The NASDAQ 100 Index posted a long-term Top on April 26, 2010. This marked the end of the Great Rally of 2009. Following that date, the Index executed a five-wave downmove (five waves indicating the direction of the operative trend) which was followed by a typical three-wave (A-B-C) partial retracement of the downmove. The top of the “C” wave occurred on June 21 with the appearance of a Bearish Engulfing Candlestick pattern, which foretold a strong decline in prices, to follow immediately.
The promise of the Candlestick pattern has been fulfilled: From the top on June 21(1939.77) through the Low as of this writing (1767.47), the Index has declined 172.30 points.
There is a secondary, and very important, significance: Today’s Low of 1767.47 is lower than the Low (1770.46) of the “B” wave. That means that the A-B-C correction in the NASDAQ 100 is now overwith, whereby the underlying downtrend has unarguably emerged and is now in force.
Candlestick patterns are remarkably accurate predictors of future price action in financial markets. This is a fine example.
William Kurtz
June 29, 2010
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