Live: Tuesday, May 19, 2020

10:40 a.m. New York time

What’s happening now? The S&P 500 overnight reached a new high, 2976.25, in its correction of the decline that began February 19, pushing 12 points above the prior high, set on April 30, at 2965. The index has so far retraced the decline from February 19 to just beyond the Fibonacci 38.2% level.

Screen Shot 2020-05-19 at 7.37.28 AM

What does it mean? The movement demands a revision of my analysis of the chart. I had concluded the correction was over and a new downward movement had begun. As it turns out, that’s no longer tenable.

What does Elliott wave theory say? The prior count had the Primary wave 2 upward correction ending and Primary 3 to the downside beginning on April 30. Wave 2 exceeding that point changes the analysis.

The revised count sees Primary wave 2 in its subwaves tracing a complex correction pattern that appears to be developing as a combination of patterns: A Zigzag followed by possibly a Flat that is still in progress.

What is the alternative? A very low probability, in my opinion, but what if the decline that began February 19 was in fact not a sign that wave 5 of Cycle degree, which began in 1974 at 60.96 (not a typo), was in fact not over? If that were the case, then the low of March 22 would mark the end of the correction and the subsequent rise would be the early stages of a continuation of Cycle wave 5.

What about my trades? No options are in my account at present. My shares in SDS profit when the S&P 500 goes down and loses when it rises.

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.

I recommend two books, both by people associated with EWI.

First, Elliott Wave Principle by Robert Prechter and A.J. Frost is the book that, along with Prechter’s analyses, that created the revival of Elliott wave theory. I first read it in 1984, and it has had a profound influenced on my thinking about markets ever since.

Second, I’ve found Visual Guide to Elliott Wave Trading by Wayne Gorman and Jeffrey Kennedy, both of EWI, to be a useful book that relates Elliott wave theory to practical trading. The authors are hands-on Elliotticians, and for an active trader, that’s exactly what’s needed — less theory and more how-to. The first chapter of the book gives a very nice thumbnail run down of what Elliott wave theory is all about.

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 19, 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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