$NQ: Review of Two Paths for This Decline

  • CastAwayTrader
  • March 9, 2023
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$NQ #NQ-mini futures #Macro update

This is our macro bearish wave count:

NQ-mini Daily chart

Note that it finally dropped under the pink 200 MA.

That wave count considers a weak (w)-(x)-(y) up structure off the Oct’22 low as a corrective wave B up.

The whole structure of the decline off the major top made in Nov’22 can be counted as a Double Three structure, a combination of several A-B-C structures. Analysts and traders who practice Elliott Wave theory always try to identify a five wave impulsive structure. Because once we identify an impulsive structure we can identify a prevailing direction of the market. Impulsive structures quite often equal to trending markets. Read more here.

Looking at the Daily chart above we see that NQ topped in the Red box and we see the green box, the ultimate destination of that huge correction that started in Nov 2021.

The big unknown is what kind of a path price will choose to get from the red box down to the green box.

If you look at preceding legs down labelled with capital letters A and C colored in red you will see that none of them actually had a clean five wave down structure! All moves down were combinations of several a-b-c’s.

Let’s discuss two main alternative paths:

(i) under a simplified approach we can attempt counting that move down as an unfolding five wave down structure of subwave (a) of wave C of (Y) down targeting the October low made at 10,600:

NQ-120 min chart

Under that straightforward very bearish count NQ just started an accelerated stage of the decline in a micro wave iii of subwave -c- of wave -iii- down. In that stage we normally get runaway gaps and very small if any pullbacks. Price just relentlessly goes down. Under that very bearish count NQ should drop to 11,500 without any pullbacks.

(ii) we may not get that perfect five wave down structure described above and instead get a bunch of a-b-c’s.

NQ-120 min chart

NQ may replay the same (a) down, (b) up, (c) down structure as highlighted in the upper red box.

Under that structure this decline is subwave -c- of a wave (a) down that will most likely find support in the Green Demand zone and from that zone we may get a bounce/flat consolidation during next week.

A gap down tomorrow and failure of bulls to fill that gap would be a strong argument in favor of the (i) very bullish scenario.

If, instead, NQ finds support in the Green Demand zone 11,870 – 11,820 tomorrow then we deal with a more conservative structure of the decline and that means we can expect a corrective a-b-c up bounce next week.

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