The NASDAQ (IXIC) is now at a decision point. It has completed wave 5 and its subsequent ABC correction of a significant 5 wave cycle that started in June of 2016 (I'll post a log scale image indicating this below). The above chart demonstrates the drop to the trend line on 4/2 that completed this major wave.
Now we await the next move in the NASDAQ. Bulls could hope for a new cycle to start and the NASDAQ to go on to new all time highs. Bears (myself included at this time) may be looking for a pull back in the coming weeks, possibly to the logarithmic trend line (around roughly 6200) for a cycle that started in February of 2016. This would complete wave 3 and 4, and would be the start of a (possibly truncated) wave 5. Under this scenario, after this 5th wave is completed, the NASDAQ would fall to the log trend line of an even larger 5 wave cycle that started in 2009. This is a pretty far out projection (months to even a year or more), but it is an important consideration because the implication would be that the NASDAQ has already reached its all time high for the near future, and we need to plan for a potential bear cycle to start in the coming months/years.
For the immediate future however, I am watching to see if we get a continued retracement of the recent ABC correction. This could be a move up to the 7200 to 7300+ range as noted above for a 50-61.8% retracement of the recent move down off the all time highs. Alternatively, the more modest retracement the NASDAQ/IXIC has already completed could be just about all we get, and the move toward the lower trend line ensues more rapidly. This will become more clear in the next few days.
I have not really elaborated on a more long term bull scenario at this time as I have a hard time seeing the NASDAQ moving on the new all time highs. I will explain in more detail via images below.
Trade active
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My wave analysis dating back to 2009 on the log scale.
Comment
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Again log scale chart going back to 2009, with Fib extensions demonstrating wave 3 as a 1.618 extension of wave 1, and wave 5 as a 1:1 extension of wave 3. Given Elliott Wave principle suggests two waves are typically of similar size (here waves 3 and 5 on the log scale), we could be lead to believe that wave 5 has peaked and that we are now due for a retracement.
Hi CryptoTA4U, first time seeing your ideas. Nice analysis!
Always hard to look out that far, of course, but it does seem that sometime soon we will be completing Wave 5. Events since late January have certainly started to get everyone’s attention.
It will be interesting to see the impact that 1Q earnings reports have. Of course, we are now dealing with the headwinds caused by posturing in the trade “war”, which I believe will be resolved without one. Yet, just the posturing moves are enough to gyrate things unbelievably, even if NASDAQ probably has less to lose in it than any of the three major indexes.
It is difficult for me to fathom how everyone is getting their undies in a bunch over the non-farm payroll figures today! If you look at the average of the last six months, it is 196.333K. February was revised upward to 326K, while March was 103K. The AVERAGE for the two months together was 214.5K, exceeding the expectations for either month (200K FOR FEB AND 193K FOR MAR), and higher than the rolling 6-month average. This tells me that we simply had a timing issue - more people than expected got hired earlier than expected...and that should be considered to be a good thing, should it not? But by Wall Street’s reaction, you’d think we are on the cusp of driving right over the cliff.
Now, everyone is hand-wringing over Powell’s comments that he foresees continued escalation of interest rates. OK. Why is this news? We all know it is coming — rates can’t stay at zero forever!
Let’s face it, the economy is strong, job growth is strong, we aren’t going sky-high on interest rates any time soon, and there is not going to be a trade war. Not sure where the top of Wave 5 is, but I think we have some room to go yet.
CryptoTA4U
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@satertrading, I have been following the news, but as far as my technical analysis goes, I ignore it all. I try to look at charts from a purist perspective (not letting fundamental analysis affect my technical analysis).
As you are probably aware, technical analysis is based on the assumptions that the price moves in trends, history tends to repeat itself, the market discounts everything (taken from Investopedia).....hence past trading data (volume, price, etc) are all that matters. While I'm still somewhat inexperienced at this (I've been investing for years, but only recently relying more heavily on TA/Elliott Wave Analysis), I've found that technical analysis generates far better returns for me than attempting to understand/factor in every piece of information available that a fundamental analyst would need to consider. I have come to trust what the chart tells me more than what the news, buy or sell side analysts, company reports, earnings/etc tell me. For example, I expected Micron (MU) was due for a pull back despite the positive news, analyst upgrades, earnings beat, low PE, etc based 100% on the chart pattern (see that trading idea of mine if you like).
I've been burned on stocks I believed in when it was found companies were cooking their books, when biotechs flopped over a failed drug, etc. With technical analysis, I ignore it all, watch the chart action and make my buy/sell/hold decision based on indicators. I know I'll make mistakes and misread an indicator at times, but I have confidence that as I continue this process, my skill in this art will improve and thus my returns should as well.
Thank you for commenting. I hope you continue to follow and comment on my trading ideas. It is truly an exciting endeavor for me as someone who is trained in my profession (unrelated to stocks) to recognize and make decisions every day based on recurring patterns.
satertrading
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@CryptoTA4U, cool. I do believe price action and Elliot Wave are likely the two best approaches to TA, and generally deliver superior results. I will indeed continue to follow you. On the crypto side I follow MarcPMarkets and goldbug1, which are both TA-focused.
Always hard to look out that far, of course, but it does seem that sometime soon we will be completing Wave 5. Events since late January have certainly started to get everyone’s attention.
It will be interesting to see the impact that 1Q earnings reports have. Of course, we are now dealing with the headwinds caused by posturing in the trade “war”, which I believe will be resolved without one. Yet, just the posturing moves are enough to gyrate things unbelievably, even if NASDAQ probably has less to lose in it than any of the three major indexes.
It is difficult for me to fathom how everyone is getting their undies in a bunch over the non-farm payroll figures today! If you look at the average of the last six months, it is 196.333K. February was revised upward to 326K, while March was 103K. The AVERAGE for the two months together was 214.5K, exceeding the expectations for either month (200K FOR FEB AND 193K FOR MAR), and higher than the rolling 6-month average. This tells me that we simply had a timing issue - more people than expected got hired earlier than expected...and that should be considered to be a good thing, should it not? But by Wall Street’s reaction, you’d think we are on the cusp of driving right over the cliff.
Now, everyone is hand-wringing over Powell’s comments that he foresees continued escalation of interest rates. OK. Why is this news? We all know it is coming — rates can’t stay at zero forever!
Let’s face it, the economy is strong, job growth is strong, we aren’t going sky-high on interest rates any time soon, and there is not going to be a trade war. Not sure where the top of Wave 5 is, but I think we have some room to go yet.