Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose back into the 4190s early in the session but then fell again, back into the 4130s. This morning’s analysis is unchanged: The middle segment of an upward correction that began on October 13, 2022 is still underway. In the terminology of Elliott wave analysis, wave C{-8} within wave 2{-7} continues. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined sharply, from the 4170s to the 4130s, as the employment situation report showed non-farm payrolls growing at nearly triple the expected rate. In overnight trading, the price remained below the February 2 high, 4208.50.

What does it mean? The final segment of an upward correction that began on October 13, 2022 continues and is nearing its end. That final segment internally is a middle part within the final segment, the 3rd of five directional movements, or waves.

When the middle wave within the final segment is complete, it will be followed by a declining wave, and then a rise to new highs.

When that final segment is complete, it will be the end of the upward correction, and will be followed by an energetic downtrend that will carry the price at least 700 points lower, and most likely much lower than that.

What are the alternatives? The middle part of that final segment may have ended at the February 2 high, and the 4th wave within that segment may be underway. It will be followed by a rising 5th segment that will complete the upward correction.

Chart notes. In developing Elliott wave analysis in the 1930s, “waves” is the term R.N. Elliott used to describe directional movements on the chart. The waves on a chart form a complex structure, with larger waves containing smaller waves and also being part of still larger waves, with all waves producing the same patterns and following the same rules. Nowadays we call that a fractal structure.

Today we still follow Elliott’s practice of numbering waves within trending waves and using letters for waves within corrective waves. Each wave has a place — a degree — within the fractal hierarchy. I use subscripts, within curly brackets, to show the degree. The smaller the number in the subscript, the smaller the degree.

On today’s chart below, the waves I’m tracking are relatively small, and the degrees are negative numbers.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? Here’s where the S&P 500 futures stand in the fractal hierarchy.

Under both the principal and the alternative analyses:

  • The upward correction is rising wave 2{-7},
  • One degree lower, wave 2{-7} is in its final segment, declining wave C{-8}.

Under the principal analysis:

  • Wave C{-8}, in turn, is in its middle segment, rising wave C{-9}.

Under the alternative analysis:

  • Wave C{-9} ended on February 2 — yesterday — at 4208.50
  • Declining wave D{-9} — the 4th of five subwaves within wave C{-8} — is now underway.

Wave C{-9} is the third of five subwaves within wave C{-8}. When the 5th subwave is complete, it will also be the end of wave C{-8} and of the upward correction, wave 2{-7}.

Downtrending wave 3{-7} will follow and will carry the price below 3502, the starting point of wave 2{-7}. Third waves are almost always the longest and most energetic of the trending waves, and I expect wave 3{-7} to move significantly below 3502.

All of that is happening within wave 3{-6}, which began on August 16, 2022. Wave 3{-6} is one of a series of nested downtrending wave, moving up the fractal structure five degrees, to wave 4{-1}, which began on January 4, 2022 at 4808.25. Wave 4{-1} is the next-to-the-last wave within a large expanding Diagonal Triangle, wave 5{0}, that began on December 26, 2018.

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)
  • S&P 500 Futures and index:
  • 4{-1} Minor, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-2} Minute, 1/4/2022, 4808.25 (down)
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down)
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 2{-7} Minuscule, 10/13/2022, 3502 (up)

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, February 3, 2023

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 futures rose during the session, to 4208.50, and then pulled back, into the 4150s.

The upward correction that began on October 13, 2022 continues and is in its last segment, which began on December 22, 2022. That last segment, in turn, is in its middle portion, meaning more upside potential remains.

As an alternative, the session high could mark the end of the correction’s final segment and of the correction itself. Under this scenario, the subsequent decline is the start of a significant downtrend.

In Elliott wave terminology, the upward correction, wave 2{-7}, is still underway and is in its final subwave, wave C{-8}, which is in its middle wave of five, wave C{-9}.

Under the alternative analysis, the session high may mark the end of wave C{-8} and of the wave 2{-7}. I consider this scenario to be unlikely because the wave structure within wave C{-8}, at the {-9} degree, shows it has further to go before reaching its end.

The chart I posted at 11:50 a.m. had an error, showing wave B{-9} twice. I’ve corrected it to show that the present rise is wave C{-9}.

Although what is happening today looks large, it’s fairly small in comparison to wave 4{-1}, the downward movement that began on January 4, 2022, and even smaller in comparison to the vast expanding Diagonal Triangle, wave 5{0}, that encompasses all that is happening at present. Wave 5{0} began its work on December 26, 2018.

