9:40 a.m. New York time
The upward correction is larger than it looked.
The S&P 500 moved above the end of the 1st wave of Minor degree in after-hours trading, violating a rule of Elliott wave analysis, and I have revised my wave count. I have also switched my analysis to S&P 500 futures rather than the index itself, since futures capture the after-hours trading.
In yesterday’s analysis I had counted the low of March 22, which is 2174 on the futures, as the end of wave 3 at the Minor degree, the decline that began March 13.
That has been proven wrong. In my recount, I view that low as being the end of Minor wave 5, and the upward correction is the 4th wave of Intermediate degree — one step higher — correcting a portion of the downward move since March 3.
By the new Fibonacci analysis, the correction has paused just short of a 38.2% correction. This is a not uncommon turning point for 4th waves. Other possible turning points are 50% (2655.50) and 61.8% (2769.13).
The new wave count will be invalidated if the correction rises above 2853.29.
As I noted yesterday, a 4th wave tends to be shallower than the other corrective wave, the 2nd. They also tend to take more time, and so I would not expect an immediate continuation of the roaring downtrends we’ve seen since the crash began on February 19. However, once the 4th wave has done its work, then I expect a 5th wave of Intermediate degree to carry the market below 2174, perhaps a good distance below.
I’ve used Elliott wave analysis in my trading for nearly 40 years, and I’ve found throughout that the biggest ambiguity is deciding what degree a market movement belongs. Bigger, like the Intermediate? Or smaller, like the Minor? The market doesn’t place a you-are-here sign on the movements. Fortunately, R.N. Elliott’s method is self-correcting. If I get the degree wrong, as I did yesterday, then I’ll soon know it and can correct the analysis, as I have done today.
By Tim Bovee, Portland, Oregon, March 25, 2020
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