Live: Friday, June 12, 2020

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined to 2992.25 at the end of the day Thursday and then bounced back, retracing 24% of the decline that began June 8.

What does it mean? The upward move from late yesterday is a correction within the larger downtrend. Once it is complete, the downtrend will resume with a great deal of power.

Screen Shot 2020-06-12 at 6.44.11 AM
S&P 500 E-mini futures 15-minute bars

What does Elliott wave theory say? I’ve moved the wave degrees on yesterday’s chart up one, and it might well change against as Primary wave 3 plays out its downward course. I’ve also superimposed the Fibonacci retracements. The present correction is a 4th wave of Minor degree within the 1st wave of Intermediate degree. Fourth waves tend to be on the shallow side. I’ve seen many halt around the 38.2% Fibonacci level. Often the 4th will end within the 4th subwave wave of the 3rd subwave, which would be a between a 50% and a 61.8% retracement. Neither would be outside the mainstream of 4th waves and would put the price around 3140.

I don’t want to lose sight of the fact that all of this detail is playing out within the 1st Intermediate wave of the 3rd Primary wave. The Primary wave 1, beginning in February, lasted 32 days and declined by 36%. The present Primary wave 3 so far has lasted four days and declined by 7.4%. Within Primary wave 1, Intermediate wave 1 lasted nine days and fell by 16%. As the start of the crash it was exceptionally rapid. Such a decline in the present Intermediate wave 1 would bring the index’s price down to 2687. If Primary wave 3 were to equal Primary 1, then it would drop to below 2008.

We have far more to distance to cover in this downtrend, even at the Primary level, which is a lower degree, considering that that correction stretches all the way up to the Grand Supercycle degree, three levels above Primary.

What is the alternative? I have no alternatives at this point.

What about my trades? Having entered my first options position of Primary wave 3 (and posted an analysis), my next decision is when to enter another. I want at least three days between entries (totally arbitrary), which pushes the decision into next week. My inclination at this point is to wait for the Minor wave 2 correction to the upside within Intermediate wave 3.

I shall hold on to my existing position through the present Minor wave 2 correction.

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, June 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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