SP500 Analysis

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures in overnight trading completed their rise that began on October 13 and began a shallow correction.

What does it mean? The correction will be followed by a push higher that will complete the first leg of the rise that began on October 1 and will be followed buy a sharp move to the downside that will remain above 4260.

What’s the alternative? The rise since October 1 could prove to be a separator, marking the boundary between two corrective patterns within a compound structure.

[S&P 500 E-mini futures at 9:35 a.m., 100-minute bars, with volume]

What does Elliott wave theory say? The overnight peak at 4469.50 marked the end of wave 3 of Subminuscule degree and the beginning of a shallow 4th-wave correction, all within wave 5 of Minuscule degree. The end of Minuscule 5 will trigger the simultaneous end of wave 1 of Submicro degree, which began October 1 from 4260. The ensuing wave 2 of Submicro degree, if it follows the pattern of most 2nd waves I’ve seen, will retrace much of the 1st-wave rise from October 1. Under the rules of Elliott wave analysis, 2nd waves never move beyond the start of the preceding 1st wave, and so the price will remain above the October 1 low of 4260.

The alternative is unchanged from the last few days: The rise from October 1 is an X wave of Submicro degree separating two corrective patterns in a compound correction. Such compound corrections are common in 4th waves, which matches the nature of the parent, wave 4 of Micro degree, which began September 3.

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, 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, October 18, 2021

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.

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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.

SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued its rise, reaching 4467.50 on the futures, 4475.82 on the index. Wave 3 of Subminuscule degree within wave 5 of Minuscule degree continues. 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 rise overnight, reaching a high of 4446.15.

What does it mean? The rise is the final leg of an uptrend that began October 1 and will be followed by followed by a correction of the rise that began on May 13 from 4046.88 on the index.

What’s the alternative? The present rise is a wave connecting two corrective patterns in a compound structure. The final leg of the uptrend has not yet begun.

Chart. The upper chart is a short-term view of the futures, from September to the present. The lower chart is a long-term view of the index, from 2018 to the present.

[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]
[S&P 500 index, 2-day bars]

What does Elliott wave theory say? The present rise is wave 3 of Subminuscule degree within wave 5 of Minuscule degree, whose completion will mean the end of wave 1 of Submicro degree.

But what does that really signify? One of the great discoveries of R.N. Elliott in the 1930s, as he developed the theory named after him, was that on stock charts, the large and the small follow the same patterns. There is nothing to distinguish a weekly chart with 30-minute bars from a yearly chart with daily bars from a 20-year chart with monthly bars. Large or small, the charts trace patterns that follow the same rules and tendencies.

The larger waves — what I call the parent waves — provide context for understanding the implications of the smaller waves — the child waves. And this operates all the up and down the degrees tracked in Elliott wave theory, from the present wave 3 of Subminuscule degree all the way up to wave 3 of Grand Supercycle degree, which, according to Elliott wave analyst Robert Prechter, founder of Elliott Wave International, got its start in the 18th century.

A brief homage: Prechter’s work taught me everything I know about Elliott wave theory, since I first read his book, The Elliott Wave Principle, in the early 1980s. The Elliott Wave International site is a generous teacher, and I recommend it to anyone who wants to improve their Elliott wave analytical skills. (Not a paid ad. This is me speaking from the heart.)

Here I’ll trace the degrees from small to large, as I understand them through my analysis, describing what I see as the significance of each.

Wave 3 of Subminuscule degree is the middle wave of its parent degree. When it is complete, it will go through a shallow 4th wave correction, and then push up further as a 5th wave. Subminuscule degrees tend to reach completion within a week.

Wave 5 of Minuscule degree is the final wave within its parent wave. When complete, it will mark the end of its parent wave 1 of Micro degree.

Wave 1 of Submicro degree is the first of five waves. First waves tend to be a bit tentative, as though traders aren’t quite able to believe that an uptrend is underway. It is followed by 2nd wave correction that reclaims much of the 1st wave’s rise, and then by an energetic 3rd wave. It is that 3rd wave, in my opinion, that will be likely to break above the September 1 peak of 4545.85 on the index, 4549.50 on the futures.

The parent, wave 5 of Micro degree, is the main actor at the moment. The end of its child wave 5 of Submicro degree will also be the end of wave 5 of Micro degree.

The end of wave 5 of Submicro degree will trigger the end of a series of ancestral waves, all the way up to great-grand-parent: Micro 5, Subminuette 5, Minuette 5 and Minute 5. The largest of the degrees, Minute 5, began on September 30 and so far has lasted a month and a half, with still more time to go.

