Live: Friday, June 19, 2020

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures have begun the final leg up in the upward correction that began June 15 at 2923.75.

What does it mean? The end of the upward correction will be the beginning of a major decline that will eventually carry the price down to around 2000 or below.

Screen Shot 2020-06-19 at 6.32.11 AM
S&P 500 E-mini futures, 30-minute bars

What does Elliott wave theory say? The current wave up is a C wave of Minor degree. C waves often are the same length as the preceding A wave, which in this case was 277 points. Add that to the starting point of Minor C — 3064.50 on June 17 — and that gives a target of 3284.25 as the end of Minor wave C and also of Intermediate wave 2.

But 3284.25 violates a rule of Elliott wave theory: A 2nd wave cannot move beyond the start of wave 1, which in this case was 3231.25 on June 8. So 3231.25 is the maximum rise allowed under the present count.

What is the alternative? I’ve been writing this a lot lately, but the alternative is a move beyond 3231.25, which destroys the entire count since February. I don’t expect it to happen.

What about my trades? Minor wave C is in Minute wave 3 out of five waves total, so it’s time to think about how best to get back into options once Minute wave 5 begins. As of today the monthly options expiring July 17 are 28 days away, just seven day’s before I exit winning options positions. The monthlys expiring August 21 have 63 days left. The ideal midpoint is 45 days, so August is 18 days before that point and July is 17 days after. Wave C may have another day or two to go, so the August options seem to be the best choice.

After Intermediate wave 3 begins, there’s still value in waiting to enter. The Minor 1st wave of Intermediate 3 will be followed by a wave 2 that will retrace a significant part of that 1st wave. So, perhaps best to wait until late in Minor 2 so I can catch Minor 3 of Intermediate 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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