Is the Nasdaq 100 Entering a Critical Elliott Wave Inflection Point in Early 2026?

The Nasdaq 100, a bellwether for global technology markets, has been a focal point for traders and investors in late 2025 and early 2026. With the index surging to record highs amid a bullish Elliott Wave structure, the question of whether it is approaching a critical inflection point has gained urgency. This analysis examines the interplay between technical indicators of momentum and signs of market exhaustion, offering a nuanced perspective on the index's trajectory.

Elliott Wave Continuation: A Bullish Blueprint

Elliott Wave theory suggests the Nasdaq 100 is in the final stages of a multi-wave rally. According to a December 2025 update, the index's December 10 high of 25835 is classified as wave-i of a larger (green) fifth wave, with subsequent movements fitting a textbook third-wave structure. Analysts project the index could reach 26825, with further targets at 26155 and 27225 as part of this progression. A combined analysis of Elliott Wave, seasonality, and Pi-based cycles even forecasts a potential rally to 28000 by late April 2026.

Technical indicators reinforce this bullish narrative. Key support at 25350 has held firm, and a break above 25760/25830 could open the path to 26107 and beyond. E-mini Nasdaq-100 Futures analysis also highlights a completed three-wave correction, with wave (5) potentially propelling the index to new highs around 26989, provided it remains above 23905. These patterns suggest a continuation of the uptrend, at least in the near term.

Market Exhaustion: Divergence and Overbought Signals

However, signs of market exhaustion are emerging. The Relative Strength Index (RSI), a critical momentum gauge, has climbed into overbought territory near 70, signaling potential vulnerabilities. More concerning is the bearish divergence observed: while the Nasdaq 100 continues to hit new highs, the RSI forms lower highs, indicating weakening momentum. This pattern is often a precursor to corrections, as institutional players may begin locking in profits.

The broader S&P 500 has also displayed cautionary signals, including a "topping tail" formation at key resistance levels, which suggests distribution by large investors. For the Nasdaq 100, this dynamic is amplified by the concentration of returns in mega-cap stocks. Breadth indicators like the NGX/NDX ratio-a measure of small-cap versus large-cap strength- highlight a maturing trend, with leadership among dominant names facing technical challenges.

While the 14-day RSI currently stands at 62.643, still within a "Buy" range, moving averages across multiple timeframes (5-day, 50-day, 200-day) also support a "Strong Buy" outlook. Yet, these signals must be weighed against the risks of a late-cycle rally. Analysts warn of a high probability for a 5–10% pullback in early 2026, with a smaller but notable risk of a deeper 10–20% correction driven by earnings and guidance risks.

Synthesis: A Tipping Point in Early 2026?

The Nasdaq 100's trajectory hinges on resolving the tension between bullish wave structures and bearish exhaustion signals. On one hand, the Elliott Wave framework and technical momentum suggest the index could test 26989 or even 28000 by mid-2026. On the other, overbought conditions and divergences imply a correction is not only possible but increasingly probable.

A critical inflection point may emerge if the index fails to hold above key support levels, such as 25350 or 24647. A breakdown below these thresholds could validate a bearish scenario, with the November 2025 low of 23854 acting as a potential floor for a deeper correction. Conversely, a sustained break above 25760/25830 could extend the bullish wave pattern, though traders should remain vigilant for signs of distribution.

Conclusion

The Nasdaq 100's path in early 2026 is a classic case of a market at a crossroads. While technical indicators and Elliott Wave analysis paint an optimistic picture, the growing signs of exhaustion-particularly RSI divergence and breadth deterioration-cannot be ignored. Investors should closely monitor key levels and institutional activity, as the next few weeks could determine whether this rally concludes with a sharp correction or evolves into a new phase of consolidation. In either case, the coming months will test the resilience of a market that has defied gravity for much of 2025.