So today’s drama is but a momentary rush within a far larger saga.

[S&P 500 index at 3:25 p.m., 3-day bars]

The top chart, newly added, shows the entirety of the expanding Diagonal Triangle so far, using the S&P 500 index. It is labeled with the revised analysis.

The middle chart, initially posted at 11:30 a.m. and updated for this posting, shows the S&P 500 futures, including the upward correction and the downtrend that preceded it, labeled with the revised analysis.

The lower chart, posted at 9:35 a.m., shows the S&P 500 futures labeled with the former, now superseded analysis and has not been updated.

11:50 a.m. New York time

Chart reanalyzed. The S&P 500 futures moved above 4180 at the opening bell, invalidating the analysis of this morning and stretching back to late December. Here is the new analysis.

What’s happening now (revised). The futures rose into the 4190s early in the session.

What does it mean (revised)? An upward correction that began on October 13, 2022 is underway and is in its third and final segment.

What are the alternatives (revised)? There are alternatives, but I have more analysis to do before I’ve nailed them down. Tomorrow…

Chart note (revised). This chart shows the revised analysis. I’ve retained the former, now invalid, analysis from this morning.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave analysis say (revised)? These are the waves that I’m tracking under the revised analysis.

Principal analysis: The upward correction, wave 2{-7}, began on October 13, 2022 from 3502. It is now in its third subwave, wave C{-8}. When wave C{-8} is complete, it will also be the end of the upward correction, wave 2{-7}, which will be followed by a significant downtrend, wave 3{-7}, which will carry the price down to 3502, the starting point of the upward correction, and likely significantly below that level.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, reaching a high of 4176.25 so far.

What does it mean? The upward correction that began on December 22, 2022 continues. Under that scenario, the highest the price can rise at this point is 4180. Any movement above that point would invalidate the analysis that follows and would require a major reanalysis.

The yet unanswered question about today’s high is what it represents: The peak of the first segment of the upward correction, or of the correction as a whole. The principal analysis this morning continues to show it as being the end of the first segment of the correction.

What are the alternatives? There are two.

  • Alternative #1: The first segment of the upward correction, wave A{-10}, ended at the overnight high. The declining second segment, wave B{-10}, will follow.
  • Alternative #2: The third and final segment ended at the overnight high, and with it the entire upward correction. A downtrend is now underway and will carry the price below 3785.50, the starting point of the correction, and most likely significantly below that level.

If the price moves above 4180, the revised analysis would look something like this:

  • The December 13 peak becomes the first segment of an upward correction that began on October 13, 2022.
  • The decline that followed becomes the second segment of that correction, still underway.
  • The upward correction follows a downtrending wave that began on August 16, 2022 from 4327.50.

Chart note. I’ve placed a Fibonacci ladder on the chart, in red, showing how close the price has come to a 100% retracement of the downtrend the preceded the correction.

Directional movements — “waves” in the parlance of Elliott wave analysis — form a fractal pattern of smaller waves within larger waves, which in turn are building blocks of still larger waves. A wave’s position in the fractal hierarchy is called its “degree”. I show each wave’s degree with a numerical subscript within curly brackets. The smaller the subscript’s number, the smaller the degree. The chart shows relatively small waves, lasting for months rather than years, and so the subscript’s are negatives.

The following chart is from an earlier analysis, which has been replaced by a new analysis. See the chart above.

[S&P 500 E-mini futures at 9:35 a.m., 4-hour bars, with volume]

What does Elliott wave theory say? The waves I’m tracking are unchanged from yesterday, and their description, below, is only slightly modified.

Principal analysis: The upward correction is wave 2{-9} and is nearing the end of its first subwave, wave A{-10}. The Fibonacci ladder on the chart tracks the wave 2{-9}’s retracement of the downtrending wave that preceded it, wave 1{-9}.

Analysis #1: Wave A{-10}, the first subwave of wave 2{-9}, ended at today’s high. The second subwave, wave B{-10}, is now underway.

Analysis #2: Wave 2{-9} and its third and final subwave, wave C{-10} ended at today’s high. Wave 3{-9}, a downtrend, is now underway.

The three analyses are are all happening within wave 1{-8}, a downtrending wave with wave 2{-7}. Both began on December 13, 2022, from 4110. Those two waves, in turn, are subwaves of a nested series of downtrending waves of increasing size, up to wave 4{-1}, the next-to-the-last subwave of an expanding Diagonal Triangle, wave 5{0}, which began on December 26, 2018.

