Nasdaq 100 Elliott Wave Weekly Update: Assessing the Final Leg of the Bull Market

The Nasdaq 100 is now in a critical phase of its long-term cycle, with the weekly technical structure pointing to the final leg of a powerful bull market. The setup is defined by a specific wave count that frames the current rally as the third sub-wave of a larger, final fifth wave. This placement carries significant implications for the market's immediate trajectory and its vulnerability to a deeper correction.

The foundation of this analysis is the November 21 low of 23,854. This level is not just a minor support; it is the critical benchmark for the broader bull market. As noted in recent updates, if the November 21 low at 23,854 holds, the bull market will likely continue, ideally well into April next year. Any breach below this level would strongly suggest the bear market is already underway, a scenario that would invalidate the current bullish wave count.

Within this context, the current weekly structure is clear. The index has completed a second wave down to 24,647 (gray W-ii). From there, it launched a rally to a high of 25,716 on December 26 (orange W-1), followed by a second corrective low at 25,086 on January 2nd (orange W-2). The rally from that low is now identified as the third sub-wave (orange W-3) of a larger third wave (gray W-iii), which itself is the third wave of the final fifth wave (green W-5). This is a late-cycle structure where the primary risk is a shift from a standard impulse pattern to an overlapping ending diagonal.

The bottom line is that the market is in a late-cycle phase. The current rally is the third leg up in a final push, setting up a critical test of the 23,854 support level. The path of least resistance is higher, with targets in the 26,825 to 27,225 range for the completion of this final wave. Yet, the very nature of this structure-being the third wave of the final fifth wave-signals that the market is nearing exhaustion. The setup is primed for a decisive test of the key support, with the outcome determining whether the bull market can eke out a few more weeks or if a deeper, 2022-like bear market is imminent.

Fibonacci Targets and Key Warning Levels

The technical setup now defines a clear path and a series of critical thresholds. The immediate target for the ongoing third wave is a rally toward 27,225. The path to that peak is expected to be a series of waves: an intermediate peak near 26,825, followed by a pullback to approximately 26,155, before the final push to the 27,225 high. This is the standard impulse pattern within the final fifth wave.

For the bulls, the path is guarded by a sequence of warning levels. These are not arbitrary; they are key support zones that, if breached, signal increasing vulnerability. The primary levels to watch are 25,639, 25,428, 25,086, 24,647, and the critical long-term support at 23,854. A break below the 24,647 level-a key swing low from the second wave down-would be a major red flag, indicating the market is shifting from a standard impulse to a more dangerous overlapping ending diagonal. Such a shift would likely see the index rally toward 27,860 before the final, 2022-like bear market begins.

The bottom line is one of high-stakes precision. The market is in a late-cycle phase where the final push toward new highs is both the most likely and the most perilous scenario. Every point gained is a step closer to a decisive test of the 23,854 support. The alternative path, while currently less probable, is stark: a diagonal rally to 27,860 would be a final, deceptive surge before a deep correction. For now, the setup remains bullish, but the warning levels are the real story. They are the technical checkpoints that will determine whether the bull market can eke out a few more weeks or if a major downturn is already in motion.

Structural Shifts and Fundamental Catalysts

The technical setup is now converging with a fundamental shift in the market's core narrative. The Nasdaq 100 enters 2026 in a mature bull market, not at the start of a new cycle. While the longer-term trend remains intact, a growing cluster of signals suggests the balance of risks has shifted toward a correction rather than a fresh acceleration. This is not a bearish call on technology, but a recognition that the market's focus is maturing.

The primary catalyst for any correction is earnings and guidance risk. The market is in the process of shifting from rewarding companies merely for having AI to rewarding those that can prove they are making money from it. This is a critical inflection point. As one analysis notes, the conversation is likely going to shift from AI excitement to AI ROI. Investors are increasingly asking what measurable return a company is earning on its massive AI spending. This phase, focused on return on investment, could have a big impact on how the index performs.

The scale of this investment makes the shift unavoidable. AI spending is no longer a rounding error. One estimate shows that artificial intelligence captured nearly half of all global funding in 2025. The biggest Nasdaq-100 companies are investing tens of billions in data centers and infrastructure. These large spending efforts are now showing up in capital expenditures and depreciation, setting the stage for a period of intense scrutiny on profitability. The market's focus is moving from hype to the bottom line.

This fundamental re-rating is the real story beneath the technicals. It introduces a new source of volatility, as the index's heavy concentration in mega-cap leaders becomes a double-edged sword. If these leaders fail to demonstrate clear earnings growth from AI, the entire rally could be vulnerable. Yet, this shift also holds the potential for a healthier, wider market if more companies can prove their AI monetization. For now, the setup points to a late-cycle adjustment, where the technical targets are less about new highs and more about testing the resilience of a market that is finally being asked to show its returns.

Forward Scenarios and Key Watchpoints

The setup now defines two distinct paths for the Nasdaq 100 in the coming weeks. The most likely scenario is a correction, not a full reversal. This would be a typical late-cycle adjustment, driven by earnings and guidance risk rather than macroeconomic stress. As the market enters 2026 in a mature bull phase, a Nasdaq 100 correction looks more likely than a full reversal. Historical drawdowns suggest a 5–10% pullback is the probable outcome, with a smaller but non-trivial risk of a deeper 10–20% correction if earnings disappoint. The key implication is that this correction sets up a potential buy-the-dip opportunity later in the year, as dip buyers re-enter the market once the adjustment is complete.

The critical watchpoint for confirming or invalidating this thesis is the 23,854 support level. This is the November 21 low that serves as the foundation for the current bullish Elliott Wave count. If the November 21 low of 23854 holds, the Bull market will likely continue. A break below this level would be a major technical signal, strongly suggesting the bear market is already underway and invalidating the current wave count. It would confirm the shift from a standard impulse pattern to a more dangerous overlapping ending diagonal, likely triggering the final, 2022-like bear market before a new multi-year rally can begin.

The central theme of 2026 will be the market's fundamental re-rating, shifting from AI excitement to AI ROI. This is the primary catalyst that will determine the depth and duration of any correction. The conversation is already forming around what measurable return companies are earning on their massive AI investments. The conversation is likely going to shift from AI excitement to AI ROI. Quarterly earnings reports will provide the primary evidence for this transition. Companies that can demonstrate clear profitability from their tens of billions in AI spending will likely hold their ground, while those reliant on hype may face pressure. This shift introduces a new source of volatility, as the index's heavy concentration in mega-cap leaders becomes a double-edged sword. For now, the technical targets are less about new highs and more about testing the resilience of a market that is finally being asked to show its returns.