2:30 p.m. New York time

No trades planned today. The S&P 500 futures are down today, by about 500 points. If it continues, then that would suggest, using Elliott wave analysis, that the 4th wave to the upside is complete, and a 5th wave to the downside, in the direction of the dominant trend, had begun.

But wait. The 4th wave correction under that scenario has problems. First, it would be a zig-zag, a less likely form for a 4th wave. Second, it would be the same form as the 2nd wave; the 2nd and the 4th usually have different forms.

 

Even more seriously, the count of the internal form of wave 4 shows a three-wave pattern — A-B-C — as is required for flat correction waves. But that’s that spike to the upside before A? The one marked with a question mark. Only by ignoring that spike could I get a valid 3-wave count within A for a flat — a sideways correction –according to the Elliott wave rules. Not ignoring it gives A a five-way count, which is proper for a zig-zag.

 

 

Here’s where the whole messy count leaves me.

1. The 4th wave is a zig-zag, just like the 2nd, which is unusual, but not forbidden.
2. But, the 4th wave retraced near 50%, which is quite short for a zig-zag. It’s more in line with a flat.
3. The only way to make a flat work is to ignore the spike early on the 4th. Which is ridiculous. That would be cheating in the count on a massive scale.

If the price moves below the March 22 low, the end of the 3rd wave, then the 4th wave is complete and we’re in the 5th, and final, wave of the Intermediate level decline that began February 19.

If not, then something else is happening and it’s back to the drawing board.

I shall obsess about this all weekend. Enjoy!

By Tim Bovee, Portland, Oregon, March 27, 2020

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothin

g 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

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.