Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose to the mid-4100s on the futures, about halfway into the likely price range where the upward movement that began on May 20 will end (marked with blue dashed lines on the chart). The rise from that date is wave C{-10} within an upward correction that began on May 12, wave 4{-9}. I count C{-10} as being in its 5th and final internal wave. I’ve updated the chart.

10:35 a.m. New York time

MRVL earnings play exit. I’ve exited my short bull put vertical spread on MRVL for 30.3% of maximum potential profit and have updated the trade analysis with full results.

9:35 a.m. New York time

After the weekend. The U.S. markets will be closed on Monday for the Memorial Day holiday. Trading will resume on Tuesday.

What’s happening now? The S&P 500 E-mini futures traded in a narrow range overnight, staying close to the lower boundary of the anticipated price target for the rise that began on May 20.

What does it mean? The rising last segment of the upward corrective pattern that began on May 12 is still underway and has a bit more upside potential remaining. I expect the segment to end in a range between 4047.50 and 4203.50 (marked with blue dashed lines on the chart).

What’s the alternative? The present rise will most likely be the end of the upward correction, but it’s possible that the correction will take a compound form, connecting two or three corrective patterns together.

[S&P 500 E-mini futures at 3:30 p.m., 57-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, wave C{-10}, the final wave of the three-wave Flat corrective pattern that is forming the upward correction that began on May 12, wave 4{-9}, is continuing. Wave C{-10} began on May 20. I see the C wave as being in its 4th wave correction internally, which will be followed by a final upward move, wave 5{-11} within C{-10}.

Normally, 4th waves have a single corrective pattern, usually consisting of three subwaves, within them, but sometimes they form a compound structure build from two or three corrective patterns, separated from each other by a connecting wave, which would be wave X{-10} in this case.

Whether wave 4{-9} is simple or compound, it will be followed by wave 5{-9}, a resumption of the downtrend, wave 5{-8}, that began on April 21.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 27, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

MRVL Trade

Marvell Technology Inc. (MRVL)

Update 5/27/2022: I exited my short bull put vertical spread on MRVL, 21 days before expiration, for a $0.53 debit per contract/share, a profit before fees of $23 per contract. Shares were trading at $50.19, down $6.90 from the entry level.

The Implied Volatility Rank at exit was 73.9%, down 3.4 points from the entry level.

I exited on the day after entry because the position reached 30.3% of maximum potential profit, slightly above my normal exit point for earnings plays, 25% of max.

Shares declined by 6.9% over one day for a -4,412% annual rate. The options position produced a 43.4% return for a +15,840% annual rate.


I have entered a short bull put vertical spread on MRVL, using options that trade for the last time 22 days hence, on June 17. The premium is a $0.76 credit per contract share and the stock at the time of entry was priced at $57.09.

The Implied Volatility Ratio stood at 77.%.

Premium:$0.76Expire OTM
MRVL-bull put spreadStrikeOddsDelta
Puts
Long54.0059.0%34
Break-even56.7655.0%38
Short56.0051.0%42

The premium is 76% of the width of the position’s short/long spread. The profit zone covers a 0.6% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 1.6:1, with maximum risk of $124 and maximum reward of $76 per contract.

How I chose the trade. The trade was placed to coincide with MRVL’s earnings announcement, after the closing bell on the day of entry. The short strikes were set to coincide with the expected move of $0.83 either way, based on options pricing, which gives a price range of $56.34 to $58. The Zacks Investment Research earnings surprise predictor was unavailable — sometimes analysts will withhold that information — but reporting in Zacks and SeekingAlpha suggested a positive outcome, and the Zacks rank is “2”, meaning “buy”, and on that basis I entered the position.

By Tim Bovee, Portland, Oregon, May 26, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose during the session, entering the target price range on the futures. The rise is part of wave C{-10} within an upward correction, wave 4{-9}. As I count it, the C wave internally is in its middle subwave, wave 3{-11}.

When that 3rd subwave is complete, it will be followed by wave 4{-11}, which typically would take the form of a Flat correction, and then will finish off with a final rise, wave 5{-11}. That will be the end of wave C{-10} and of wave 4{-9} under my principal analysis, although 4{-9} will continue if it turns out to be a compound correction, discussed in the alternative analysis.

I’ve updated the vchart.

2:25 p.m. New York time

MRVL earnings play entry. I’ve entered a short bull put vertical spread on MRVL, using options that expire 22 days from now, and have posted a trade analysis.

