11:20 a.m. New York time
In the Elliott wave model of the chart, the 3rd wave of the decline that began February 19 — the Intermediate level — and the 3rd wave of a lower degree within that decline — the Minor level — are still underway. The S&P 500 after a bit of hesitation in the early trading punched down to a new low in this decline.
The Elliott wave rules of analysis require that the 3rd wave not be the shortest of the waves moving in the direction of the trend, which is down. Either the 1st wave or the 5th wave must be shorter. The larger Intermediate level has met that requirement. The smaller Minor level 3rd wave has 7% plus change further down to go.
There are two possibilities for the remainder of the Minor 3rd wave:
- At a minimum, to satisfy the not-the-shortest rule, the S&P 500’s decline from March 3 would have to continue down to at least 2079.21, and there’s no rule that prohibits it from dropping further.
- Or, the Minor 5th wave, which is to come, would have to be shorter than the 1st wave, during which the index fell by 631.67, with no rule that says how much shorter it must be.
So, I’m fully invested for a decline, and none of my options positions has yet to reach the mandatory management point of 50% of maximum potential profit. I have no trades in sight. This will be a day of study and quiet reflection with a pot of green tea steaming by my side.
By Tim Bovee, Portland, Oregon, March 17, 2020
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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