Live: Tuesday, May 5, 2020

10:25 a.m. New York time

What’s happening now? The S&P 500 continues its upward move within an upward correction of the decline that began in February. The price has retraced half of its initial correction decline and has continued past that Fibonacci level.

What does it mean? The upward movement has satisfied its target requirements — between 38% and 79% — and could enter a decline at any time.

Screen Shot 2020-05-05 at 7.23.40 AM

What does Elliott wave theory say? The present rise is a B wave of Minor degree within wave B of Intermediate degree within wave 2 of Primary degree. By the rules it must break into three waves, and at present it looks more like five waves to me. Given the normal ongoing uncertainty over what degree of wave is being counted, I’m unwilling to label it as three waves at this point.

What is the alternative? It is possible to label the high of April 30 as the end of the Primary wave 2, the low of May 3rd as the end of Intermediate wave 1  within Primary wave 3 and the present upward movement as Intermediate wave 2, although the internals in my count rule out that possibility. None the less, if the price moves below 2174, which is the end of Primary wave 1, then the alternative count is correct.

What about my trades? Continuing to hold three short bear call options spread positions on SPY: Lots 12, 13 and 14, all expiring May 15. (The lot numbers link to the entry analyses.) At this point, as is often the case with in-the-money short options positions, I would have a bigger loss if I exited down than I’ll have if they expire in-the-money.

Learning and other resources. Elliott Wave International has long been the leading analytical house based on Elliott wave theory. They make available a number of free educational materials and other resources, in addition to their for-pay subscriptions.

Terminology. Here are some links to information about some of the technical jargon I use.

Charts. On my charts, waves have a subscript showing the degree above or below the Intermediate degree. Here are the subscripts and the degree each represents:

  • {+3} Supercycle
  • {+2} Cycle
  • {+1} Primary
  • No subscript: Intermediate
  • {-1} Minor
  • {-2} Minute
  • {-3} Minuette

By Tim Bovee, Portland, Oregon, May 5, 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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