For the first time since June, the NASDAQ-100 (NDX) is making new highs without immediately stumbling. While I don’t rule out the possibility of an imminent short-to-intermediate term top, the recent strength raises the probability of a continuing rally.
Zooming out to a longer-term Elliott Wave perspective, I consider the major correction during Dec 2015 – Feb 2016 to have been Primary Wave IV of the 2009 bull market. Since the Feb 2016 low, we have had two completed waves of intermediate degree (labeled in white). The third intermediate wave began at the Brexit low of June 2016. This third wave appears to be an extended wave, in which its subwaves are comparable to or bigger than the overarching intermediate waves in magnitude. These subwaves are labeled in white parenthesis.
Within this extended wave, it looks like we have four subwaves complete, with the fifth wave taking off from the recent low in July. In Elliott Wave theory, the magnitude if fifth waves is notoriously difficult to predict. Sometimes they top out before even reaching a new high. But if they make new highs, they usually do not exceed the magnitude of Wave I by a large margin.
Wave I, in this case, would be the rally from June 2016 – Aug 2016. If the current rally were to be comparable on a point basis, the projected top would be at 6250 on the NDX. On a percentage basis, the projected top would be 6427 on the NDX. This target range is indicated by the rectangle on the chart above.
But as I said above, the top could occur at any time.
After the top occurs, I expect an Intermediate Wave IV drop of 7-10% to match the Intermediate Wave II drop during April – June 2016. This drop would be followed by a final push to new highs to complete the bull market that began in 2009.