For reference to terminology used, please look at technical analysis under our resources section here. Regarding the horizontal lines, black lines represent strong support/resistance, while dark red lines mark very strong support/resistance.here. Regarding the horizontal lines, black lines represent strong support/resistance, while dark red lines mark very strong support/resistance.
Elliott Wave counts are meant to provide context. Each colored count represents the most probable paths given the current price data. There is a pattern unfolding in real-time, one of which will play out. By monitoring price levels that are held/broken, it will help us figure out which one is in play, so that we can better manage risk.
I/O Fund Positioning
We continue to hold a sizable cash position; however, not as large as last month. We have been taking gains in various positions as they hit our technical and valuation targets, while not liking many great companies based on current technicals and fundamentals, at this moment. This tactic has naturally put us into cash close to tops.
The one exception we have found continues to be in the AI, specifically the AI memory space. Micron’s (MU) recent report was stellar, and it is showing up in the charts and fundamentals. We made a large move into MU and decided to begin layering into Lam Research and Broadcom, as well.
We always prefer to layer into names that we want to own based on several scenarios playing out. Though we only added 2% in Broadcom, we could easily see this moving into a 10% position. If something changes and we break critical supports across the board, we may stop out of both Broadcom and Lam Research, reduce our risk, and target lower levels. We plan to hedge Micron if this happens.
We also continue to accumulate crypto based on technical levels getting hit. Until critical support levels break, or we start seeing overheating with on-chain metrics, we will continue to follow our game plan and buy the dips.
The below pie chart represents our invested assets, not including cash or hedges. As of now, we are ~35% hedged, and may stop out of this hedge if the green path outlined above starts to build in probabilities.
Nvidia (NVDA)
Nvidia appears to be setting up for one more high into the $1050 – $1200 range. Note the pattern from the high is a clear 3 wave move. This looks corrective, which suggests the larger uptrend isn’t over. This is accompanied with the composite index making a lower low, while price is making a higher low. This tends to happen in on-going uptrends.
Below $880 will be the first warning to the bullish case, but this drop can really go as low as $785 and still hold the pattern that would take us higher. As long as any further weakness holds above $785, I still expect to see another high. Below $785 and the top is in, which would have us shift toward setting up buy targets.
Micron (MU)
MU is still in the middle of an incomplete uptrend pattern. Note how we have gone vertical, which tends to be around the halfway point of a 5 wave pattern. At some point, maybe a little higher from where we are, we will see a 4th wave correction take hold. This pullback needs to hold above $100 to keep the pattern valid. If this happens, we will look to add on the 4th wave pullback, and targeting around $150 – $160 for the 5th wave, as of now.
Bitcoin (BTCUSD)
While many alt-coins saw a big sell-off over the weekend, which altered their counts, Bitcoin has yet to test even the upper support for this minor 4th wave pullback. So far, it appears that we are in a bull flag, which still needs to chop around above $57,000 before completing. A break below $57,000 will be the first warning that something else might be playing out. However, as long as any additional weakness holds above $48,000, we are treating this as a buying opportunity. Below $48,000 and the larger uptrend pattern is at risk of invalidating.
Advanced Micro Devices (AMD)
So far, this pullback appears to be corrective within a larger uptrend. Note how the pattern is a 3 wave drop on decelerating selling volume. Also, the downside is losing momentum, as noted by the divergence in the composite index. At minimum, it appears that we are setting up for a bounce.
What concerns me is that we are below important price supports at $191 and again at $173. If the next bounce is a 3 wave move higher that fails at one of these price levels, it will be a warning sign that we may not get another high. If we can reclaim these levels in a more direct/5 wave move higher, then we can certainly see the uptrend continue.
In order for any of these moves higher to manifest, we need to find support above $158. Any decisive close below this level, would put this count in jeopardy of not playing out.
Netflix (NFLX)
NFLX has been tracing the leading diagonal pattern for 2 years. We are in the final 5th wave of this larger 5 wave pattern, and as long as any additional weakness holds $605, I expect to see one more swing higher before completing. Below $605 is a warning that this may not happen. Below $544 and the top is in for NFLX.
Ethereum (ETHUSD)
The breakdown below $3000 was significant for Ethereum’s structure. This invalidated the classic 5 wave pattern we have been tracing, which was pointing toward $10,000. At best, I see a diagonal pattern playing out, which should see one more high to complete the large 3rd wave.
