Live: Thursday, June 25, 2020

10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures are in the later stages of a decline within the early stage of a larger decline.

What does it mean? The early stage of the larger decline will be followed by an upward correction that may well bring the price up close to 3100 — temporarily. The correction will be followed in turn by a move down toward the lower boundary of the trend channel, below 3000.

Screen Shot 2020-06-25 at 6.54.57 AM
S&P 500 E-mini futures, 45-minute bars

What does Elliott wave theory say? The channel connects the starting points of Minor waves 1 and 3 for the upper boundary and a parallel line through the start of Minor wave 1 for the lower boundary. Once Minor wave 3 is completed by a 4th wave correction upward and a final 5th wave downward, then a significant 2nd wave uptrend at the Intermediate degree will begin. Second waves, if structured as they usually are as a zig-zag, can retrace as much as 90% of the 1st wave decline. That would put the Intermediate 2nd wave peak as high as the 3180s. No guarantee, of course, that it will retrace 90%. It’s a tendency, not a rule.

What is the alternative? What I’m counting as Minor wave 3 could in fact still prove to be a complex 2nd wave correction. A fall below 2923.75 would remove the alternative.

What about my trades? Unchanged. I’m waiting for Intermediate wave 3 to come along and do its good work of changing losses to profits among my holdings.

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 25, 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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