11:05 a.m. New York time

DLTR earnings play exit. DLTR beat analysts’ earnings expectations, the share price rose by 18.8%, and I exited my short bear call vertical options spread for all of the maximum potential loss, plus some. I’ve updated the trade analysis with details.

OLLI earnings announcement date changed. The earnings announcement date listed for OLLI changed after I entered the position. The new earnings announcement date is listed as June 8 before the opening bell. I’ll hold on to the position, exit if it turns profitable before the announcement, and otherwise wait to see how the announcement goes. I posted a trade analysis at the time I entered the position.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose above 4000 in overnight trading.

What does it mean? The final leg of an upward correction continues and is less than 50 points below the range that will likely mark the high point of the rise.

What’s the alternative? The present rise is the final segment of a three-wave correction. However, sometimes corrections take a compound form. if that happens, then the present rise won’t be the final leg of the correction.

[S&P 500 E-mini futures at 3:30 p.m., 55-minute bars, with volume]

What does Elliott wave theory say? Wave C{-10} within with 4{-9} is underway. Internally, the C wave will have five waves and is presently in wave 3{-11}.

Wave C is likely to end within the range marked with blue dashed lines on the chart, between 4047.50 and 4203.50.

If the alternative scenario plays out, then wave C{-10} will be followed by a connector, wave X{-10} and then a second corrective pattern, all within the wave 4{-9} upward correction.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 26, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

OLLI Trade

Ollie’s Bargain Outlet (OLLI)

Update 5/26/2022. The listed earnings announcement date for OLLI changed after I entered the position. The new date is June 8 before the opening bell.


I have entered a short bear call vertical spread on OLLI, using options that trade for the last time 23 days hence, on June 17. The premium is a $1.47 credit per contract share and the stock at the time of entry was priced at $45.12.

The Implied Volatility Ratio stood at 64.8%.

Premium:$1.47Expire OTM
OLLI – bear call spreadStrikeOddsDelta
Calls
Long52.5079.0%28
Break-even48.9771.5%36.5
Short47.5064.0%45

The premium is 58.8% of the width of the position’s short/long spread. The profit zone covers an 8.5% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.4:1, with maximum risk of $353 and maximum reward of $147 per contract.

How I chose the trade. The trade was placed to coincide with OLLI’s earnings announcement on the day of entry. The time of day has not yet been announced. The short strikes were set to coincide with the expected move of $6.80 either way, based on options pricing, which gives a price range of $35.24 to $48.84. I structured the position as a bear play because the Zacks Investment Research earnings surprise predictor was negative, at -3.04%, with a strong sell rank of 5.

By Tim Bovee, Portland, Oregon, May 25, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

DLTR Trade

Dollar Tree Inc. (DLTR)

Update 5/26/2022: I exited my short bear call vertical spread on DLTR, 22 days before expiration, for a $4.01 debit per contract/share, a loss before fees of $267 per contract. Shares were trading at $158.60, up $25.14 from the entry level.

The Implied Volatility Rank at exit was 69.8%, down 22.7 points from the entry level.

I exited on the day after entry because the stock price moved contrary to what analysts had expected. DLTR beat earnings expectations, the share price rose sharply, and the bearish options position moved into loss territory. I exited at 109.6% of maximum potential loss.

Shares rose by 18.8% over one day for a +3,186% annual rate. The options position produced a 66.6% loss for a -24,303% annual rate.


I have entered a short bear call vertical spread on DLTR, using options that trade for the last time 23 days hence, on June 17. The premium is a $1.34 credit per contract share and the stock at the time of entry was priced at $133.46.

The Implied Volatility Ratio stood at 92.5%.

Premium:$1.34Expire OTM
DLTR-bear call spreadStrikeOddsDelta
Calls
Long150.0080.0%25
Break-even146.3476.5%29
Short145.0073.0%33

The premium is 53.6% of the width of the position’s short/long spread. The profit zone covers a 9.7% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 2.7:1, with maximum risk of $366 and maximum reward of $134 per contract.

How I chose the trade. The trade was placed to coincide with DLTR’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincide with the expected move of $13.95 either way, based on options pricing, which gives a price range of $120.17 to $146.67. I entered a bearish trade based on the Zacks Investment Research earnings surprise predictor of -4.88% along with a sell rank of 4.

