Live: Thursday, July 16, 2020

9:35 New York time

What’s happening now? There was a divergence among the three major S&P 500 products, with two crossing above what I had labelled the peak of Primary wave 2 on June 8. Here are the numbers:

  • S&P 500 index: June 8 high, 3233.13; July 15 high, 3238.28; broke above by 5.16 points
  • S&P 500 E-mini futures: June 8 high, 3231.25; July 15 high, 3233.25; broke above by 2.00 points
  • SPY exchange-traded fund: June high, 323.41; July 15 high, 323.04; fell short by 0.37.

All three are now below their July 15 highs, although by only a little.

What does it mean? The upward correction that began March 22 from 2174 is still underway. It did not end on June 8.

What does Elliott wave theory say? The two breakouts, if we’re willing to accept two out of three as action-worthy, mean that the July 8 peak of the end of an Intermediate wave within the end of Primary wave 2, whose high so far on the S&P 500 E-mini futures chart is 2233.25.

Screen Shot 2020-07-16 at 6.36.36 AM

However, does two out of three really dictate the status of the full range of products? I don’t think so; I want unanimity before I sign up on the idea that Primary wave 2 continued past June 8. At this point, in my opinion, the best we can say is that the chart is ambiguous. However, I’ve marked the chart to conform with the breakout as a working hypothesis, even though it’s not yet confirmed.

If the price continues with another three-wave pattern inclining up or sideways, with the SPY exchange-traded fund moving with the other two products rather than remaining a lone wolf, then the analysis placing the S&P 500 still in Primary wave 2 will be confirmed.

What is the alternative? If the price falls below 2174 (the red line) in a five-wave pattern, then Primary wave 2 is over and Primary wave 3 is confirmed.

And if the line rises above 3397.50, the tan line, the crash of February 19 was nothing more than a correction within the rise that began in December 1974 and is still continuing.

What about my trades? I’m holding what I have and not entering any new positions at this point.

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, July xx, 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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