Crossroads: Will We See an All-Time High or a Major Correction?

5 oct

The US100 is approaching a key juncture, with multiple technical indicators pointing to a potential breakout or significant pullback in the coming weeks. Traders should remain vigilant as we assess key patterns emerging on various timeframes. Here’s a closer look at what the charts are telling us and how these signals might play out by year’s end.

Short-Term Outlook: 20,400-20,500 in Focus
Currently, the US100 appears to be targeting the 20,400 to 20,500 range, aligning with the completion of a potential corrective phase. On the daily and 4-hour charts, this move reflects a classic wave structure consistent with Elliott Wave Theory.

Wave 4 corrections are known for their complexity, often displaying choppy, sideways movements that frustrate trend-following traders. This could mean we experience some consolidation in the short term before a breakout, with a potential bullish continuation if the market holds key support levels.

Rising Wedge: A Bearish Signal?
However, traders need to be cautious. There is a possibility that NASDAQ is forming a Rising Wedge pattern on the weekly chart—an often bearish formation that signals a potential loss of momentum. This pattern usually occurs when the price is making higher highs, but at a decreasing rate, indicating a weakening trend. As the wedge narrows, the likelihood of a breakdown increases, and if we see strong resistance emerge near 20,400-20,500, this could signal the beginning of a larger correction.

We’re nearing the end of what looks like a B wave correction on the weekly chart. If this B wave fails to push through resistance convincingly, we could see the start of a C wave decline, leading to a test of support levels well below 17,000 before October ends. This move would align with a bearish breakdown of the Rising Wedge, potentially triggering increased volatility as market sentiment shifts.

Bulls Eyeing New All-Time Highs?
On the flip side, if the US100 manages to break above the 20,500 resistance zone, we could see a continuation of the bullish trend, setting the stage for a run toward new all-time highs before the year ends. In this scenario, the current consolidation could serve as the foundation for another leg higher, especially as the market shakes off any short-term bearish signals.

Seasonally, Q4 tends to be strong for equities, and if macroeconomic factors remain supportive, the NASDAQ could experience a rally through the end of 2024. This bullish breakout could potentially see the index reach new heights, surpassing its previous all-time highs, as momentum traders jump in and risk appetite returns.

Deeper Correction in Early 2025?
However, even if the US100 continues to rise to the year’s end, traders should be aware that a deeper correction may be on the horizon in early 2025. Parabolic moves often end in sharp reversals, and if the market becomes overextended, we could see a significant pullback at the start of the new year.

Given the confluence of resistance zones and potential bearish patterns like the Rising Wedge, traders must keep an eye on both short- and long-term signals. If the index struggles near 20,500 and fails to break higher, it could lead to a prolonged corrective phase, with a retest of critical support levels below 17,000 as early as October or November.

Key Levels to Watch
Support: 19,800 (short-term), 17,000 (long-term)
Resistance: 20,400-20,500 (critical zone)
All-Time High Potential: Above 22,000 by year-end (if breakout occurs)

The US100 is approaching a critical decision point, with potential outcomes that could take it to either extreme. In the short term, the 20,400-20,500 range will serve as a key resistance level, with the potential for a Rising Wedge breakdown that could lead to a major correction below 17,000 by the end of October. However, if the bulls can push past this zone, we may see new all-time highs before the year closes, followed by a deeper correction in early 2025.

Traders should remain flexible and vigilant, watching for confirmation from price action and volume before committing to either side of the trade. The next few weeks could define the US100 trajectory for the coming months, and risk management will be crucial in navigating this volatile period.