By Tim Bovee, Portland, Oregon, May 25, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose during the session, reaching the 3990s on the futures. The higher it goes, the more likely it is that wave C{-10} within the wave 4{-9} upward correction is still underway. No change in the analysis. I’ve updated the chart.

2:50 p.m. New York time

OLLI earnings play entry. I’ve entered a short bear calls options spread on OLLI and have posted a trade analysis.

2:35 p.m. New York time

DLTR earnings play entry. I’ve entered a short bear call options spread on DLTR and have posted a trade analysis with details of the position’s structure and other details.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded narrowly in the 3900s overnight.

What does it mean? The second of five segments within the final leg of an upward corrective pattern is now underway. When the corrective pattern is complete, it is most likely that the downtrend that began on April 21 from 4509 will resume. I’ve marked the probable ending range of the correction in blue on the chart.

What are the alternatives? There are two, and I consider both to be unlikely.

Alternative #1: The upward correction ended on May 17, and the downward correction has resumed. The severely truncated middle wave of the correction under this scenario makes the chart a poor fit for this analysis.

Alternative #2: The middle wave of the upward correction is still underway and the final wave has yet to begin. The longer the present sideways movement goes, without the price reaching down to the end point of the middle wave so far, the less likely this scenario appears.

[S&P 500 E-mini futures at 3:30 p.m., 50-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave C{-10} within wave 4{-9} — the final wave in an upward corrective pattern — is now underway. The C wave will have five waves within it, and presently wave 2{-11} of that set is now underway. The end of wave C will mark the end of the parent wave 4, if the 4th is a simple correction. Sometimes 4th waves will string together two or three corrective patterns, and if that occurs, then wave C{-10} will be followed by a connecting wave X{-10} and then wave A{-10}, the first wave of a second corrective pattern.

As discussed in yesterday’s Trader’s Notebook, the various rules and tendencies of Elliott wave analysis allows analysts to infer a likely range within which the C wave will end. In this case, wave C{-10} will likely end between 4047.50 and 4203.50. That’s a tendency, not a sure thing.

Under alternative #1, May 17 marked the end of wave 4{-9} and the subsequent decline is wave 5{-9}, which internally is now working through wave 2{-10}, an upward correction within the downtrend.

Under alternative #2, wave B{-10} within wave 4{-9} is not yet complete.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 25, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The final wave of the present upward corrective pattern in the S&P 500 continues. Wave C{-10} within wave 4{-9} will have five waves internally. The 1st wave is complete, a two-day drop from the 3900s in the futures into the 3800s was the 2nd wave, and a 3rd wave to upside may have begun, as the price returns to the 3900s. No change in the analysis. I’ve updated the upper chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to trade in the 3900s overnight, as it has since last Friday.

What does it mean? The upward correction that began May 12 continues, as does its third and likely final leg, which began on May 20.

What are the alternatives? Unchanged from yesterday.

Alternative #1: The second leg of the correction is still be underway. The price has reached the target price range and yet could have a bit more downside left.

Alternative #2: The upward correction ended on May 17, and the decline that followed is a resumption of the downtrend that began on April 21 from 4509.

The Charts. The upper chart is a close-up view of the decline that began on May 4, covering 15 trading days. I’ll discuss it in the “What does Elliott wave theory say?” section. The lower chart covers the past three years and shows the present expanding Diagonal Triangle in its entirety. I’ll discuss it a section called “The Big Picture”, including setting some price targets for the decline that began on January 4.

[S&P 500 E-mini futures at 3:30 p.m., 45-minute bars, with volume]
[S&P 500 index at 9:34 a.m., 2-day bars]

What does Elliott wave theory say? Under the principal analysis, the upward correction, wave 4{-9} is in what most likely will be its final wave, C{-10}. The correction is taking the form of a Flat, and C waves in Flats will often retrace 100% to 165% of the preceding A wave, giving a target price range of 4047.50 to 4203.50. I’ve marked those levels on the chart with blue dashed lines.

I say the C wave is likely the final wave because 4th wave corrections commonly have three waves internally. Sometimes, however, 4th waves will connect two or three corrective patterns patterns together. It’s less common, but not uncommon.

Under Alternative #1, wave B{-10} within wave 4{-9} is nearing an end but has not yet reached completion. It will be followed by a resumption of the downtrend, wave 5{-9}.

