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 (crimson) 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 adverse divergences …, and able to transfer decrease.“
The market validated our major expectation and reached the best draw back goal zone set final week ($11432 on December 7 vs. the $11300-11600). Thus technically, it has carried out sufficient to contemplate all the black W-b full. See Determine 1 under.
Nonetheless, since we’re almost definitely coping with an irregular expanded flat, a 3-3-5 sample, the decline from the December 1 excessive (crimson W-b) ought to unfold in 5 waves. Thus I count on 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 can carry the index much more profound and higher into the best crimson and black goal zones.
From there, my major expectation is the following extra important 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 under $11,200 is a primary warning for the Bulls the black W-c won’t occur. The 2nd and last warning for the Bulls are at $10,800 and $10,700 (dotted orange and crimson horizontal strains), respectively.
Backside line
Final Friday’s decline was, in reality, “the initiation of the ultimate decline to that W-b goal zone earlier than W-c begins.” Thus, the “crimson W-c of black W-b decrease” stays our major battle plan. Quick-term, we are able to count on the index to high 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 instant breakdown under $10,700 -with the primary warning under $11,200- we are going to search for the index to succeed in 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 unsuitable, i.e., when the markets break above or under sure worth ranges decided by the EWP guidelines.* Thus, one should all the time have another expectation out there. This strategy is not any completely different from inserting an precise commerce. One has a major expectation -based on excessive odds, say 10:1- the commerce will turn out to be worthwhile. Why else place the commerce!? However on the similar time, one has a sure worth stage -the cease loss level- under (or above, in case one is brief) the acquisition worth the place one is aware of the commerce is unsuitable and have to be deserted: the choice. We additionally all the time hope the commerce will likely 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 various are the identical, one can then use these invalidation ranges decided by the EWP as one’s cease loss ranges for buying and selling.
