Christmas Bonus - NDX

For your Christmas enjoyment, I am showing below a detailed degree analysis of the NASDAQ 100 Index or NDX. Before I show you the charts, I must implore you to understand a few simple facts about the indexes. The first is that below are the "Birthdays" or "Born On" days of some of the major indexes.

DJIA - 5/26/1896

S&P500 - 3/4/1957

NDX -  1/31/1985

Having a different "born on date" means that each index was created at a different time, and for a different specific purpose. The second is that each of these indexes is composed of a different number and type of stocks. The DOW was/is largely 30 Industrials. The S&P500 is half-a-thousand stocks that also mixes in financial, some technology, real estate, retail, and everything but the kitchen sink, while the NDX largerly focuses on the 100 largest capitalization technology stocks. With that as a background, can we at least agree that these major indexes might have different Elliott Wave counts at different times? I can actually prove that case logically, if you like: neither the S&P500, nor the NDX was even invented in 1945, so those two indexes must have had a different count, "0", than the Dow did at that time. Case proved. Now on to the first chart.

NASDAQ 100 Cash Index - 1 Month - Close Only

With a born-on date in 1985, I contend that the NDX is currently in it's Cycle III'rd wave of a count that may be a diagonal - perhaps a "leading" one. This count is slightly different than the Dow and the S&P500 due to its relatively young age. Cycle I crested in the year 2000, and was likely a Primary A,B,C pattern where there are very, very few significant pull-backs along the way, with the 1987 crash being the notable exception (can you even spy it on the chart?). Within Cycle I, Primary-A (or circle-A) is the short wave, and Primary-C (or circle-C) is the much longer wave.

Further, from a degree perspective, within Cycle III, Primary-A increased only  ~580% whereas Cycle I increased by 3,650%, so from a degree perspective, a Primary-A wave is allowed to be this long. Primary-A is also shorter in time than all of Cycle I, so, again, this fits with degree labeling. We don't know where the exact top of Cycle III is located, so at the present time, it is a dotted line. For now, this is the trend line pattern that the market has made. I didn't. I just drew in the lines.

Cycle II is a zigzag or sharp pattern that ended in 2009. We know for a fact that the Dow and the S&P500 made a lower low 2009, but the NDX made only a truncated zigzag arguing for the significant strength in the subsequent rally, one we are still experiencing. Within Cycle III, the pattern of alternation is now that Primary-A is the longer wave, and Primary C is the shorter wave in the sequence - just the opposite of that in Cycle wave I. So, below, let's look at a more detailed chart of Cycle III.

NASDAQ 100 Cash Index - 1 Month - Cycle III

Within Cycle III, I contend that Primary-A counts almost identically to the S&P500 and the Dow Jones Industrial Average in both wave numbers and degree. Wave Intermediate (4) may be a triangle. Intermediate Wave (3) is clearly the extended wave in the sequence. But, I contend that the wave to Intermediate (5) must be an Intermediate wave because it is longer in time than wave Intermediate (1). As such, the two waves must be of the same degree. (The only other possibility is that wave (5) is of one larger degree.) 

Therefore, Primary-A ends at the exact same location as SuperCycle III, in the Dow, at the October, 2018 high. Now, then, we have another wave that truncates in 2020, and that must be within a different degree-sized wave than Cycle II - which truncated - or else it would be bad alternation. And, it is indeed a different sized wave. It is only a Primary wave, Primary-B, so it fits! Still, it is larger than Intermediate Wave (4) in price and time. Therefore, it must be a larger degree wave than Intermediate, and it is. It is a Primary wave!

Finally, the last sequence were are in now is a Primary-C wave. It may well be a diagonal to end this sequence, within the NDX. Being in a Primary-C wave now makes all the sense in the world from a) the speed of the move, b) the choppiness of the move, c) the lack of sustained pull-backs, and d) the historic extremes of sentiment and participation.

Back to the first chart, we know that within contracting diagonals the third wave may be shorter in time than the first wave. We are approaching that metric at about 142 months now, versus about 178 - 180 months for Cycle I.

So, we need to see if a diagonal forms in this index, and whether a significant retracement occurs. If it does, we simply conclude that in the same manner that we are Primary waves for the S&P500 (see my earlier discussion of Primary-B in the Dow and S&P500 in a post way back on June 6th, called Trillions, at this LINK) we are also in a Primary sequence for the NDX.

Have an excellent start to the week, and possibly an excellent start to your vacation if you are beginning one this week. P.S. This is the third post this weekend, and if you haven't, you may wish to read the other two, as well. I hereby state that I have not seen this analysis anywhere else, and it is entirely my own work.

Happy Christmas Season,

TraderJoe