Almost 2 months ago, we already questioned the possible new bull count (see here) using the COMPQ and NDX. Since then nothing has changed in our POV, and in fact the NDX is now back to the same price level when we posted our doubts March 7… Hence, now is a good time to revisit this issue.
Figure 1 shows the hourly chart of the NDX since the February low with a possible bullish count: indeed could be counted as having completed 3 waves up, with a possible 4th wave underway. Well, the market does still need to proof that 5th wave up; and it ain’t there till it is…
Fig 1. NDX hourly. Possible bull count.
This count on the NDX aligns well with for example a possible bullish count on the DOW:
Fig 2. DOW hourly. Possible bull count
So far so good, right!? The DOW is now at a 23.6% retrace of the possible 3rd wave up, rather common for an a of a 4th wave, or even all of the 4th. Perfect! Nothing to worry, right!?
But, the first “problem” is that the current decline on the NDX has now retraced almost 61.8% of the entire possible wave iii… That’s very deep and very uncommon for a 4th wave of the same degree, as it normally retraces 23.6-38.2% of the prior 3rd wave. Hence, this is a serious warning for those who hope and still anticipate the coming possible 5th wave.
Can we gather more evidence? Sure, lets take a renewed look at the NAZ: figure 3.
Fig. 3: NAZ hourly. Not an impulse due to overlap
If we try to apply the same possible bullish count to the COMPQ as we did on the NDX and DOW, we’re stumbling into a 1st and 4th wave price overlap. This is not allowed, and thus the COMPQ can’t be in an impulse up. As such we don’t have an impulse on the NDX either. Figure 4 shows the bear count of a set of ABC’s up. This is most likely the correct count, also given the aformentioed very deep retrace already underway.
Fig.4: NDX hourly chart. Set of abc’s instead
Please note that the NDX hit the 1.50x extension of (Red) a, from (Red) b); while the COMPQ and SPX (latter not shown) hit the 1.618x extension. Both are very common c-wave extensions. The final nail in the coffin for the NDX will be overlap with the February 22 high of 4235.17. Today the market came with 102p; striking distance and found support at the yellow trend line. Once this overlap happens, the bull count is officially off the table, while it already has 2 strikes against it: 3 strikes and you are out. What would this mean for the S&P500,? Simple: new lows below 1810 are then inevitable and we’ll be looking for SPX1700… Why? Because tech can’t be in a bear and the rest of the market in a bull. Tech leads, and if the leader becomes the laggard, the bull is singing it’s last song. Simple.
As you notice, Intelligent Investing tracks many lines of evidence to determine the market’s next big move, Elliot Wave, S/R, TIs and TAs are several of them. Holistic objective analysis allows us to be on the right side of the market more often than not, without any preconceived notion or opinion. We use just the facts. Just like we did here! Do you want to be on the right side too? Of course! Then please join us here.