Wave 3 of Minor degree, Minute degree’s parent, will be complete by the end of the wave 5 of Minute degree and will go into a 4th wave correction. Minor wave 3 is a subwave within an expanding Diagonal Triangle that began on February 26, 2018. In Triangles, the price bounces between the upper boundary and the lower boundary. In expanding Triangles, the boundaries keep getting farther apart. So wave 4 will reach down into the 2000s or lower, and then be followed by wave 5, which will return to a still higher level. The decline will surely feel a bit like the end of the world as we know it.

Wave 5 of Intermediate degree, the expanding Diagonal Triangle that is Minor degree’s parent, will be complete when wave 5 of Minor degree reaches its end. This sets up another cascade of completions, since the end of Intermediate 5 also means the end of its parent, grand-parent and great-grand parent waves, of degrees Primary, Cycle and Supercycle — each in wave 5 — and of wave 3 Grand Supercycle degree.

Wave 3 of Grand-Supercycle degree will be followed by a shallow 4th wave correction upon completion, although “shallow” isn’t what it will feel like, since the decline will be correcting a rise reaching back into early 18th century. It’s quite possible that no one alive today will see the end of wave 4 of Grand-Supercycle degree.

And there we have it, from an overnight rise to a correction potentially lasting a century or more.

And a note on the alternative analysis: If the price reverses and moves back down toward the 4260 level, then the likelihood is that wave 4 of Micro degree is still underway, and the rise-fall pattern is wave X of Submicro degree, standing between two corrective patterns in a compound structure. This has the effect of pushing the beginning of wave 5 of Micro degree down the road a week or more. But eventually wave 4 of Micro degree will end, and the movements described in the principal forecast will begin.

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, 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, October 15, 2021

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
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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.

SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has risen during the session, reaching above the October 7 high, to 4430.25 so far, in a movement that lends credence to my principal analysis: Wave 3 of Subminuscule degree within wave 5 of Minuscule degree is underway, in an Elliott wave pattern that will eventually carry the price above the September 3 peak, 4549.50, which marked the end of wave 3 of Micro degree.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to rise overnight, coming within one point of 4400.

What does it mean? The rise is an energetic middle leg of the rise that began on October 12 following a correction within the larger rise that began on October 1.

What’s the alternative? The correction that began October 7 is still underway and the present rise will connect two corrective patterns in a compound structure.

[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]

What does Elliott wave theory say? Under the principal scenario, the overnight rise is wave 3 of Subminuscule degree within wave 5 of Minuscule degree within wave 1 of Submicro degree within a series of 5th waves of increasing degree, from Micro up to Minute, all within wave 3 of Minor degree, which began on February 23 with the end of the early pandemic crash. This scenario requires the price in the next month or so to work its way above the September 3 high, 4549.50, which was the endpoint of wave 3 of Micro degree.

Under the alternative scenario, the rise will stop short of the October 7 high, 4420.50, and will begin tracing a second corrective pattern within a compound correction, wave 4 of Subminuette degree.

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, 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, October 14, 2021

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.

SP500 Analysis

3:50 p.m. New York time

My trades. I’ve exited my long call position on GLD for a profit and updated the analysis with details.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the day, reaching within 2 points of yesterday’s low on the futures, and then rose again, so far staying below yesterday’s high, 4365, as wave 5 of Micro degree continues. 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 rose slightly in overnight trading while remaining between yesterday’s high and low.

What does it mean? The early stages of the rise from yesterday’s low continues within the larger rise that began October 1. Eventually — probably a month or more from now — the price will exceed the September 3 high of 4549.50. A move above the October 7 high, 4420.50, will strengthen the case for this principal scenario.

What’s the alternative? The downward correction that began October 7 is still underway. A move below the October 12 low of of 4317.25 will strengthen the case for this alternative scenario.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? By my principal analysis, uptrending wave 5 of Minuscule degree began on October 12. So far it has been a tentative rise, with an internal rise (wave 1?), decline (wave 2?) and small rise (first step in wave 3 or another step in wave 2?). This is all happening within wave 5 of Micro degree, which began on October 1 and which will eventually work its way above the September 3 high, 4549.50

By my alternative analysis, the rise-decline-rise pattern since October 12 is a continuation of wave 4 of Minuscule degree, meaning the correction that began October 7 is still underway.

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, 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, October 13, 2021

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
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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.

SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose slightly during the session and then reversed slightly, and has continued to trade above its overnight low, as wave 5 of Minuscule degree continues to work through the early stages of its rise. 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 declined to a low of 4317.25 in overnight trading and then rose into the 4360s.

What does it mean? The three-leg pattern of the decline completes the correction that began on October 7, and the price has begun a rise that will eventually exceed the September 3 high of 4549.50. I have some uncertainty over whether the correction is indeed over, for reasons described in the alternative scenario.

What’s the alternative? It is possible to count the decline from October 7-12 as completing only the first leg of the correction, with an upward move (now underway) followed by another downward move. It is also possible that the rise that began last night is a separator wave that will be followed by a second corrective pattern in a compound structure, extending the correction and putting off the eventual rise to a new high.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? Under my principle analysis, the decline from October 7-12 is wave 4 of Minuscule degree, with three waves of Subminuscule degree internally, A-B-C. Under my alternative analysis, that decline is wave A of Subminuscule degree with three waves of Bitsy degree internally. As always with Elliott, degree identity involves a lot of ambiguity that is often resolved only after the price movement is complete. It’s also possible, under the first alternative scenario, that Subminuscule waves A through C don’t complete the 4th wave correction, and instead, the rise that began last night is an X wave, which will be followed by a second corrective pattern in a compound structure.

Whichever scenario plays out, the correction will be followed by a 5th wave rise of Minuscule degree that will complete the parent, wave 1 of Submicro degree, whose parent, grandparent and great-grandparent waves, up four levels to Minute degree, are all 5th waves, within wave 3 of Minor degree, which began at the end of the pandemic crash last year, on February 23.

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, 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, October 12, 2021

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.

SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell into the afternoon from a morning high of 4407.50 on the futures, remaining above the Sunday night low. Wave 4 of Minuscule degree continues. No change in the analysis. Chart updated.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a low of 4352.25 when trading resumed Sunday evening and rose slightly.

What does it mean? The low and reversal were a continuation of a shallow correction within an uptrend. The low may have marked the end of the first of, most likely, three segments within the correction, although that is not a certainty.

What’s the alternative? It remains possible that the uptrend is in fact a separator within a larger ongoing downward correction. The separator will be followed by another corrective pattern in a compound structure.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]

What does Elliott wave theory say? Under principle scenario, the shallow correction — wave 4 of of Minuscule degree — began on October 7 and is possibly in the second segment internally, wave B of Subminuscule degree.

The pattern is happening within wave 5 of Micro degree, which began on October 1. The 5th wave will eventually move above the preceding 3rd wave, which ended on September 3 at 4549.50, and the move could carry the price significantly above that level.

Under the alternative scenario, wave 5 of Micro degree has not yet begun. Instead, wave 4 of Micro degree is forming a compound structure, and the rise from October 1 is wave X of Submicro degree, separating the now complete first corrective pattern from a second corrective pattern that has not yet begun.

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, 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, October 11, 2021

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.

SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 spent the session trading in a narrow range as the sideways-trending wave 4 of Minuscule degree continued on its course. No change in the analysis. I’ve updated the upper chart.

2:50 p.m. New York time

My trades. I’ve exited my long call position on GM for a profit.

9:35 a.m. New York time

What’s happening now? In overnight trading, the S&P 500 E-mini futures declined by nearly 40 points from yesterday’s peak of 4420.50.

What does it mean? The decline is the second correction in the early stage of the uptrend that began October 1. Once the correction is over, the price will resume its rise, eventually exceeding 4549.50, the high set on September 3.

What’s the alternative? It remains possible that the rise from October 1 is a separator between two corrective patterns in a compound structure. Under this scenario the uptrend lies in the future, having not yet begun.

Charts. The upper chart is a near-term view of the S&P 500 E-mini futures; the lower chart shows a longer-term view, dating back to the early pandemic crash.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]
[S&P 500 index at 9:33 a.m., daily bars]

What does Elliott wave theory say? Upper chart: Under my principle analysis, the S&P 500 has begun a 4th wave of Minuscule degree within wave 1 of Submicro degree. Minuscule 4, which will most likely be a Flat, will be followed by a 5th wave to the upside which, when it ends, will also mark the end of Submicro 1 and the beginning of a Submicro 2 correction. Second waves often retrace much of the preceding 1st wave, and so the price could again dip below 4300, while remaining above 4260, the low of October 1. The end of Submicro 2 will mark the start of wave 3 of Submicro degree, which will carry the price beyond recent levels.

