Live: Thursday, May 14, 2020

3:45 p.m. New York time

I labelled the move up this morning as Minor degree; it could just as easily be one degree lower, at Minuette. Time will tell.

1:40 p.m. New York time

Minor wave 4 to the upside began at mid-morning from a low of 2760.25, rising 69.25 points so far, or 25%.

9:45 a.m. New York time

What’s happening now? The S&P 500 is continuing its decline that began April 30 from 2965. The low so far in the movement is 2777, about 45 minutes before the opening bell.

What does it mean? The decline so far has traced has only 188 points, down 6.3%, suggesting that it has much further to go. The current leg down is only 15% of the initial decline, from February 19 through March 22, and since the second leg down tends to be the most energetic, I would think that the bear market has miles to go before it sleeps (with a nod to the poet Robert Frost).

Screen Shot 2020-05-14 at 6.39.31 AM

What does Elliott wave theory say? The index continues to be in the Minor 3rd wave within the Intermediate 1st of the Primary 3rd, making it the middle of the present leg down within the Intermediate degree. There’s no set length for the duration of a wave at any degree. The way I think it: For Intermediate, think days to weeks, and for Primary, think weeks to months. In any case, the trend is down, with my target at the Intermediate degree being below 2000.

What is the alternative? It’s possible, although just barely, that the 2nd wave of Primary degree, which began April 30, is still working out a complex pattern. A decline below 2174, the start of Primary wave 1, would invalidate the alternative.

What about my trades? My three short bear call options spread positions on SPY, Lots 12, 13 and 14, expire tomorrow, May 15. I’ll make decisions today and tomorrow over whether I should exit before expiration, or wait until expiration. At present exiting would cost 15% to 22% over the cost of allowing the options to be exercised at expiration, which is an argument that I should wait.

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 14, 2020

Disclaimer

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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Based on a work at www.timbovee.com.