Live: Wednesday, March 25, 2020

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.

Screen Shot 2020-03-25 at 6.41.00 AMThat 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


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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