close icon

NASDAQ Bulls’ Resiliency has its Limitations

The NASDAQ 100 index closed at a new all-time high of 7826 last week, powered by strong Q1 earnings reports by Amazon and Microsoft, among others. The index is up by 650% from its 2009 low and by 884% since the bottom of the dot-com crash in October 2002.

Looking at than phenomenal growth, one can easily forget that the NASDAQ 100 can go down, too. No trend lasts forever and history shows that those who ignore this lesson suffer the greatest losses.

So instead of simply relying on the future to resemble the past, let’s take a look at the index through an Elliott Wave perspective. The weekly chart below reveals the structure of its entire uptrend since October 2002.

NASDAQ 100 setting the stage for a bearish Elliott Wave reversal

It looks like the bulls’ resiliency has its limitations. The great rally investors enjoyed during the last 17 years has formed a complete five-wave pattern called an impulse. It is labeled (1)-(2)-(3)-(4)-(5), where wave (3) is very extended and wave (5) is currently still in progress.

NASDAQ Bulls Have a Problem

The problem the bulls have with this pattern is that according to the theory, a three-wave correction in the opposite direction follows every impulse. In other words, we can expect a bearish reversal once wave (5) is over. The anticipated three-wave pullback has the potential to erase at least one-third of the post-2002 rally.

The RSI indicator also supports the negative outlook with a bearish divergence between waves (3) and (5). The exact ending point of wave (5) remains unknown, but in our opinion, the NASDAQ 100 has entered the high-risk-low-return area investors are better off avoiding. A decline to ~5500 seems to be around the corner.

Did you like this analysis? Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!



Stay informed with our newsletter

Latest Elliott Wave analysis on different topics delivered to you weekly.

Privacy policy
You may also like:

Insurance ETF Nearly Halves As COVID-19 Takes Toll

Maybe only with the exception of grocery stores, one can hardly find a stock not suffering from the COVID-19 disaster. Insurance companies were not spared either, so it is no surprise that the SPDR Insurance ETF (KIE) crashed, as well. This ETF, which ranks Progressive and Brown & Brown among its top holdings, lost 46.1%…

Read More »

Another Nightmarish Week, Another Illogical S&P Surge

As COVID-19 spreads across the U.S., the economy is teetering on the verge of collapse. Initial jobless claims came in at 6.6 million yesterday, bringing the three-week tally to nearly 17 million. The unemployment rate is estimated to have already surpassed its 2008-2009 recession level. Economists at Goldman Sachs, Morgan Stanley and the IMF predict…

Read More »

S&P 500 Elliott Wave Analysis Giveaway

The S&P 500 crashed by as much as 35% in just one month. And while the coronavirus outbreak was totally unpredictable, the crash it caused made perfect sense. Elliott Wave is our favorite method of analysis, but as the market kept rising we decided to back it up with fundamental data. The result was a…

Read More »

S&P 500, Against All Logic, Re-Enters Bull Market

The coronavirus pandemic forced the global economy to grind to a halt. Major U.S. stock market indices made their fastest plunge into bear market in history. In less than two months, DJIA and the S&P 500 lost 38.4% and 35.4%, respectively. “The virus is just starting to spread in the United States, the market is…

Read More »

Dow Jones Transports Ready for a Rebound?

The coronavirus pandemic is wreaking havoc on the global economy. Governments are closing malls, restaurants and literally all kinds of social gathering places, and even putting entire cities on lockdown. In the meantime, stock market indices are in free fall. The S&P 500 is down 28.7% YTD and the Dow Jones Industrials lost 35.2% since…

Read More »

Three Years Ahead of the COVID-19 Airlines Disaster

As the coronavirus pandemic rages on, governments are taking measures to restrict unnecessary travel and mass gatherings. The airlines sector is probably the one being hit the hardest by the restrictions. The high fixed costs and huge debt loads of the airlines make them extremely vulnerable to economic downturns. With international and domestic travel on…

Read More »

Nikkei Down 30% on COVID-19 Fears. Time to Buy?

The last time we looked at the Japanese Nikkei 225 was on November 19th, 2019. The index was comfortably trading above 23 400 and the uptrend seemed very healthy, on the surface at least. And indeed, in December, the price reached 24 116. However, the fact that prices have been rising in the past didn’t…

Read More »

More analyses