The wave layout on the 4-hour chart of the NASDAQ-100 index still looks very convincing. At the moment, three descending waves have been formed. So, we can assume that the construction of the entire correctional section of the trend has been completed. If this is true, then the quotes may resume their uptrend towards the targets located above the current wave 5. That is, the recent highs will be updated, and the index will continue to grow in the long term. However, it is also possible that instead of the a-b-c waves of a smaller scale we will see the a-b-c waves of a larger scale. Then the current wave structure will simply become part of the first wave a of the new downward section. In addition, the stock market needs a favorable news background, while market participants need to forget their fears over inflation, the Fed's inaction, and the overheated market. Let me remind you that during the entire pandemic, stock indices have been growing mainly thanks to the huge amounts of cash that the US government and the Federal Reserve have injected in the economy. According to the current wave layout, the uptrend is over. Thus, after three ascending waves, I expect to see at least three more descending waves.
Yesterday, the news background was quite favorable for the US stock market. The number of initial jobless claims was only 444,000 which is the lowest number since the beginning of the pandemic. The number of continuing jobless claims amounted to 3.75 million which is slightly more than the previous amount and above market expectations. But there was downbeat data as well. The Philadelphia Fed Manufacturing Index, which reflects the sentiment of the region's manufacturing companies, dropped to 31.5 points although it was at 50.2 in April. However, this is not the worst result as any value above zero is considered positive. Thus, the markets quickly moved away from the Fed's minutes and resumed purchases of the shares of the leading US companies included in the key indices. On Thursday, the Dow Jones index closed with an increase of 188 points or 0.55%, the Standard & Poor's 500 index rose by 43 points or 1%, and the Nasdaq Composite added 236 points or 1.77%.
However, I would not jump to conclusions yet. The wave layouts of all three leading indices imply the formation of correctional trend sections. Investors' fears about inflation have not disappeared. The Fed made it clear on Wednesday that in the event of a further strong economic recovery it will be ready to intervene and begin to roll back the quantitative easing program. However, not a word was said about the growing inflation and methods of combating it. Moreover, the plans to cut the QE program require long preparations and will not be done in the coming months, while inflation may accelerate in May from the current 4.2%. Thus, investors will stay worried about this which may confirm the forecasts for the current wave layout.
Based on the analysis performed, I believe that the three-wave structure is complete, but at the same time it can transform into a more complex set of waves. Therefore, I recommend that you do not rush with opening new positions on #NDX. Now we can observe the construction of a three-wave ascending section which may complete its formation in the near future near the 23.6% Fibonacci level that correlates with the mark of 13,629. An unsuccessful attempt to break through this mark will indicate that the index is ready for a new decline.