A reanalysis, should it become necessary, will have these waves:

  • The December 13, 2022 peak at 4180, now the end of wave 2{-7}, becomes the end of wave A{-8}, the first segment of an upward correction that began on October 13, 2022. Wave 2{-7} is still underway.
  • Declining wave B{-8} is now underway and is the second segment of the correction.,
  • The upward correction is a subwave of downtrending wave 3{-6}, which began on August 16, 2022 from 4327.50.

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)
  • S&P 500 Futures and index:
  • 4{-1} Minor, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-2} Minute, 1/4/2022, 4808.25 (down)
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down)
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 2{-7} Minuscule, 10/13/2022, 3502 (up)

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, February 2, 2023

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 futures whipsawed between the 4040s and the 4080s after the Federal Open Market Committee announced a 25-basis-point increase in the Fed Funds rate. Fed Chair Jerome Powell’s news conference began at a low of 4048.50, and as he spoke the price shot up to 4144.50, remaining near that high point as the closing bell approached.

In terms of Elliott wave analysis,

  • The price remains a bit less than 30 points below 4180, the starting point of the preceding wave, 1{-9}. Under the Elliott wave rules, the price cannot move above that level. If it does, it forces a major reanalysis.
  • The rise confirms this morning’s principal analysis: An upward correction that began on December 22, 2022, wave 2{-9}, is still underway. Under that analysis, the correction is nearing the end of its first internal segment, wave A{-10}.
  • The rise also leaves the two alternative analyses in place, but the January 26 high, 4109.25, has been replaced by today’s high, 4144.25 so far.

The alternatives now read:

  • Alternative #1: The first segment of the upward correction, wave A{-10}, ended at the February 1 high (whatever it turns out to be). The declining second segment, wave B{-10}, will follow.
  • Alternative #2: The third and final segment ended at the February 1 high, and with it the entire upward correction. A downtrend is now underway and will carry the price below 3785.50, the starting point of the correction, and most likely significantly below that level.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures see-sawed in the 4070s and 4080s in overnight trading, remaining above an important resistance level. Trading today will be event driven. The Federal Open Market Committee announces it’s interest rate decision at 2 p.m., and Federal Reserve Chair Jerome Powell takes questions from reporters at 2:30 p.m.

What does it mean? The resistance price is 4029.30, the 61.8% Fibonacci retracement level within the upward correction that began on December 22, 2022 and is continuing the end game of its first segment. When that segment is complete, after exceeding the correction high so far, 4109.25, attained on January 26, it will be followed by a declining second segment that will remain above the correction’s starting point, 3785.50. I expect the correction to have three segments altogether.

What are the alternatives? The same two that have been with us for awhile.

Alternative #1: The first segment of the upward correction ended at the January 26 high. The declining second segment is now underway.

Alternative #2: The third and final segment ended at the January 26 high, and with it the entire upward correction. A downtrend is now underway and will carry the price below 3785.50, the starting point of the correction, and most likely significantly below that level.

Chart notes. Under Elliott wave theory, the ups and downs we see on the chart are called waves, built from smaller waves and in turn serving as building blocks for larger waves, in a complex fractal pattern. Bigger or smaller, all waves produce the same patterns and follow the same rules.

A wave’s placement within the fractal pattern is called it’s degree. I show the degree as a subscript after each wave’s number (in trending waves) or letter (in corrective waves) designator, setting off the subscript with curly brackets. The smaller the subscript number, the lower the size of the wave within the fractal structure.

I’ve superimposed a retracement ladder on the chart, in red, showing the Fibonacci retracement points. With the price above the 61.8% Fibonacci retracement, that level becomes an import level of support. If the price stays above it, then that buttresses the principal analysis. If it falls below it and stays down, that lends credence to the alternative analyses.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? Unchanged from yesterday, and I’ve copied the text of this section, unchanged.

These are the waves I’m tracking in my analyses.

Principal analysis: The upward correction is wave 2{-9} and is nearing the end of its first subwave, wave A{-10}. The Fibonacci ladder on the chart tracks the wave 2{-9}’s retracement of the downtrending wave that preceded it, wave 1{-9}.

Analysis #1: Wave A{-10}, the first subwave of wave 2{-9}, ended on January 26. The second subwave, wave B{-10}, is now underway.

Analysis #2: Wave 2{-9} and its third and final subwave, wave C{-10} ended on January 26. Wave 3{-9}, a downtrend, is now underway.

