Today Nasdaq formed the Three Gaps. The candle pattern is rather rare and it’s been a while since any of the indices made three consecutive gaps.
1. The theory says that, ideally, the Gap #1 should be closed. An important part is the index behavior upon the closure. A closure below 12929.46 or a touch and closure above. We will see.
2. The gap down formed on February 17 is still in force. The resistance level 13726.78. A daily candle is not expected to close above this level if the downtrend is meant to continue. If it closes above, there would be a crazy rally; but I doubt it, based on the multiple other signs.
3. The declining daily volume supports a possible reversal.
Possible scenarios for the next 1-2 days:
- A little rally towards 13726.78 or a little higher, followed by a sharp reversal and a closure below 13726.78.
- If Nasdaq opens tomorrow with another gap up, it is likely to start a decline immediately.
It is interesting to note that while DJI and SP500 are exploring the all time highs, Nasdaq and Russell are nowhere near the ATH. I am very curious to find out how all indices will finally align their waves from the Elliott Theory perspective. I have my popcorn ready.