We generally chart the regular NASDAQ — the NDX, QQQ, and the futures — but when you consider that a mere five momentum names, affectionately given the acronym “FAANG,” comprise nearly 40% of the weighting of the entire index, a glance at the Equal Weight version is not a bad idea. I prefer the First Trust
Watching for nuanced differentiation in the patterns between the QQEW and NDX, it is possible to see the potential for the former to lead a bit. For example, back in August/September of 2018, QQEW marked a divergent high. More recently, the QQEW began to count more like the blue 5th wave extension of (5) of Primary Wave 3 before the NDX shifted from it’s “(B)” wave.
More importantly, though, is that fact that the Equal Weight does not get pulled to such price extremes by the disproportionate momentum of a scant few stocks. The Primary Wave 3 in NDX has stretched all the way to the 223.6% Fibonacci extension as measured in log-scale off the July 2010 low for Primary 2. By contrast, the QQEW hit a more perfect 161.8% Fibonacci extension for it’s Primary wave 3 top.
The disproportionate extension, though, also appears to affect the downside corrective moves. The Primary Wave 4 for NDX can easily be an approximately -40% slide into 2020, while QQEW can be a bit less severe at only -30-35%.
In our Charts of the Day video from this past Wednesday evening, we look at the likely “A/B/C” in QQEW as well as the similar projections for the FAANG names that are likely to drag the regularly weight NASDAQ even lower.
AMZN like AAPL and FB looks much more like only three waves off the December low consistent with a corrective bounce as a B-wave inside the larger correction despite NDX & QQEW stretching to new highs over 2018. The orange C-wave measured move project about 40% lower here too, but the possible targeted support for Primary 4 in the 725 region is closer to a 60% fade with another “bounce” in the middle.
Lastly we have the stock formerly known as Google, Alphabet Inc
Zachary Mannes is a senior analyst at ElliottWaveTrader.net covering U.S. stocks.