24520. So far, our EW count has correctly guided us.

Figure 1. Our preferred long-term Elliott Wave count for the NDX

Since markets are fractal in nature, we observe that the W-v subdivides into five smaller (orange) waves, with a W-4 bottom formed yesterday. Therefore, the orange W-5 is now underway. The EW indicates that the 5th and the 1st wave are often of equal length, which suggests a target of 24882. See the dotted orange arrow. This brings the index very close to the 200.0% Fib extension at 24768, which is the ideal target for the gray W-v.

However, since the “5=1” guideline also applies to the gray W-v, it could target as high as ~25560: W-iv + (W-v = W-i) = 22977 + 2584. See the gray dotted arrow. This, in turn, aligns well with the green 300.0% Fibonacci extension at 25574 and is therefore a viable upside target.

How will we know if the higher target will be reached? Although nobody can predict the future, we can use objective measures to determine if the current rally from the September 2nd low has ended. These are our “Warning levels for the Bulls," which adjust as the price moves higher. These levels serve as our safety nets, as drops below these levels increase the chance (25%, 50%, 75%, 100%, respectively) that the top is in: 1st, blue: 24347; 2nd, gray: 24173; 3rd, orange: 23999; 4th, red: 23475.