NDX, RUT updates: after a month of chop is it time to pop?

It’s been a while (three weeks) since I last updated on the NASDAQ100 (NDX, see here), but for those who follow me you know I’ve been correctly (to within the dollar) forecasting the NDX (and therewith NAS’) highs and lows since June 3. Since the forecasted $7500 high was struck the tech indices went into a consolidation mode, but never broke below their late-June or even late-July lows, and thus there wasn’t much to report on. But, without those breakdowns happening it meant their was no larger top in place, and instead the market is most likely deciding to run with an extended, sub-dividing 5th wave. I already alerted my premium members to this option two weeks ago, though the NDX hasn’t confirmed this possibility just yet as it hasn’t made a new ATH yet. But, the RUSSELL 2000 (RUT) has already confirmed this pattern (see below) and has me adapt this option to the NDX (and NAS) as well. Why?

rut daily

Because the RUT is already making new ATHs and back to leading the other indices higher as it did earlier this summer. Remember, when indices start making new ATHs it is a Bullish sign, not Bearish. In a Bear markets make lower lows and lower highs, and so far that is not happening.

This means that according to my Elliot Wave count, minute-iii of minor-3 of intermediate-v is underway targeting ideally $1765, minute-iv down to around $1720, and then minor-3 targeting $1780. I don’t want to look any further ahead in time in case the market throws a curve ball. For now, all technical indicators (TIs: RSI5, MACD, A.I.) are all pointing up and on buy, wanting to see higher prices. Price is above the 20-day to 200-day Simple Moving Averages (SMAs) and all SMAs are Bullishly stacked: 20>50>100>150>200. Hallmark of a Bull market. Hence, there’s no bearish development on this chart.

Now, why would the NDX / NAS subdivide? Because intermediate-iii was rather straight up with only a few down days for its minor-waves. In an impulse at least one of the three up-waves subdivides and since in this case wave-i and –iii didn’t then it’s up to wave-v. As said, so far the NDX/NAS haven’t proven this thesis just yet as these two indices do need to start to make new ATHs. But, on Friday we got a nice breakout from the (black) triangle / Bull Flag pattern (similar to the prior pattern on the RUT) that was forming -targeting around $8000 (black dotted arrow)- and all TIs are pointing back up, albeit not all are on “Buy” just yet.

NDX daily TI

A break of the MACD above the red downtrend line -like on the RUT (see chart)- is Bullish, while a new ATH will confirm the subdividing wave-v count. In that case, minute-iii should ideally target $7775, minute-iv $7575, and minute-v -ending at the typical 1.764x minute-i Fib-extension- will than overlap with the 1.618x minor-1 Fib-extension at $7925 for an ideal minor-3 target. After that we’ll see again what happens.

Note, once ~$8000 is reached on the NDX, the market is IMHO putting in a very large top and I expect at a minimum a 20-30% haircut, possible a whole lot more. So please have your exit strategies in place that will get you out of the market before the big swoosh gets going. And if you don’t have one, I gladly teach you one. Click here. Alternatively, you can sign up for my private twitter feed with market beating real-time ETF-trading alerts that will also keep you on the right side of the markets. Click here.

Arnout, Ph.D.

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Founder and President Intelligent Investing, LLC

Vice President NorthPost Partners, LP

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