The three analyses are playing out within wave 1{-8}, a downtrending wave with wave 2{-7}. Both began on December 13, 2022, from 4110. Those two waves, in turn, are subwaves of a nested series of downtrending waves of increasing size, up to wave 4{-1}, the next-to-the-last subwave of an expanding Diagonal Triangle, wave 5{0}, which began on December 26, 2018.

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)
  • S&P 500 Futures and index:
  • 4{-1} Minor, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-2} Minute, 1/4/2022, 4808.25 (down)
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down)
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, February 1, 2023

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 futures rose during the session, reaching the 4070s and remaining below the January 26 high, 4109.25, which is the peak so far of the upward correction that began on December 22, 2022. 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 fell in overnight trading, reaching a low of 4007.50, and then reversed, rising back into the 4040s.

The decline brought the price below the 61.8% Fibonacci level, and a whipsaw brought it back above that resistance point. The rapid movement coincided with release of the 4th quarter Employment Cost Index, which, at 1%, was lower than the consensus expectation of 1.1% and the prior quarter result of 1.2%.

What does it mean? The upward correction that began on December 22 is nearing the end of its first segment. The 61.8% resistance level, 4029.30, is a key price in assessing the chart. If the futures stay above that level, then the principal analysis remains the most likely assessment. If price swiftly moves below that level, then the alternatives gain credence.

The correction’s first segment has reached a high of 4109.25 on January 26. A move above that level would discredit the alternative analyses.

What are the alternatives? There are two, both

Alternative #1: The first segment of the upward correction ended at the January 26 high. The declining second segment is now underway.

Alternative #2: The third and final segment ended at the January 26 high, and with it the entire upward correction. A downtrend is now underway and will carry the price below 3785.50, the starting point of the correction, and most likely significantly below that level.

Chart note. The chart continues to display the Fibonacci ladder for the upward correction — in red — showing the correction’s retracement of the downtrendng wave that preceded it.

The directional movements — “waves” — in Elliott wave analysis form a fractal structure, within which each wave contains smaller and is in turn contained by a larger wave. All waves, big and small, produce the same suite of patterns and follow the same rules.

To analyze a chart, each wave must be located within the fractal structure — which waves are contained by which larger waves, up and down the structure. In labeling this chart, I’ve given each wave a number for a subwave of trending waves and letter for a subwave of corrective waves. I designate the place within the fractal structure, the wave’s degree, with a subscript in curly brackets designating the wave’s relative size. The smaller the subscript number, the lower the wave’s degree.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? These are the waves I’m tracking in my analyses.

Principal analysis: The upward correction is wave 2{-9} and is nearing the end of its first subwave, wave A{-10}. The Fibonacci ladder on the chart tracks the wave 2{-9}’s retracement of the downtrending wave that preceded it, wave 1{-9}.

Analysis #1: Wave A{-10}, the first subwave of wave 2{-9}, ended on January 26. The second subwave, wave B{-10}, is now underway.

Analysis #2: Wave 2{-9} and its third and final subwave, wave C{-10} ended on January 26. Wave 3{-9}, a downtrend, is now underway.

The three analyses are playing out within wave 1{-8}, a downtrending wave with wave 2{-7}. Both began on December 13, 2022, from 4110. Those two waves, in turn, are subwaves of a nested series of downtrending waves of increasing size, up to wave 4{-1}, the next-to-the-last subwave of an expanding Diagonal Triangle, wave 5{0}, which began on December 26, 2018.

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)
  • S&P 500 Futures and index:
  • 4{-1} Minor, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-2} Minute, 1/4/2022, 4808.25 (down)
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down)
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 31, 2023

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 futures reached a high of 4078 early in the session and then declined, falling so far into the 4030s. The price remains slightly above the 61.8% Fibonacci retracement level, 4029.30, which is often a major resistance point.

No change in this morning’s 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 after trading resumed overnight, reaching a low so far of 4040, well below the January 27 high, 4109.25, but above the 61.8% Fibonacci retracement level, 4029.30.

What does it mean? The decline is a part of the first segment of an upward correction that began on December 22, which is still underway although nearing its end. Under this scenario, the price will quickly reverse and move higher. The further the price falls, the more likely it becomes that an alternative scenario better matches the chart.

What are the alternatives? The alternative scenarios consider the upward correction further advanced than does the principal analysis.

In Elliott wave analysis, each segment — a directional movement called a “wave” — has a characteristic called a “degree”, which places it within the complex fractal structure of waves containing smaller waves and being contained by larger waves, with all waves producing the same patterns and following the same rules.

A reading of how far advanced the correction is depends upon how we read the degree of each wave. And there is no reliable way to do that in advance. We only know the degrees for sure one a pattern is complete.