This is a risky count, and the only bullish interpretation I can find. The reason is because it has the C wave of 3 as a diagonal, and the larger structure is a diagonal. So, this specifies uncertainty within the markets. The current minor 4th wave can drop as low as 2450 and still be valid. Below this level will be concerning.
Regarding the red count, it is very much alive in Ethereum and not in Bitcoin. But, we would need to see a large 5 wave pattern drop below 2015 to make this more likely. As of now, we only have 3 waves down from the high.
Supermicro (SMCI)
So far, we are only seeing 3 waves down from the high. As long as we stay above $775, we can push higher in a final 5th wave push. We need to see a vertical bounce above $775 to give me confidence this might happen. If we break below $775, then the top is in.
Chainlink (LINKUSD)
We only have a 3 wave drop from the high, so far. This is what we wanted, as this correction is following a clean 5 wave move off the 2023 low. We hit our target box, and began buying again. There is a chance that we are only at the bottom of the A wave in this correction. If that is the case, the next larger bounce will be a 3 wave move that fails below $19.80. If we go above $19.80, the odds will start favoring a low. If we go below $8.75, then the larger bullish count we have been tracking could be in trouble.
Broadcom (AVGO)
AVGO is in a rising wedge. It either topped in a 3rd wave or has one more small swing to $1527 before topping. When wedges break, it's usually a sharp drop back to the start of the wedge, which takes us into our buy zone at $1015 – $900. Below $1275 is the first warning and below $1200 will put the top in.
Lam Research (LRCX)
The green count below has LRCX still in the larger 3rd wave. Above $1007 and this is what I believe is playing out. The blue count has LRCX topping in the larger 3rd wave. A break below $900 will confirm this. Either way, I believe LRCX has more room to run, which lines up with the fundamental outlook. So, we will continue to look for places where we can add.
Solana (SOLUSD)
This drop in Solana actually explains the messy structure in the most recent swing higher. It, now, best fits as an ending diagonal, which means that we should see fresh highs. This means that we are in the final push of a 5th wave. The real question will be – what wave is this 5th wave ending? If it is the end of a larger 3rd wave, then the following 4th wave correction will be another great buying opportunity. However, if this is ending the 5th wave, then that will be the top in Solana. Regardless, both counts suggest volatility after we get a fresh high, so we will likely take significant gains if this happens. For this to play out, we must hold last weekend’s low at $119.
If we break $119, then that leads us to the other interpretation, which states that we have topped in the larger 3rd wave and still working through the 4th wave. This would mean that the next several weeks – months will be a range followed by another low below $100. In this scenario, we must hold $77 – $70 or a bigger top will likely be in.
Crowdstrike (CRWD)
CRWD appears to be in a 4th wave. It should find support around $270 if this is a shallow 4th wave, exhibited by the blue count below. However, if we break below $270, we should see a more conventional 4th wave, which should take us the $238 region. This 4th wave can go as low as $218 and still be valid. Below $218 and a bigger top is likely in.
Microsoft (MSFT)
MSFT is tracing a wedge pattern for the final 5th wave push. I keep going back and forth between the larger 5th wave being a standard 5 wave pattern or a large degree ending diagonal. Based on recent price action, I tend to favor the later. Regardless, both counts have MSFT potentially pushing higher for a final 5th wave swing. Below $397 and the odds favor a top being in. Below $365 and the top is in.
Cloudflare (NET)
NET just broke the critical support level at $90. Below here and the odds favor a top being in. I’d prefer to see a more direct drop for confirmation, which we are not getting. Instead, the price action is quite messy, which has me open to another high in a final swing. This is outlined by the green count below. If the next bounce is a 5 wave move, it will become my primary.
Broad Market Technical Analysis
Price Analysis
Last month, we took a deep dive into the long-term trends that appear to be approaching an inflection point. This analysis positioned the bull market that started in 2023 as part of a much greater bull market that started in 1933. For those that would like this context, please read the opening section in last month’s report here.
We are in a secular bull market, and when this bull run will end is an important question. There are 3 interpretations of the secular bull market that started in 2009.
If we zoom in on the 2022 top through today, we can get a better context on where the market is. These three scenarios are outlined below.