Under the alternative scenario, the rise from October 1 and the future decline is wave X of Submicro degree, marking the division among two corrective patterns in a compound structure.

The lower chart shows the boundaries of an expanding Diagonal Triangle that began in December 2018. The 3rd wave of Minor degree is presently at the upper boundary. It will eventually approach the lower boundary as a 4th wave and then rise again to the upper boundary in a 5th and final wave.

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, 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, October 8, 2021

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
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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.

GM Trade

General Motors Co. (GM)

Update 10/8/2021: The price of my GM option rose sharply after the company announced revenue expectations from electric vehicles. Although the Fisher Transform indicator continues to give an up signal, I took my profits.

I exited my long call position 105 days before expiration, for a $4.75 credit per contract/share, a profit before fees of 120 per contract. Shares were trading at $58.53, up $2.09 from the entry level.

The Implied Volatility Rank at exit was 18.8%, down 0.1 point from the entry level.

I decided to exit despite the lack of an indicator signal based on past experiences wherein a price jump based on news is followed by a decline. I considered it better to exit now and put the money to work elsewhere.

Shares rose by 3.7% over one day for a +1,352% annual rate. The options position produced a 33.8% return for a +12,338% annual rate.


I have entered a long call on GM, using options that trade for the last time 106 days hence, on January 21, 2022. The premium is a $3.55 debit per contract share and the stock at the time of entry was priced at 56.44.

The Implied Volatility Ratio stands at 18.9%

Premium:$3.55Expire OTM
GM-long optionStrikeOddsDelta
Call
Long57.5058.0%49

The maximum risk is $355 per contract and the maximum reward is uncapped.

How I chose the trade. The Fisher Transform indicator gave a buy signal, and I confirmed that it was unlikely to be a whipsaw based on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, October 7, 2021

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.

SPY Trade

SPDR S&P 500 ETF Trust (SPY)

I have entered a short bull put spread on SPY, using options that trade for the last time 43 days hence, on November 19. The premium is a $1.12 credit per contract share and the stock at the time of entry was priced at $441.25.

The Implied Volatility Ratio stands at 20.1%

Premium:$1.12Expire OTM
SPY-bull spreadStrikeOddsDelta
Puts
Long428.0066.0%31
Break-even434.1263.0%34
Short433.0060.0%37

The risk/reward ratio is 3.5:1, with maximum risk of $388 and maximum reward of $112 per contract.

The premium is 44.8% of the width of the position’s short/long spread. The profit zone covers a 5% move to the downside.

How I chose the trade. I entered the traded based on Elliott wave analysis, concluding that wave 3 of Minuscule degree within wave 1 of Submicro degree began on October 6, a set-up that has upside potential.

By Tim Bovee, Portland, Oregon, October 7, 2021

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.

SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose during the day, reaching a peak of 4420.50 on the futures, 4429.97 on the index. Late in the day it reversed, falling slightly. All of this is happening within uptrending wave 3 of Minuscule degree within wave 1 of Submicro degree. That is, the late-day decline is a correction within an uptrend. No change in the analysis. I’ve updated the chart.

2:30 p.m. New York time

My trades. I’ve entered a short bull put spread position on SPY and a long call option on GM, and exited a long put on XLY.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued climbing overnight, exceeding the high of October 1.

What does it mean? The break beyond the range of the correction than ran from October 1 to October 6 adds weight to a scenario that says the correction has ended and a rise is underway that will eventually exceed the September 3 high of 4549.50.

What’s the alternative? If the price reverses and falls back to the 4270s, then the alternative scenario comes into play: The present rise separates two corrective patterns in a compound structure.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]

What does Elliott wave theory say? Under my principle analysis, the rise that began yesterday is wave 3 of Minuscule degree within wave 1 of Submicro degree within 5th waves of successively higher degrees — Micro, Subminuette and Minuette — within wave 5 of Minute degree within wave 3 of Minor degree, which began on October 30, 2020.

The September 3 peak ended wave 3 of Micro degree, and wave 4 of Micro degree ended on October 1. The present wave 5 of MIcro degree will eventually reach to new heights, beyond the end of the preceding 3rd wave.

If the price reverses before reverses from its present level, plus or minus, then wave 4 of Micro degree is still underway and is forming a compound structure. Under this alternative scenario, the present wave is wave X of Submicro degree and will be followed by another corrective pattern, most likely a Zigzag or a Flat.

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, 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, October 7, 2021

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.