I have been twofold confident that NDX was forming a Head & Shoulder and the right shoulder was almost done with a Zig Zag (I was assuming that the wave C was unfolding a wedge).
I made the mistake to anticipate the expected reversal pattern without a stop. So now I am trapped (I am long SQQQ and SPXU), fortunately it's a small position, I do not lose sleep over it, but I must act with an exit strategy.
Now that the H&S has been killed, odds favour a move back towards the March high maybe a weekly pop above the upper Bollinger Band forming a Double Top.
Due to the fact that so far it is impossible that price is forming Triangle or an Ending Diagonal unless NDX is now involved in the early stages of a wave (III), since the internal structure of the advance from the April 15 low is clearly corrective I don't expect a breakout above the March 6 high.
But going forward we have to pay a close attention to the Summation Index, which is issuing a buy signal from extremely oversold RSI readings. Rest assured that if the path were from oversold to overbought then regardless the assumed corrective pattern the "journey" to the upside would be large.
In the mean time as long as price does not deny this new scenario since both the down leg from the March 6 high and the current advance are corrective I will consider that this up leg is a wave (B) or (X) hence it should establish a lower high or at the most a marginal higher high.
Friday's unexpected "huge" rally has printed a Hanging Man candlestick at the second lower high of the decline from the March 6 high (Resistance) with the real body of the candlestick above the upper Bollinger Band, therefore usually for the immediate time frame price should struggle increasing the odds of a short-term pause (Consolidation). The constructive bullish pattern will not be jeopardized as long as price remains above the support layer located in the range 3637 - 3626.
If this were not the case, because momentum players step in, NDX has no real obstacle until the next resistance layer located in the range 3796-3717.
The RSI (5) in the daily time frame is also suggesting that the pace and extent of last week's rally should result in a pullback to alleviate the short-term extremes.
Regarding the Elliott Wave count of the advance from the April 15 low I maintain the Zig Zag scenario with an impulsive wave (C) underway following a Triangle wave (B). The equality extension target for the assumed wave (C) is located at 3715.33.
If this is the correct count we could have to options:
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The wave (3) is in place or almost done. If this is the case a wave (4) pullback cannot overlap below 3625.77 The pullback could form a Zig Zag or a Triangle. The following up leg should complete the Zig Zag (Blue count)
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An extended wave (3) is underway, in which case price would be establishing the wave (I) of a large impulsive sequence wave (3). If this is the correct count the following pullback wave (II) could be larger but should not breach 3613 (Red count).