- Red Count – This count suggests that the secular bull market that started in 2009 ended in early 2022 for the S&P 500. This would make 2022 the (A) wave in the first corrective move down in a new secular bear market. This would then make 2023-2024 the (B) wave bounce, or a cyclical bull market within a larger secular bear market. How we will know this count is playing out is that the next larger drop will be a more direct, 5 wave pattern. This would mean that 2025 will be a sharp, and devastating drop for those not prepared, as we retrace all of the 2023 cyclical bull market and likely go beyond.
- Blue Count – This count has us in the final moves of a blow off top. This blow off top is the 5th wave of an ending diagonal pattern. Within a larger context, this ending diagonal pattern is the 5th wave of the bull market that started off the COVID low. How we will know this count is playing out instead of the red count is that the next larger drop should be a 3 wave pattern, followed by a final push for the bulls that will retrace most of the drop. This count will give us a ~10% trading range into 2025, before seeing the bigger drop.
- Green Count – This count has us halfway through with the final 5th wave in the secular bull market. If this is playing out, we will need to hold 4960 and then turn back higher in a direct move that is 5 waves. If this happens, and we break out to new highs, it will make this count a higher probability.
The major support regions 5080, 5055 and 4960. So far, we have taken out 2/3 of these supports, which builds the case for a top being in. We should see a bounce soon, the structure of which will be very important for what follows.
Supporting Markets and the Alternative Bullish Count
The majority of price and time information suggest that we are approaching a top, of sorts. However, some charts can be worked into a larger uptrend that can take us into 2025 before topping. This month, we will discuss what I want to see in order for us to pivot our positioning, as well as some problematic markets for the green count.
Small Caps (IWM)
Small caps are the biggest concern that I have regarding the green count. If we are about to embark on the 5th wave of a large degree 3rd wave, typically, we’d be able to see this type of move, to some degree, in all major charts. This is simply not the case in small caps.
IWM is seeing an important confluence of time, price and pattern with IWM. The below Gann chart shows price struggling underneath a confluence of major angles and a cluster of important cycles. Note how the trend was moving into this region, which suggests a reversal is most likely.
If we analyze the pattern going into this important region, it appears that we have already put in a top. I have been discussing for many months how IWM, since bottoming in 2022, has been tracing what appears to be a large degree (B) wave in a much larger correction. The final move of this (B) wave is a 5 wave move higher. This has taken place, and is now breaking the support region that should have held if we are going to push higher.
In the chart below, you can see that we have gaped below the lower trend channel in what appears to be an ending diagonal pattern for the final 5th wave. Since then we are tracing what looks like a 5 wave pattern lower. If we get a small bounce for 4 that holds $200, followed by a 5th wave lower, then we will have strong evidence that our thesis is playing out. This is one of the key charts to watch.
The alternative count is that we have a leading diagonal pattern that just completed. This would also be a 5 wave pattern, and should be followed by a 3 wave bounce that can go above $200, but should hold below $205.
So, the next bounce will be very telling for IWM. If we get a corrective/3 wave move, it will increase the odds of a top being in place.
Semiconductors (SMH)
One of the most important markets, right now, is semiconductors. The reason for this is because this segment of the market has been largely compensating for the weakening Mag 7 from 2023. As long as the AI push holds, and semis lead, we can keep this bull market going.
What’s interesting is that on March 8th, Semiconductors topped while the broad market pushed higher. It’s always concerning when the market leaders do not confirm a new high, which is why we are cautious now. More times than not, the cycle leaders will lead on the way down, when the market reverses.
If SMH decisively breaks below $218, then it is a strong warning that this sector has topped. This will be a warning to broad market, which will likely follow. On the other hand, if SMH can break above $241, then it will support this bull market pushing higher, at least into late April/early May.
NASDAQ-100 (NDX)
Regarding NDX, this chart best shows how the alternative green count will likely play out. In order for this to manifest, we need to not only see SMH break above $241, but I’d also like to see NDX break above 18,606.
If we instead, break down below 17,810 – 17,265 then the odds will start building that a top is building in NDX.
As you can see, we are just above the final support for the green. So, we will need to see a reversal soon, and it needs to be in the shape of a direct/5 wave pattern. If it is instead a 3 wave pattern, it will build the odds that a top is in place.
I’m not sure if you want me to talk about Inflation or Rates. If so, I can coble together those sections from the original report here.
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