Live: Thursday, June 18, 2020

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose slightly in overnight trading in and then took back part of the upward movement as it traces through the middle portion of an upward correction within a larger downtrend.

What does it mean? The early morning decline has retraced exactly down to the 38.2% Fibonacci level. If that is in fact the end of the middle portion of the correction, then the next move we be a correction finale to the upside, ending above 3150.75 but below 3231.25.

Screen Shot 2020-06-18 at 6.43.49 AM
S&P 500 E-mini futures, 30-minute bars

What does Elliott wave theory say? Whether the middle portion of the correction — a B wave of Minor degree — is in fact complete remains ambiguous. In the Zigzag pattern, B waves tend to retrace between 38% and 79% of the preceding A wave, so the present downward B-wave correction within an uptrending 2nd wave correction of Intermediate degree may in fact be complete. But it could still decline by quite a bit and remain true to the norms of B waves in Zigzags.

In either case, once the Minor C wave reaches its end, it will be followed by an Intermediate 3rd wave decline within a Primary 3rd wave decline. In Elliott wave analysis, 3rds waves tend to be single-minded and powerful as they pursue their trend. So after C look for a significant decline.

What is the alternative? The usual: A move 3231.25 would be the end of the world as we know it, at least insofar as the present Elliott wave analysis goes. It would trigger a full reassessment of my count since February 29.

What about my trades? Unchanged. I’m staying out of options until the end of Intermediate wave 2, in hopes of catching a significant part of Intermediate 3. I’m holding my bear shares (SDS) until the end of Primary wave 3.

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 11, 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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