We need a capitulation bottom with VIX over 30 and RSI under 30 in NDX to setup a climax bottom [500 Word Article]

NASDAQ Capitulation Watch: Why the True Low May Form at the Open

Historically, NASDAQ corrections that unfold as zigzags tend to resolve at A = C, where the final leg of the decline matches the first in length and momentum. This symmetry often marks the exhaustion point of selling pressure and sets the stage for a meaningful reversal. However, today’s market behavior has clearly broken from that textbook expectation. Instead of stabilizing at A = C, NASDAQ nosedived into a far more aggressive decline, reaching a 1.618 extension in a downward Wave 3 near 22,460—a classic signature of panic-driven liquidation.

Wave 3 declines are fundamentally different from typical corrective legs. They are emotional, relentless, and often feel “unfair” in their speed. This is the phase where stops are triggered en masse, margin calls accelerate selling, and confidence collapses. The fact that NASDAQ pressed directly to a 1.618 extension rather than pausing at A = C strongly suggests that fear, not orderly profit-taking, is currently in control.

What adds further weight to the bearish momentum is what happened after the closing bell. After-hours futures dropped nearly 400 points, signaling that sellers are not finished. Overnight futures weakness often precedes the most important lows, because capitulation frequently occurs when liquidity is thinner and emotions are raw. Rather than forming a tidy intraday bottom, markets sometimes deliver their final flush right at or shortly after the open, when overnight panic collides with cash-session orders.

From a Fibonacci perspective, the 21,900–22,000 zone stands out as a critical area to watch. This region aligns closely with .382 retracement support of the larger advance, making it a logical magnet if selling pressure continues into the morning. In strong bull markets, .382 retracements are often sufficient to reset sentiment before the dominant trend resumes. A final spike into this zone would fit perfectly with a Wave 3 capitulation scenario.

Volatility indicators reinforce the idea that we are approaching an inflection point rather than the beginning of a prolonged crash. The VIX is threatening a move toward 30, a level that has historically coincided with intermediate-term bottoms in technology-heavy markets. A VIX spike into the high 20s or low 30s reflects widespread fear, aggressive hedging, and emotional surrender—conditions that are typically present near Wave 3 lows.

Momentum readings tell a similar story. The RSI on the NASDAQ 100 (NDX) is approaching sub-30 territory, a classic oversold signal. While RSI can remain oversold longer than traders expect, the first dip below 30 often occurs very close to a meaningful low or, at minimum, the setup for a sharp countertrend rally. When RSI, VIX, and Fibonacci support converge, the odds of a violent reaction increase substantially.

It’s important to note that a capitulation bottom does not automatically signal the end of the correction. Even if Wave 3 terminates near 21,900–22,000, the most likely next phase would be a Wave 4 relief rally, potentially retracing .236 to .382 of the entire decline. Still, identifying the Wave 3 low is critical, as it often precedes the fastest upside move of the entire corrective sequence.

In summary, while NASDAQ typically bottoms at A = C, today’s action points to a deeper, fear-driven Wave 3 flush. With futures collapsing, .382 support approaching, the VIX pushing toward 30, and RSI nearing deeply oversold levels, the market is setting up the conditions for a true capitulation bottom—possibly right at the open.