Under Alternative #2, the upward correction, wave 4{-9}, ended on May 17 after completing three waves, with an overly short B wave in the middle. The decline the followed is downtrending wave 5{-9}.

The principal and the alternatives are all playing out within downtrending wave 5{-8}, which began on April 21 from 4509.

The Big Picture. The lower chart shows a view of the S&P 500 index since the beginning, on December 26, 2018, of the expanding Diagonal Triangle that has encompassed all of the ups and downs of the markets for more than three years.

The Triangle is wave 5{0} within the wave 5{+1} uptrend that began on March 6, 2009, from 666.79. We’ve come a long way since that middle year of the Great Recession.

A Diagonal Triangle has five waves within it, and the present decline is wave 4{-1}. My question is, how low can it go?

Elliott wave theory provides answers. There are two rules governing the 4th wave of a Diagonal Triangle. It never moves beyond the end of the preceding 1st wave, and must end within the price range of that 1st wave.

Wave 4{-1} can’t move below 2346.58, where wave 1{-1} began, and it must decline to at least 3393.52, the endpoint of wave 1{-1}.

There are also some tendencies relating to 4th waves within Diagonal Triangles.

The 4th wave is usually longer than the preceding 2nd wave. Wave 2{-1} was 1,201.66 points long, wave 4{-1} began at 4818.62, and subtraction gives us a 4th wave endpoint of at least 3616.46, around 350 points below the present level.

The 4th usually retraces between 66% and 81% of the preceding 3rd wave. Wave 3{-1}, which ended at 4818.62, is 2,626.26 in length. So 66% of that length is 1,733.33 and 81% is 2,127.27. Those lengths, subtracted from the endpoint, provide a price range of 2691.35 to 3085.29.

Put all the rules and the tendencies together, and the endpoint of the present wave 4{-1} downtrend is likely to be between 2691.35 and 3085.29, more or less. I’ve marked that range on the chart with blue dotted lines.

However, a caveat. That range describes tendencies. Under the strict rules, wave 4{-1} could end as high as 3393.52 and as low as 2346.58 — each about 300 points beyond the nearest retracement wave the 3rd wave..

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.4 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 24, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:45 p.m. New York time

Correction. The price targets for Wave C{-10} in the Elliott Wave section were slightly off. I’ve corrected the calculation and the text, and have added red dashed lines to the chart that shows the likely range of the wave’s endpoint.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved slightly higher during the session, into the mid 3900s on the futures. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded in a narrow range, in the low 3900s, after trading resumed overnight.

What does it mean? The upward correction that began on May 12 from 3855 is now in its third and likely final leg.

What are the alternatives? There are two:

Alternative #1: The second leg of the correction is still be underway. The price has reached the target price range and yet could have a bit more downside left.

Alternative #2: The upward correction ended on May 17, and the decline that followed is a resumption of the downtrend that began on April 21 from 4509.

[S&P 500 E-mini futures at 3:30 p.m., 45-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, wave 4{-9}, which began on May 12, is now in its third wave, C{-10}. In a Flat corrective pattern, the C wave is usually 100% to 165% as long as the preceding wave A. In this case, wave A{-10} was 240 points long, wave C that is 100% of that length would reach 4047.50, and at 165% of that length would reach 4203.50.

Wave C{-10} ends the corrective pattern, but sometimes corrections, especially 4th waves, will take a compound form, connecting two or three corrective patterns together within a single parent wave. The patterns are separated by connecting waves.

Under Alternative #1, wave B{-10} — the middle wave of its parent wave 4{-9} — is still underway. Friday’s low, 3807.25, was within the target price range, and the pattern can be counted as having three waves internally. Yet the rise and pause after that low could be subwaves of the third subwave within B{-10}.

Under Alternative #2, wave 4{-9} ended on May 17 at 4095. The internal wave structure is a bit muddy — trending waves and corrections seem shallower than they ought to be. Nonetheless, it can be counted as being a complete 4th wave correction.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 23, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. By falling below 3855, the starting point of the first leg of the present upward correction, the price decline during today’s session cleared up one ambiguity in the chart: The wave 4{-9} correction is taking the form of a Flat, which is the most common form taken by 4th waves. That Flat is in its middle segment, wave B{-10}.

Although a 138% maximum retracement of the A wave is a common outcome of the B wave in a Flat, it’s not a firm rule, just a tendency. So the price may well move below the present 3807.50 low of the day toward the 138% retracement level, 3763.80, and might even drop lower. Or, the low of the day might be the end of wave B{-10} and the start of upward wave C{-10}.

