Figure 1: NDX100 hourly candlestick chart with EWP count and technical indicators.
The index rallied off the Sept. 20 low in an overlapping, corrective fashion. By tracking it on the hourly chart, I could establish it had the option to either put in a non-overlapping impulse move higher or, indeed, present us with overlap to the downside. The latter became evident on Monday, Sept. 27 as the NDX went below the Sept. 21 high and could not make five non-overlapping waves higher (blue arrow in Figure 1 above). Thus, it was time to look lower – and lower it went.
Now, it appears the index has completed five waves to the downside from last week’s bounce, which reached the ideal 62% retrace of the initial A-wave lower. Thus, there are three waves down (red A, B, C, made up of a 3-3-5 internal pattern) since the early September all-time high.
The question now is: Can the correction be considered complete, as corrections at a minimum journey in three waves?
To answer this question, let’s look at Figure 2.
Figure 2: NDX 100 hourly candlestick chart with EWP count and technical indicators.
Figure 2 zooms out to mid-July and includes the smaller waves: (grey) minute-iii (July 26 high), minute-iv (August 18 low), and minute-v (early September ATH). The minute-iv wave is critical here as that was a one-degree smaller (complex) 4th wave compared with the current minor-degree 4th wave the index is experiencing. See also the daily chart in my previous article (here). It follows minute-iv lasted 123 hours (19 days), whereas the current three-waves drop from the recent ATH has lasted just over 119 hours.
Although three waves down appear to be (close to) complete and, therefore, the correction can be considered complete, it would be rather odd to have a one-degree smaller wave last about the same as the next higher degree wave (minute vs. minor). Besides, minute-iv was a complex (flat) correction, which is typical for any degree 4th wave, and, therefore, the current minor-4 wave should also become complicated.
Thus, based on wave-degree time-symmetry and the nature of 4th waves, the best conclusion is that the recent correction has not yet run its course. Instead, only the initial phase is likely over. A bounce (grey minute wave-b in Figure 2) should be expected soon before minute-c completes (green) minor wave-4 later in October at around current price levels.