Live: Thursday, April 9, 2020

10:10 a.m. New York time

What’s happening now? The S&P 500 continues to rise in an upward correction within the larger downtrend. The price shortly after the opening bell moved above the 50% retracement, a Fibonacci level.

What does it mean? Completion of the correction will signal a powerful resumption of the downtrend. In retrospect, the present movement to the upside will be seen as a sucker play that drew people back into the market too early. One tip-off to the weakness of the rise is the volume of SPY, the exchange-traded fund that tracks the S&P 500. Volume has been declining through the price rise that began March 23. (Each bar represents one day in the chart below. The yellow line shows the volume trend.)

Screen Shot 2020-04-09 at 6.53.15 AM

What does Elliott wave theory say? The S&P 500 remains in a Minor 5th wave to the upside within an Intermediate C wave to the upside, part of a Primary 2nd wave correction to the upside within a downtrending Cycle 1st wave. The channel suggests that the 5th wave could reach above 2900, although there is no guarantee. (Each bar in the chart is 30 minutes.)

Screen Shot 2020-04-09 at 7.00.24 AM

The end of the Minor 5th within Intermediate C will mark the end of the Primary 2nd wave and the beginning of the Primary 3rd wave down, which will carry the price below 2174, and most likely quite a distance below, although there’s no way to set a target yet.

What is the alternative? A 2nd wave can never move beyond the start of wave 1. In this case, Primary wave 1 on February 19 began the crash, from 3397.50. If the price were to move above that level, then the chart would demand a re-analysis of everything that has happened in the market since mid-February. I don’t expect this to happen, but it could.

What about my trades? I shall continue to hold my short bear call options spreads on SPY. The short call strike prices are $261 and $263.

By Tim Bovee, Portland, Oregon, April 9, 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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