So consider the waves within the rise from December 22. In the principal analysis, I place those waves two degrees below the entire correction. In the alternatives, I move those waves one degree higher. Having done so, we have two alternatives.

Alternative #1: The correction is in its third and final segment, and the decline from January 27 is a subwave of that segment. The price will soon reverse and move higher. For the analysis to be correct, the price must remain below 4180, the starting point of the downtrending wave that preceded the correction.

Alternative #2: The January 27 high marks the end of the final segment of the correction, and of the correction itself. The decline that has followed is the first segment of a downtrend, which will carry the price below 3785.50, the starting point of the upward correction, and most likely significantly below that level.

Chart note. I’ve placed a Fibonacci retracement ladder on the chart, to better understand the upward correction’s retracement of the preceding downtrending wave. The 61.8% retracement level is a major decision point for prices, a place where they either reverse or breakthrough and continue onward. For this correction the 61.8% retracement is at 4029.30.

Either way, the movement brings clarity to the chart. A bounce back to the upside lends credence to the principal analysis and alternative #1. A breakthrough downward favors alternative #2.

I show the degree of each wave using a subscript, within curly brackets, showing the position of the wave in relation to a very large wave, the base, that began in December 2018 and that encompasses everything that has happened on the chart since that date. The upward correction has the subscript {-9}, meaning it is nine degrees below the base. The smaller the subscript number, the lower the degree.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? The upward correction is wave 2{-9}, nine degrees below the base, wave 5{0}.

Under the principal analysis, wave 2{-9} is in its first subwave, A{-10}.

Under alternative #1, wave 2{-9} is in its third and final subwave, C{-10}.

Under alternative #2, wave 2{-9} ended on January 27 and downtrending wave 3{-9} began on that date. Wave 3{-9} is presently in its initial subwave, 1{-10}.

All of this is happening within downtrending wave 1{-8}, which began on December 13. Wave 1{-8} is a subwave within a series of nested downtrending waves of increasing size, running from wave 3{-7}, which also began on December 13, up to wave 4{-1}, which began on January 4, 2022.

Up an additional degree is the base, wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2019. The present decline, wave 4{-1}, is the next to the last wave within the triangle. It will be followed by wave 5{-1}, which will rise above wave 4{-1}’s starting point, 4808.25 on the futures, and perhaps significantly above that level.

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)
  • S&P 500 Futures and index:
  • 4{-1} Minor, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-2} Minute, 1/4/2022, 4808.25 (down)
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down)
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 30, 2023

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 futures continued to rise during the session, reaching above 4100. The 61.8% Fibonacci retracement level, mentioned in the Chart note below, is at 4029.30, so the price as moved a bit beyond, although such breakouts aren’t uncommon.

Nothing that has happened so far run against the principal analysis that has been with us for awhile: An upward correction, wave 2{-9}, is underway. The higher the price, the closer it comes to a level that would discredit that analysis and force a major re-analysis of the chart. Under the rules of Elliott wave analysis, a 2nd wave cannot move beyond the starting point of the 1st wave that preceded it. For wave 2{-9}, that sets an upper limit of 4180. If the price moves above that level, then the rise isn’t wave 2{-9} and something else is going on,

But, for now, 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 meandered sideways overnight, staying largely in the 4050s and 4060s.

What does it mean? The price remained below the high point of an upward correction that began on December 22, 2022 and is now in its final leg.

What are the alternatives? The indecisive trading has done nothing to give an edge to the principal analysis or one of the two alternatives, which are unchanged for a second day in a row.

Alternative #1: The first segment ended at the January 26 high.

Alternative #2: The third and final segment ended at the January 26 high, and with it the entire upward correction. 

Chart note. I’ve placed a Fibonacci ladder, in red, on the chart, showing the retracement levels that tend to be reversal points.The most reliable of these is the 61.8% retracement. The price has shot above that level twice, on January 23 and January 25, suggesting that the futures are approaching a reversal to the down side.

I’ve labeled the waves — directional movements — in my usual fashion: Subwaves of trending waves are labeled with numbers, and of corrective waves, with letters. The placement of a wave within the fractal hierarchy of the chart — its degree — is shown by a subscript, in curly brackets. The lower the subscript number, the smaller the degree.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? These are the waves I’m tracking within the upward correction that began on December 22, 2022 — wave 2{-9}:

  • Principal analysis: Upward wave A{-10}, a subwave of 2{-9}, is still underway.
  • Alternative #1: Wave A{-10} ended yesterday and downward wave B{-10} is underway.
  • Alternative #2: Rising wave C{-10}, the final wave in the corrective pattern, ended yesterday, bringing wave 2{-9} to an end. Downtrending wave 3{-9} has begun and will carry the price below 3785.50 — the starting point of wave 2{-9} — and potentially much lower.