No change in the mid-day re-analysis. I’ve updated the upper chart.

1:10 p.m. New York time

A fresh analysis. The S&P 500 reversed and moved below the May 12 low, 3855. That invalidates the principal analysis from this morning and pushes things back to Thursday’s analysis. The middle wave of an upward correction that began on May 12 is still underway.

In Elliott wave terminology, the present wave is B{-10} within wave 4{-9}. The B wave began on May 17 from 4095. B waves often retrace between 100% and 138% of the preceding A wave. This B wave has already broken through the 100% retracement, 3855, and dropping toward the 138% retracement, 3763.80.

Once wave B{-10} is complete, then this morning’s principal analysis of wave C{-10} will kick in.

I’ve retained the old chart and added a new one, with red lines marking the 100% and 138% retracement levels.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

10:15 a.m. New York time

FL earnings play exit. I’ve exited my short bull put options spread on FL for 58.5% of maximum potential profit and have updated the trade analysis with results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, retracing 38.2% of the rise from May 12 to May 17.

What does it mean? The overnight rise is the third leg of an upward correction within a larger downtrend that began on April 21. When the present rise is complete, it will be followed by a resumption of the downtrend that will carry the price below the May 12 low, 3855, and perhaps significantly lower.

What are the alternatives? There are two.

Alternative #1: The upward correction ended on May 17, and the subsequent decline was a resumption of the downtrend, the overnight rise being a smaller upward correction within that downtrend.

Alternative #2: The present corrective pattern will be followed by a second corrective pattern and perhaps a third, forming a compound correction.

[OUTDATED: S&P 500 E-mini futures at 9:35 a.m., 40-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave C{-10} within wave 4{-9} — the third leg within an upward correction — began on May 19.

The upward potential of this wave C depends upon the pattern of the three-wave correction.

If it’s a Zigzag (A: 5 waves internally, B: 3, C: 5), then it will often cover the same distance as the preceding A wave, which was 240 points long, giving a target of 4096.

If it’s a Flat (A: 3, B: 3, C: 5), then wave C will often retrace 100% to 165% of wave A, giving a target of 4095 to 4251.

Under Alternative #1, wave 4{-9} ended on May 17 at 4095. The subsequent decline was wave 1{-10} within downtrending wave 5{-9}, and the overnight rise was wave 2{-10}, an upward correction.

Under Alternative #2, the end of wave C{-10} won’t be the end of wave 4 {-9}. Instead, the C wave will be followed by a connecting wave, which I will label wave X{-10}, and then by a second three-wave pattern, and perhaps a third in a compound correction.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 5{-7} Minuscule, 3/29/2022, 4631 (down)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, in the ever-changing markets, we can judge that similarity of structure only after the fact.

See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, May 20, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

FL Trade

Foot Locker Inc. (FL)

Update 5/20/2022: I exited my short bull put vertical spread on FL, 28 days before expiration, for a $0.27 debit per contract/share, a profit before fees of $38 per contract. Shares were trading at $33.07, up $2.64 from the entry level.

The Implied Volatility Rank at exit was 90.8%, down 13.2 points from the entry level.

I exited on the day after entry at 58.5% of maximum potential profit, well above my normal exit point for earnings plays, 25% of max.

Shares rose by 8.7% over one day for a +3,167% annual rate. The options position produced a 140.7% return for a +51,370% annual rate.


I have entered a short bull put vertical spread on FL, using options that trade for the last time 29 days hence, on June 17. The premium is a $0.65 credit per contract share and the stock at the time of entry was priced at $30.43.

The Implied Volatility Ratio stood at 104.0%.

Premium:$0.65Expire OTM
FL-bull put spreadStrikeOddsDelta
Puts
Long25.0071.0%20
Break-even28.1565.0%25.5
Short27.5059.0%31

The premium is 52% of the width of the position’s short/long spread. The profit zone covers a 7.5% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.8:1, with maximum risk of $185 and maximum reward of $65 per contract.

How I chose the trade. The trade was placed to coincide with FL’s earnings announcement, before the closing bell on the day after entry. The short strikes were set to coincide with the expected move of $4.59 either way, based on options pricing, which gives a price range of $25.92 to $34.94.

By Tim Bovee, Portland, Oregon, May 19, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.