Live: Monday, Aug. 27, 2018

11:35 a.m. New York time

SPY broke above the peak of the bull market, which ended on Jan. 26 — an event that intuitively is filled with paradox. The damage to my Elliott wave analysis, however, is far less than might be imaged.

The SPY chart covers the past year with daily bars.


The paradox is how can a price within a bear market be higher than the start of the bear market. A bear market peak means the highest point, and there is no higher than highest.

Except in Elliott, where the form of things always takes precedence over our intuition. Here’s how I see it:

All is fine with the chart from the Minor degree {+3} on down. It is at the Intermediate degree {+3+} where the potential rule violation has occurred.

The peak of the present counter-trend corrective wave would be the 2nd wave of Minor degree {+3}. Elliott has a firm rule that a 2nd wave cannot move beyond the start of the 1st wave of the same degree. Full stop. No appeal. That’s the rule.

So that peak cannot be the end of the 2nd wave Minor degree correction to the upside, to be followed by a 1st wave down of Minor degree {+2} as the first wave of the 3rd wave down of Intermediate degree {+3}. That disallowed count is the most straightforward in my mind, but the markets are often less than straightforward in their course.

The alternative is to label the next wave down, once the Minor C wave is complete, as the 1st wave of Minute degree {+1} within an X wave of Minor degree {+2}.

I referred to that possibility in my analysis of Aug. 23 (although the degree labeling has since changed).

So, bottom line: My bear market analysis remains intact. The coming X wave may be tradable. Although not the beginning of a 3rd wave down, which would certainly carry to significant bear-market lows, it is of a sufficiently high degree to produce a decline that fits in with my goal of trades having lifespans of 30 days to 45 days.

By Tim Bovee, Portland, Oregon, Aug. 27, 2018

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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