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)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 27, 2023

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. So far during the session, the S&P 500 futures have dropped into the 4020s and risen back in the 4060s. The ups and downs of the last few days have centered on the 61.8% Fibonacci retracement level, meaning that the upward correction has taken back about that much of the downtrend that preceded it. In Elliott wave terminology, wave 2{-9} — the upward correction — has retraced +/- 61.8% of wave 1{-9} — the preceding downtrend.

I’ve drawn a Fibonacci ladder on the chart in read, showing the retracement levels. A 61.8% retracement is a common reversal point for corrections, and the fact that the retracement has reached that level and stalled lends credence to Alternative Analysis #2, that the correction is reaching an end.

I’m not yet ready to buy into that interpretation of the chart. Nonetheless, it’s a strong competitor with my principal analysis, which has the uptrend still underway and in its first leg.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures whipsawed after the 4th quarter GDP was released, ending by rising into the 4060s, to a new high for January.

What does it mean? The inflation metric in the GDP report came in at +3.2% compared to the consensus expectation of +4.3%. The chart analysis remains unchanged: An upward correction that began on December 22, 2022 continues and is in its first segment.

What are the alternatives? Also unchanged.

Alternative #1: The first segment ended at today’s high.

Alternative #2: The third and final segment ended at today’s high, and with it the entire upward correction. 

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? The upward correction is wave 2{-9}. The three scenarios in today’s principal analysis plus the two alternatives differ in their wave labeling within waver 2{-9}.

  • Principal analysis: Upward wave A{-10} is still underway.
  • Alternative #1: Wave A{-10} ended today and downward wave B{-10} has begun.
  • Alternative #2: Rising wave C{-10}, the final wave in the corrective pattern, ended today, also bringing wave 2{-9} to an end. Downtrending wave 3{-9} has begun and will carry the price below 3785.50 — the starting point of wave 2{-9} — and potentially much lower.

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)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 26, 2023

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 futures price continued to fall early in the session, to 3963.25, and the reversed, rising so far into the 4030s. 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 fell in overnight trading, reaching 3980.

What does it mean? An upward correction that began on December 22, 2022 is underway and is in its first of three segments. When the present first segment is complete, it will be followed by a declining second segment, and then by a third segment that once again pushes to the upside.

This principal analysis is based on a count that sees the first segment as having completed three of five subwaves.

What are the alternatives? I’m finding a lot of ambiguity in this chart, which has led to a several alternatives. The lower the price goes, the more likely one of the alternatives becomes.

Alternative #1: The first segment ended at the January 23 high, 4056.75. This scenario is based on a count of five complete subwaves, the expected count within the first wave within a Zigzag corrective pattern. This alternative requires that the price remain above 3785.50, the starting point of the upward correction.

Alternative #2: The third and final segment ended at the January 23 high, and with it the entire upward correction. The internal count since the correction began can be viewed as three complete subwaves. This scenario will be confirmed if the price moves below 3785.50, the starting point of the upward correction.

Chart notes. Segments, called “waves” in Elliott wave analysis, are labeled on the chart with numbers if they occur within trending waves and letters if they’re within corrective waves. The analysis is based on an understanding that no wave stands alone. Each wave is part of a larger wave and in turn contains smaller waves, all of which form the same sorts of patterns and follow the same rules. Each wave has a place within the hierarchy of nested waves, called a fractal hierarchy. I show the relative position of each wave with a subscript, contained within curly brackets, following the wave number. The smaller the subscript number, the lower in the hierarchy the wave.

The chart shows the S&P 500 futures from September 15, 2022 to the present.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? Here are the waves of the principal analysis and each alternative.

For all analyses, the upward correction is wave 2{-9}.

Principal analysis:

  • Wave 2{-9} is in its first subwave, rising wave A{-10}. When complete, it will be followed by declining wave B{-10}.

Alternative #1:

  • Wave A{-10} ended on January 23 at 4056.75 and declining wave B{-10} is underway. It will be followed by rising wave C{-10}, which will complete the wave 2{-9} upward correction.

Alternative #2:

  • Wave C{-10} ended on January 23, and with it, the upward correction, wave 2{-9}. The decline that followed is downtrending wave 3{-9}, which will carry the price below 3785.50, the beginning of the upward correction, and most likely significantly below that level.

