Live: Tuesday, May 12, 2020

3:50 p.m. New York time

Elliott wave analysis: The S&P 500 has broken below 2885.25, the end of Minor wave 1, a movement that invalidates my preferred count. The alternative count is now my preferred, with Primary wave 3 to the downside beginning on April 30 from 2965. The current wave is Intermediate wave 3 to the downside.

10 a.m. New York time

I’ve added to my SDS holdings, buying 53 shares for $22.58 each. SDS moves double in the direction opposite the S&P 500.

9:40 a.m. New York time

What’s happening now? The S&P 500 continues the sideways trend that began May 10.

What does it mean? The index is in a lower-scale correction within a larger correction. Once that correction is complete, there will be a final, perhaps brief, push to the upside followed by a significant, large decline.

Screen Shot 2020-05-12 at 6.41.31 AM

What does Elliott wave theory say? Minor wave 4 continues to work through a Flat pattern within Intermediate wave C of Primary wave 2. The end of the Flat will also be the start of the final wave of Intermediate wave C and Primary wave 2, unless the Minor 4th turns into a combination, a more complex correction. The next wave, Primary wave 3, will decline sharply, almost certainly below the 2,000 level.

What is the alternative? The chart can also be counted as Primary wave 2 having ended on April 30 at 2965, making the present move Minor wave 4 within Intermediate wave 2 to the upside. My preferred count and the alternative are identical under the Elliott wave analysis. A move above 2965 confirms my preferred count. A very energetic onset of a decline with the price since April 30 having stayed below 2965 will confirm the alternative count.

What about my trades? Still holding 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.)

Like millions of Americans I have received my Covid-19 relief payment from the government, and like 40% of the recipients, and I shall save it, investing it in shares of SDS, the inverse S&P 500 exchange-traded fund.

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 12, 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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