The NASDAQ bull failed again but will try again soon - here is why and when!

The Bulls tried hard until Thursday afternoon before conceding another defeat, and the trading bears regained control. Breaking the downward-sloping consolidation channel to the upside was too much heavy lifting for now, given "etsy ketsy" CPI and PPI prints and the Hamas-Israeli conflict that can quickly turn into a full-fledged war between Israel and its Arab neighbors.

So what?

We are still witnessing the initial stage of a NASDAQ bull (IMHO). This is confirmed by the price action of the SP 500, although the latter looks much weaker. That being said, the profound weakness of NASDAQ 100 and NASDAQ on Friday is an early warning signal. The preferred NASDAQ 100 Elliot Wave bull count goes like this.

Initial Rally (Potential Wave 1): The move up from November '22 to around the end of February '23 looks like an impulsive wave.

First Correction (Potential Wave 2): A corrective phase ended around mid-March '23 after the initial rally. This may be Wave 2.

Longest Rally (Potential Wave 3): Following the Wave 2 correction, there was a significant move upward until the peak around the end of July '23. This can be labeled as Wave 3.

Complex Correction (Potential Wave 4): After the peak in July, there has been a sideways move with a clear downward trend, characterized by the overlap of prices, that seems to last into October. This complex corrective wave might fit a standard a-b-c or an alternative a-b-c-d-e structure and be labeled Wave 4.

Latest Move Up (Potential Wave 5 or d): From late September/ early October '23 onwards, there has been a move upwards, which could either be the beginning of Wave 5 as per the standard a-b-c (4th wave) count or Wave d if consider the a-b-c-d-e 4th wave count.

Suppose the complex Wave 4 (a-b-c-d-e) interpretation is accurate. In that case, the index might be on its final stretch within Wave d (still) or having already started Wave e on Thursday afternoon, after moving up towards the upper trend line, with a Wave e correction to unfold next, followed by a Wave 5 rally.

On the other hand, if this is already the next Wave 5 move, then we might expect it to culminate soon, depending on its relationship in length with Wave 1 or 3.

Now what?

The four charts below show the NASDAQ 100 price action at different time frames. From top left to top right and bottom left to bottom right - NASDAQ 2-year, NASDAQ 4-month, NASDAQ 1-month, and NASDAQ last 10 days.

The top right chart shows the potential a-b-c-d-e count. If correct, Wave e may bottom at around 14275 - 14300 on the index. This coincides with the low recorded 7 June (see top left chart). It would stop at the lower trend channel again. Wave e would have about the same length as Wave c. This could mark the end of the corrective phase. There would have been a total retracement of roughly 1650 points. There is solid technical evidence that such a retracement might be the bottom of wave 4, mainly because of the following:

Wave Length Symmetry: If Wave e has the same length as Wave c, this would create a sense of symmetry, often seen in Elliott Wave patterns. This kind of symmetry can provide more confidence in the count.

Technical Confluence: The 14.275 - 14.300 level would represent a significant retracement, and if it aligns with the lower boundary of the trend channel, it could serve as a strong confluence zone, adding further weight to its significance as a potential endpoint for Wave e.

Fibonacci Retracement of 38,2 Percent: A move to the 14250 - 14300 level would result in the fourth wave retracing about 38 percent of the length of the prior third wave. It should coincide with the SP 500 holding above the critical 4150 - 4200 level.

Given these considerations, the 14.250 - 14.300 level is a plausible target for the end of Wave e, especially if other technical indicators and patterns align with this view. Remember, the end of Wave e would be followed by the commencement of Wave 5, which, if the count is correct, could push the index toward new all-time highs.

Support and Resistance Levels

We see the following primary support levels:

Support 1: 14.900 (break below confirms that we are in Wave e)

Support 2: 14.450

Support 3: 14.275

Support 4: 13.750

Support 5: 12.880 (this level must hold for the bull count to be valid)

We see the following primary resistance levels on the NASDAQ 100:

Resistance 1: 15.330 (break above means break of the downward channel, probably confirming that we are in wave 5)

Resistance 2: 15.620

Resistance 3: 15.800

Resistance 4: 15.950

Preferred count

We stick with the a-b-c-d-e pattern within corrective Wave 4 as our preferred count. The market is a bitch. A pattern like this drives both camps - bulls and bears - crazy. It would fit the seasonal patterns and lead to a strong Wave 5 year-end rally. It may stretch 2000 - 3000 points (wavelength equality principal, in this case, with wave 1) and would finish around the ATHs of the NASDAQ 100. It would also mean that the first half of 2024 would be bumpy - either going sideways or significantly down if the current move up is not the start of a new bull but simply a big bear market rally (I will deal with that possibility shortly).

Other technical indicators

There are a couple of other technical indicators supporting this analysis. The same applies to seasonal patterns. We want to skip this part for now.

The week ahead

A break below Wave 1 of the recent move-up that started at the end of September would signal that we are in corrective Wave e. A break of the upper trend line at around 15.330 would signal that the corrective Wave 4 ended with a simpler a-b-c pattern and that Wave 5 has already begun.