Live: Monday, May 11, 2020

3:15 p.m. New York time

The S&P 500’s first Minuette degree leg, which is wave A down in Minor wave 4, ended a three-wave decline a couple of hours after the opening bell today, and has so far traced three waves to the upside. That confirms that wave 4 will be a Flat pattern, with not a lot more up and not a lot of down until it completes its work.

10:30 a.m. New York time

What’s happening now? The upward correction of the S&P 500 is nearing its end, with a decline that began on Sunday in the futures extending today. The decline as of this writing is 57.25 points, which is 1.9%.

What does it mean? The decline, which I expect to be shallow and sideways-trending, will be followed by a rise that will conclude the upward correction that began March 22. From the peak of that rise, a decline will begin, eventually dropping below 2000, perhaps by a significant amount.

Screen Shot 2020-05-11 at 7.09.34 AM

What does Elliott wave theory say? Minor wave 4 within Intermediate wave C has begun. Minor wave 3 is the longest wave of the series so far, 124 points against 118.25 for Minor wave 1. The rule is that a 3rd wave cannot be the shortest, and so the coming wave 5 to the upside has no limit on how low it can go, as long as it remains above 2889.25. the end of Minor wave 1 (the red line on the chart). The low so far has been 2889.75.

Minor wave 2 was a Zigzag, and I would expect Minor 4 to be a Flat, or perhaps a combination of some sort. This comes under a tendency for waves 2 and 4 to have different corrective patterns.

Big picture: The Intermediate C wave up has so far peaked at 2947, which is 71.0% of the length of the Intermediate A wave. The next Fibonacci point is 78.6%, which is a quote of 2965.73, and afterward, equality at 3018.75. The encompassing Primary wave 2, the whole upward correction, can’t go above the start of Primary wave 1, which is 3397.50. If it did, then the entire count of the decline that began February 19 would have to be re-analyzed.

What is the alternative? If the present wave 4 pierces 2889.25, then my count will need to be redone, probably by relabeling Minor wave 3 as Minor wave 5, and the subsequent decline as the beginning of Intermediate wave 1 down within Primary wave 3, also down.

What about my trades? My three short bear call options spread positions on SPY, Lots 12, 13 and 14, all expire on Friday. At present they stands between 21% and 27% above maximum loss at expiration. There is a significant likelihood of involuntary assignment, replacing an in-the-money call with shares of SPY. As long as the cost of getting out remains above 100% of the maximum at expiration, I shall allow unassigned positions to expire for max loss.

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 11, 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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