Final week (see ), we discovered for the (NDX) utilizing the Elliott Wave Precept (EWP):
“The first expectation is that the index topped …. It ought to now be engaged on the ultimate (purple) c-wave decrease to ideally $11300-11600 for the bigger black W-b earlier than the following rally (black W-c of blue W-B) to ideally $13.8-15.4K begins. The technical indicators look barely drained, with damaging divergences …, and able to transfer decrease.“
The market validated our major expectation and reached the perfect draw back goal zone set final week ($11432 on December 7 vs. the $11300-11600). Thus technically, it has achieved sufficient to think about all the black W-b full. See Determine 1 beneath.
Nonetheless, since we’re more than likely coping with an irregular expanded flat, a 3-3-5 sample, the decline from the December 1 excessive (purple W-b) ought to unfold in 5 waves. Thus I anticipate the present rally to fizzle out at round $11,700+/-100 for inexperienced W-4 earlier than inexperienced W-5 takes maintain to ideally $11,355+/-55 (inexperienced dotted arrow). That may convey the index much more profound and higher into the perfect purple and black goal zones.
From there, my major expectation is the following extra vital rally (black W-c) to $13.4+-/-0.5K to finish the blue W-B. The index must rally again above the December 1 excessive to inform us “the dip” is already full. Conversely, a break beneath $11,200 is a primary warning for the Bulls the black W-c won’t occur. The 2nd and ultimate warning for the Bulls are at $10,800 and $10,700 (dotted orange and purple horizontal traces), respectively.
Backside line
Final Friday’s decline was, the truth is, “the initiation of the ultimate decline to that W-b goal zone earlier than W-c begins.” Thus, the “purple W-c of black W-b decrease” stays our major battle plan. Brief-term, we are able to anticipate the index to prime out at round $11,700+/-100 earlier than the final leg decrease to ideally $11,355+/-55 kicks in. From there, the first expectation is for a rally to $13.4+/-0.5K. Our contingency plan is that on a extra speedy breakdown beneath $10,700 -with the primary warning beneath $11,200- we are going to search for the index to achieve the $9000s.
*Since monetary markets are -like life in general- probabilistic, it has choices. Thus, there’s all the time an opportunity one’s major expectation is improper, i.e., when the markets break above or beneath sure worth ranges decided by the EWP guidelines.* Thus, one should all the time have another expectation accessible. This method isn’t any totally different from inserting an precise commerce. One has a major expectation -based on excessive odds, say 10:1- the commerce will change into worthwhile. Why else place the commerce!? However on the similar time, one has a sure worth degree -the cease loss level- beneath (or above, in case one is brief) the acquisition worth the place one is aware of the commerce is improper and should be deserted: the choice. We additionally all the time hope the commerce will probably be worthwhile, however we all know with certainty, not all trades are constantly worthwhile. Understanding that buying and selling and forecasting the markets utilizing the EWP major and different are the identical, one can then use these invalidation ranges decided by the EWP as one’s cease loss ranges for buying and selling.
