Live: Friday, May 22, 2020

10 a.m. New York time

What’s happening now? The E-mini S&P 500 futures continue to move sideways after peaking at 2976.25 on May 19.

What does it mean? The chart suggests that the upward correction, which began March 22, is still underway but approaching an end.

What does Elliott wave theory say? The tip off is the number of subwaves in the first wave down after the May 19 peak. It’s three waves, meaning in this context that it’s an X wave (of Intermediate degree) separating the two corrective patterns that came before with a third corrective pattern that will finally put an end to wave 2 of Primary degree. The X wave is followed by a three-wave pattern, an A wave, another sign that the correction lives on.

Screen Shot 2020-05-22 at 7.01.55 AM

What is the alternative? I see no clear alternative at this point. Let’s see what happens wave C by my count.

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. My window for entering July monthly options opens on June 26, the day after next Monday’s market holiday in the U.S. If my interpretation of the chart is correct, I’m unlikely to have the signals I need to start trading at that point.

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 22, 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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