I am concerned about the decisive downside activity below the August 2 post-earnings low of $11.9. I discussed in July how it looked like the stock was in an Elliott Wave uptrend; however, the bearish activity since late-April is starting to look more like a trend than a correction. Long term, it now looks to me as if the stock is in a wide range sideways movement ranging from $11 to $14, with the peaks and lows of this range varying depending on the overall stock market’s action and the macroeconomic environment. What would get the stock out of this range to the upside is if we get a sustained improvement in economic growth.
It looks like some sort of short-term pullback in U.S. stocks might be underway, and I now think that we might have seen five waves of minor degree since the February low on the NASDAQ-100 (NDX). If, in fact, the five wave sequence is complete, the chart below shows the most likely scenario in my estimation.
What would confirm the completion of the five wave sequence is if the current pullback extends to the September low at 4656. Under this scenario, the NDX is in an Intermediate Wave 2 drop and is likely to bottom out somewhere between the June low at 4179 and the September low at 4656. After that, I would expect a rally to new highs lasting until mid-2017, which would form the third Intermediate wave (white) within Primary 5.
As for my longer term outlook, I will remain bullish unless we get a drop from recent highs exceeding 10% on all the major indices.