Live: Monday, June 22, 2020

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures has begun the middle portion of a significant decline, part of the mid-decline of a larger trend. I.e., this fall will have legs.

What does it mean? The upward correction of the crash beginning February 19 ended on June 8. The decline that has kicked off on June 16 will persuade all doubters that, yes, it’s real.

Screen Shot 2020-06-22 at 6.30.38 AM
S&P 500 E-mini futures, 1-hour bars

What does Elliott wave theory say? The 3rd wave of Intermediate degree began its downward trek on June 16 from 3156.25. So far, in five calendar days, it has fallen by 4.1%. This is happening within the wave of higher degree, Primary wave 3. Two 3rd waves in combination tend to have a lot of energy in the direction of their trend.

What is the alternative? It is possible, barely, that the 2nd wave of Intermediate degree is still underway. If so, it is in its final wave — a C — and will soon begin the Intermediate 3rd wave decline. A decline below 2923.25, the start of Intermediate wave 1, will eliminate this alternative.

What about my trades? This is the point where I start to considering specific entry points for bear call spread options positions. At present the SPY, which tracks the S&P 500, is in a lower-degree uptrend. My entry point will come after that, as the market starts to show some downside momentum. Tomorrow, perhaps? My shares in SDS profit as the S&P 500 falls, so I’ll hang on to them.

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 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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