The NASDAQ 100 index has been rising since early April, following the Elliott Wave Principle. It hit 24,958, which falls within the expected target range of 24,770-25,570, before reversing. This indicates a possible peak for the intermediate W-3.

Possibility Of A Pullback

The index may rise slightly to about 25,300, but there is a high chance of a green W-4 pullback. Indicators show negative divergence, but we need a drop below 24,505 for confirmation. A pullback to between 23,270 and 23,830 is expected, followed by a rise to around 26,680 for the final wave, green W-5. This target matches the 161.80% Fibonacci extension. As the index rises, key safety levels are as follows: 24,816 (blue), 24,741 (gray), 24,505 (orange), and 24,186 (red). If these levels are breached, it suggests a high chance of a market top and a likely bear market after reaching the fifth wave target. Since the NASDAQ 100 hit our target near 24,958 and paused, it suggests a temporary peak might be in play. Technical indicators are showing weakening momentum. Derivative traders should now consider shifting from a bullish to a neutral or cautiously bearish stance. This viewpoint is backed by the current economic climate as of early October 2025. The latest jobs report shows a slight rise in unemployment to 4.2%, while September’s CPI data remains above 3%. The CBOE Volatility Index (VIX) has increased from its lows, recently trading above 17, pointing to rising market risk. This overall nervousness supports our expectation for a correction.

Trading Strategies

A clear signal would be a decisive break below the 24,505 level. For traders, this could be a cue to buy put options or start short futures positions, aiming for the 23,270 to 23,830 correction zone. Using put spreads can help limit risk while preparing for this expected drop. We should note that October is often a volatile month in the market, as shown by the sharp correction in October 2023. This seasonal trend for price fluctuations reinforces the likelihood of the anticipated fourth-wave pullback happening over the next few weeks. This correction should be viewed as healthy consolidation within the larger bull market. Once this pullback finds a bottom in our target range, we anticipate the final fifth wave to rise toward 26,600. At that point, it will be wise to close bearish positions and consider going long, likely through call options, to take advantage of the last major rally of this cycle. Traders should look for signs of stabilization and bullish reversals around the 23,500 level. However, after this final high, the model indicates a larger bear market could follow, similar to the one in 2022. Therefore, this upcoming rally should be seen as the last stage of the current bull cycle. Long-term protective strategies should be put in place once the index goes beyond 26,000. Create your live VT Markets account and start trading now.

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