9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures retreated from yesterday’s peak of 3065.50.

What does it mean? The price is approaching another Fibonacci stopping point, a 78.6% retracement of the decline from February 19 to March 22.

What does Elliott wave theory say? I count the most recent push upward (highlighted in yellow) as a C wave showing a clear five waves to the upside. The 5th wave internal to wave C may not yet be complete, but it is nearing its end. There are two possibilities for what happens next: Either the end of wave C marks the end of Primary wave 2’s correction of the Primary wave 1 decline that began February 19, or the C wave will be followed by a wave down, an X wave, and then a third corrective pattern in the compound correction that is Primary 2.

What is the alternative? A move above the start of Primary wave 1, from 3397.50, would mean that the correction that began February 19 is complete and the bull market that began is 2010 is intact. I rate this as highly improbable.

What about my trades? No options are in my account at present, and no new positions are planned until I’m certain that Primary wave 3 to the downside has begun. My shares in the fund SDS profit when the S&P 500 goes down and lose when it rises. They are losing at present.

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.

• Elliott wave analysis
• Fibonacci level

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 29, 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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.