All scenarios are part of a larger set of waves:

  • The upward correction, wave 2{-9}, is a subwave of downtrending wave 1{-8}, which began on December 13, 2022 from 4110.
  • Wave 1{-8} is in turn a subwave of a series of declining waves, up to wave 4{-1}, which began on January 4, 2022 from 4808.25, the point where the present long-running bear market began.
  • Wave 4{-1} is the next to the last wave within an expanding Diagonal Triangle that began on December 26, 2018. When the wave 4{-1} decline is complete, it will be followed by rising wave 5{-1}, which will carry the price above the January 4 high, 4808.25, and perhaps significantly above that level.

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)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 25, 2023

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&P500 has traded in a narrow range during the session, with the futures rising from the early session low, 4005.25, back into the 4040s. The upward correction that began on December 22, 2022 continues, and the price has remained below the correction’s high, 4056.75, attained on January 23. I’ve updated the chart below

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to fall in overnight trading, reaching a low so far of 4012.25.

What does it mean? An upward correction that began on December 22, 2022 from 3785.50 continues and is in its first leg.

What are the alternatives?

Alternative #1: The first leg of the correction ended on the January 23 high, 4056.75, and the second leg has begun.

Alternative #2: The first leg ended on the January 17 high, the second leg on the January 18 low. Under this scenario, the final leg of the correction is either underway or ended today.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? Here are the waves I’m tracking today for the principal analysis.

  • The upward correction that began on December 22, 2022 is wave 2{-9}.
  • That wave is in its first subwave, wave A{-10}.

Under Alternative #1,

  • Downward wave B{-10} within the upward correction, wave 2{-9}, is underway.

Under Alternative #2,

  • Wave B{-10} within the upward correction ended at the January 18 low.
  • The final wave of the correction, upward wave C{-10}, is underway.

Under all three analyses,

  • All of that is happening within downtrending wav 1{-8}.
  • The downtrend is a subwave of a series of larger downtrends, reaching in size up to wave 4{-1}, which began on January 4, 2022 from 4808.25.

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)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 24, 2023

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 futures moved a few points higher after my 1:20 p.m. reanalysis, peaking at 4056.75 and then declining sharply, back into the 4020s. It’s possible, although not a certainty, that the peak marked the end of wave A{-10}, the first segment of an upward correction, wave 2{-9}, that began on January 22.

An alternative reading sees today’s peak as being the end of wave 2{-9}, the entire upward correction.

If wave 2{-9} is still underway, then we’ll see more upward movement, followed by a downward retracement, and then a final push to the upside.

If wave 2{-9} ended at today’s peak, then downtrending wave 3{-9} is underway and will carry the price below 3778.50, the starting point of wave 2{-9}, and most likely significantly below that level.

No change in the afternoon reanalysis. I’ve updated the upper chart.

1:20 p.m. New York time

This morning’s analysis? Invalidated. The S&P 500 futures, in an upward correction, has risen sharply during the session, reaching into the 4050s. The rapid movement breezed beyond the starting point of the downtrend that began on January 17 on 4035.25.

The upward correction is a 2nd wave within the five waves that make up a downtrend.

Under the rules Elliott wave analysis, if a rise marked as the 2nd wave on a chart moves above the start point of preceding 1st wave, then it’s not a 2nd wave and the analysis must be redone. And that’s the chore than I’m undertaking now.

All of this is happening within a larger downtrend, wave 3{-7}, which began on December 13 from 4180. If the price moves above 4180, then this analysis will also be invalidated.

From this point I’ll use Elliott wave terminology. See this morning’s Chart Note below for a brief explanation. First, the new chart. I’ll retain the old chart from this morning for comparison.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

The upward correction under the new analysis is wave 2{-9}. That’s one degree higher than the label on this morning’s chart, which was 2{-10}.

Wave 2{-9} is correcting the preceding wave 1{-9], which began at the same point as the parent wave, 1{-8}, at 4180. Under the rules and patterns of Elliott wave analysis, wave 2{-9} can be expected to stay below 4180, the 1st wave’s starting point.

Internally, wave 2{-9} commonly can take the form of a Zigzag, with five subwaves in the first wave of the correction, waved A{-10}, or of a Flat, with three subewaves in the correction’s first subwave. The wave count within wave 2{-9} is a bit messy, but I think wave A{-10} is in its 5th wave, which would make the pattern a Zigzag, the form most office seen within 2nd waves.

A note on the analysis.

