The Nasdaq 100's Elliott Wave Bull Case: Is This the Final Leg Before a 2022-Style Correction?

The Nasdaq 100's current trajectory has ignited a fierce debate among technical analysts: Is the index in the final leg of a multi-year bull cycle, or is it teetering on the edge of a 2022-style correction? With the market trading near 19,800 as of late 2025, the Elliott Wave framework offers a compelling lens to dissect this tension. According to Elliott Wave International, the index is in the fifth wave of a larger impulsive structure, with a projected target of 26,793 or higher if key support levels hold. However, historical precedents and deteriorating internal market metrics suggest that this bullish case is far from unassailable.

The Bull Case: A Final Fifth Wave?

Elliott Wave analysis posits that the Nasdaq 100's rally since the 2023 lows has followed a textbook five-wave pattern. Wave (3) peaked at 26,399 in late 2024, followed by a corrective wave (4) that formed as a double three-a relatively shallow pullback. Wave (5), currently underway, is expected to extend the trend higher, with a primary target of 26,793 and a secondary, more aggressive target of 28,000+ by late April 2026. This projection is bolstered by the Armstrong Pi-cycle, a cyclical model that has historically aligned with major turning points in the market.

The bear case, however, hinges on the integrity of key support levels. The November 21 low at 23,854 remains a critical threshold: if this level holds, the bull market could persist until April 2026. A break below it, however, would invalidate the fifth-wave count and signal the onset of a bear market. Current price action suggests a fragile equilibrium. While the index has held above 24,707.1-a secondary support level-the broader market's internal health is deteriorating.

Bearish Risks: Structural Weakness and 2022 Echoes

The 2022 correction, which saw the Nasdaq 100 plummet 33% from peak to trough, was triggered by a confluence of factors: rising interest rates, earnings disappointments, and a breakdown in market breadth. Today, similar warning signs are emerging. Data from VT Markets indicates that Q4 2025 earnings for tech companies fell 5% below analyst consensus, a stark contrast to the robust growth that fueled the 2024 rally. This earnings slowdown, combined with a 10% decline in the Nasdaq 100 Technology Index, highlights a structural decay in the market's foundation.

Moreover, the divergence between large-cap "generals" and smaller "soldiers" is a red flag. While the headline Nasdaq 100 is propped up by megacap stocks, mid-cap and smaller tech firms face liquidity pressures. As of November 21, 2025, only 50.98% of Nasdaq 100 components traded above their 200-day moving averages-a level far below previous bull market peaks. This thinning rally suggests that the current uptrend is increasingly reliant on speculative momentum rather than broad-based strength.

Volatility and Sentiment: A Growing Insurance Premium

The market's volatility profile further underscores the risks. Implied volatility spiked above 30 in the third quarter of 2025-a level last seen during the 2022 selloff. The risk reversal chart, which tracks the cost of puts relative to calls, has also shifted sharply bearish, indicating that institutional investors are hedging against a systemic breakdown. These metrics suggest that while the Nasdaq 100 may test 21,000-a former support level that failed during the late 2025 decline- any rallies are likely to be met with aggressive selling.

Strategic Implications for Investors

For investors, the path forward hinges on a delicate balancing act. If the Elliott Wave bull case holds, the Nasdaq 100 could extend its rally into early 2026, with 26,793 as a near-term target. However, the risks of a 2022-style correction are mounting. Derivative traders should consider strategies that profit from volatility, such as selling call credit spreads during short-term rallies toward resistance levels. For long-term investors, hedging with put options or bearish debit spreads offers defined-risk exposure to potential downside scenarios.

The market's current state mirrors a classic "final stage" bull market: technical indicators suggest continuation, but internal metrics and sentiment measures point to exhaustion. As the Nasdaq 100 approaches critical junctures, the coming months will test whether this is a sustainable fifth wave or a prelude to a deeper correction.