Nasdaq 100: Testing the Elliott Wave Thesis Against the 2022 Bear Market Parallel

The technical thesis for the Nasdaq 100 is now clear. The index is in a corrective wave, specifically the third of a third wave (orange W-3 of gray W-iii), building toward a final fifth wave (green W-5). This setup hinges entirely on one critical level: the November 21 low at 23854. Holding that support suggests the broader bull market continues, with a potential rally toward a target zone of 26500 ± 250. A break below it, however, would signal a bear market is already underway, drawing a direct parallel to the pattern seen in 2022.

The structure is unfolding as expected. After a sharp drop from the December 10 high, the index found support and rallied, forming the orange W-3 wave. It then pulled back to test the 24647 level before resuming its climb. The current trading range in the 25700s confirms the bullish wave count is intact, provided the key warning levels are respected. The immediate path is for the index to push higher, aiming for the ~26825 target for the orange W-3, before a subsequent pullback to the ~26155 zone for the orange W-4.

The bottom line is one of high-stakes tension. The bullish Elliott Wave structure is valid only if the market respects the 23854 floor. That level is the linchpin. For now, the advance-decline line has not shown the negative divergence typical of a developing bear market, offering some near-term reassurance. But the setup is a classic test of strength: a decisive move above the 26500 target would confirm the green W-5 is intact, while a failure to hold the November lows would invalidate the entire thesis and open the door to a prolonged downturn.

Technical Indicators: Confirming Momentum or Warning of Exhaustion

The technical picture presents a classic tug-of-war between bullish momentum and emerging caution. On one side, the moving average framework shows a strong bias. The daily analysis reveals 10 Buy signals versus 2 Sell signals, a clear majority that supports the uptrend. The index is also trading well above its key long-term averages, including the 50-day moving average at 25481 and the 200-day moving average at 25420, which act as a floor for the broader trend.

Yet, other indicators point to a market that may be stretched. The 14-day RSI currently sits at 62.7. While still in the "neutral" zone, this reading suggests the index is entering overbought territory. Historically, such levels often precede pullbacks, especially within a corrective phase like the one the market is in. The RSI is a leading signal, and its position here is a subtle warning of potential exhaustion.

This tension is confirmed by price action. The index has recently broken below several key warning levels set for the orange W-4 correction. It fell through 25443 and 25158, levels that were critical for the prior wave count. This breakdown, even within a corrective structure, signals that the bullish momentum is weakening. It suggests the market is not finding the support it needs to continue its climb toward the green W-5 target.

Viewed another way, the technical setup mirrors a common pattern in bear market beginnings. A strong moving average signal can persist even as the RSI warns of overextension and key support levels fail. The current configuration-bullish averages but a stretched RSI and broken support-creates a fragile equilibrium. The market is holding its ground for now, but the technical indicators are flashing a clear message: the rally has momentum, but the cost of that momentum is rising.

Catalysts and Risks: The Path to the Next Target or Breakdown

The immediate path forward is defined by a clear target and a critical line in the sand. For the bullish Elliott Wave thesis to hold, the Nasdaq 100 must first complete its corrective wave. The ideal setup calls for the index to resume its climb from the recent low, aiming for the 26500 ± 250 zone. This target represents the completion of the green W-5 wave, the final leg of the larger uptrend. The immediate next step is to push higher from the current range, with the first major hurdle being the ~26825 level for the orange W-3.

The key risk to this scenario is a failure to hold support. The November 21 low at 23854 remains the primary warning level. A decisive break below this point would confirm that the bear market is already underway, drawing a direct parallel to the pattern seen in 2022. This breakdown would invalidate the current bullish wave count and likely trigger a deeper correction. The evidence shows the odds of the uptrend ending increase with each successive break below the established warning levels, making the 23854 floor the ultimate test.

In practice, the market is currently in a corrective phase. The ideal W-ii correction level to watch for before the final green W-5 wave resumes is ~24600. The index recently found support near 24647, which aligns with this target. A clean bounce from this zone would signal the correction is complete and the final rally is intact. Any weakness below it would add to the pressure on the broader thesis.

The bottom line is a binary setup. The path to the 26500 target is clear, but it is narrow. The market must hold above 23854 and navigate the ~24600 support level to confirm the bullish structure. For now, the advance-decline line has not shown the negative divergence typical of a developing bear market, offering some near-term reassurance. Yet the technical indicators are flashing a warning of potential exhaustion. The next few weeks will test whether the rally has enough fuel to reach its target or if the risk of a breakdown is becoming too great.