The NASDAQ 100 index, as per the Elliott Wave Principle, has been in an upward impulse move since early April. The index reached 24,958, aligning with the anticipated interim target range of 24,770-25,570 and then reversed. This suggests a potential top for the intermediate W-3.

Possibility Of A Pullback

The index could see a minor rise to around 25,300 but the chance of a green W-4 pullback is high. Indicators suggest negative divergence, yet confirmation requires a fall below 24,505. A pullback to between 23,270 and 23,830 is anticipated, with expectations of a subsequent rise to around 26,680 for the final wave, green W-5. This upward target aligns with the 161.80% Fibonacci extension.

Safety net levels, raising as the index climbs, mark critical points: 24,816 (blue), 24,741 (gray), 24,505 (orange), and 24,186 (red). A breach below these levels would indicate a high probability of a market top, with a bear market likely to follow after reaching the fifth wave target.

Based on the Nasdaq 100 hitting our target zone near 24,958 and stalling, we see a high probability that a temporary top is in. Technical indicators are showing negative divergence, which suggests the upward momentum is weakening. Derivative traders should now shift from a bullish to a neutral or cautiously bearish stance.

This view is supported by the broader economic environment as of early October 2025, with the latest jobs report showing a slight uptick in unemployment to 4.2% and September’s CPI data remaining stubbornly above 3%. The CBOE Volatility Index (VIX) has also crept up from its lows, recently trading above 17, indicating that traders are starting to price in more risk. This market nervousness aligns with our expectation for a corrective pullback.

Trading Strategies

A clear signal to act would be a decisive break below the 24,505 level on the index. For traders, this could be a trigger to buy put options or initiate short futures positions, targeting the 23,270 to 23,830 zone for this correction. Using put spreads could be a way to define risk while positioning for this expected drop.

We should remember that October is historically known for market volatility, as we saw with the sharp, short-term correction back in October 2023. This seasonal tendency for price swings reinforces the potential for the anticipated fourth-wave pullback to unfold over the next few weeks. This move should be seen as a healthy consolidation within a larger bull market.

Once this correction finds a bottom in our target zone, we will expect the final fifth wave up toward the 26,600 area. This will be the time to unwind bearish positions and prepare to go long, likely through call options, to capture the last major rally of this cycle. Traders should watch for signs of stabilization and bullish reversals around the 23,500 level.

However, after that final high is reached, the model points to a much larger bear market, potentially on the scale of the one we experienced in 2022. Therefore, this upcoming rally should be treated as the last stage of the current bull cycle. Long-term protective strategies should be considered once the index pushes past 26,000.

Create your live VT Markets account and start trading now.