This is the first time I’ve had to change analyses twice in a single day. It’s a stern reminder of an important truth about Elliott wave analysis: It doesn’t predict the future. It places context around the present so that we can understand the possible futures.

9:35 a.m. New York time

Note: The following analysis has been invalidated by later events. The revised analysis can be read above, at the 1:20 p.m. update.

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

What does it mean? The rise invalidated Friday’s analysis and I’ve redone the chart. Under the revised principal analysis, the first wave within a downtrend that began on January 17 ended on January 19 at 3901.75. The price then rose in the first of two upward corrections within the trend. The correction is in its first wave.

See the Elliott wave theory section below for more on why Friday’s analysis is no longer valid.

What are the alternatives? The two alternative analyses listed on on Friday remain possibilities.

  • Alternative #1: The final wave of the upward correction continues, and the decline that began on January 17 is a downward movement within the correction.
  • Alternative #2: The correction is taking a compound form, containing two or three corrective patterns. The first corrective pattern ended on January 17, and a second pattern will begin once the present decline, linking the two patterns, is complete.

Chart note. R.N. Elliott, as he was doing the research in the 1930s that became Elliott wave analysis, called directional price movements “waves”. As he studied the charts, he realized that he wasn’t just seeing a simple meandering of prices, a walk, random or purposeful, but that the waves formed patterns within a complex structure. He came to understand that smaller waves were contained within larger ones, which in turn were contained within still larger ones. And the smaller waves contained still smaller ones. Such a nested structure today is called a fractal structure.

In labeling a chart, the analyst must show two items: The number of the wave, or its letter if its within a correction, and the placement of that wave within the fractal hierarchy, called its “degree”. Elliott chose to give names to degrees. I find that there’s greater clarity to be had if the degrees are numbered, using subscripts which, for greater visibility, I’ve placed within curly brackets.

The chart below covers the S&P 500 futures from January 13 to the present, a span of 10 days.

[INVALIDATED: S&P 500 E-mini futures at 9:35 a.m., 15-minute bars, with volume]

What does Elliott wave theory say? An attractive characteristic of Elliott wave analysis is that, although it has rules, there aren’t a lot of them. And when later events on the chart invalidate an analysis by breaking it a rule, it must be taken seriously.

The rule that invalidated Friday’s analysis is that a 4th wave correction cannot move beyond the end of the preceding wave. That is, it can’t enter the territory of the preceding 2nd wave.

The 1st wave in question, wave 1{-11}, ended on January 17 at 3996.25, and subsequent prices above that point are part of wave 2{-11}.

Wave 4{-11}, in overnight trading on January 23, move above that price. That violates a rule of Elliott wave analysis: If wave 4 moves beyond the end of wave 1, then it’s not a 4th wave.

In reanalyzing the chart, I saw that wave 3{-11} could well have ended prior to the January 19 low. On Friday I labeled that low point as the end of wave 3{-11}. I changed the analysis to show wave 3{-11} ending earlier, and labeled the low point as the end of wave 5{-11}.

That change brought to an end wave 1{-10}, the first wave of the downtrend that began on January 17. The rise that followed is wave 2{-10}, which isn’t bound by the rule violated by events after the earlier analysis.

Here are the waves under the principal analysis that I’m following today:

  • A downtrend that encompasses everything I’ve described so far is wave 3{-9}, which began on January 17 from 4035.25.
  • Wave 3{-9}, like all trending waves, will have five waves internally — three in the direction of the trend and two corrections.
  • Wave 2{-10}, the first upward correction, began on January 19 from 3901.75.
  • Internally, wave 2{-10} is in its first subwave, wave A{-11}.

For both alternatives, wave 3{-9} has not yet begun. The upward correction preceding it is still underway, wave 2{-9}, which began on December 19, 2022.

  • In Alternative #1, the decline is a downward wave within wave E{-10}, the final subwave within wave 2{-9}.
  • In Alternative #2, the decline is wave X{-10}, connecting the first corrective pattern within wave 2{-9} with a second corrective pattern that will follow.

For both the principal analysis and the alternatives.

  • Waves 3{-9} and 2{-9} are subwaves of downtrending wave 1{-8}, which began on December 13, 2022 from 4110.
  • Wave 1{-8} is a subwave of a series of nested downtrending waves reaching up seven levels to wave 4{-1}, which began on January 4, 2022 from 4808.25.

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)
  • 3{-6} Submicro, 8/16/2022, 4327.50 (down)
  • 3{-7} Minuscule, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 4110 (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, January 23, 2023

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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