Live: Wednesday, July 29, 2020

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures have bounced off of the lower boundary of the trend channel.

What does it mean? The bounce adds a bit more weight to my preferred analysis, which concludes that the upward correction that began in March is still underway.

Screen Shot 2020-07-29 at 6.38.18 AM
S&P500 E-mini futures, 1-hour bars

What does Elliott wave theory say? Under my preferred analysis, the decline from the peak of Minor wave 3, which was 3284.50 on July 23, traced three waves internally, leading to a Minor wave 4 beginning on from 3199.50 on July 24. The following Minor 5th wave, which is still underway, appears to have completed Minuette waves A and B, and to have begun Minuette wave C to the upside.

All of that is within Intermediate wave C of the Primary wave 2 correction that began March 22 from 2174.

If the preferred count is correct, then the price will move back up and most likely will break above 3284.50, the highest high within the correction so far. The upside potential is limited by the starting point, 3397.50, of Primary wave 1 on February 19. The price can’t move above that level under my preferred count.

What is the alternative? Nothing in the count so far is inconsistent with the July 23 peak beginning the end of Minor wave 5 and indeed of the entire Primary wave 2 correction. I think my primary analysis, that Primary 2 is still in force, fits the facts better, but it’s certainly debatable. If the alternative analysis is correct, then the price will quickly drop significantly below the trend line and will drop past 3105.25, the end of Minor wave 1 during the last portion of the Primary wave 2 compound correction (two Zigzag structures).

A change in nomenclature. I’ve been using “primary analysis” for what I consider to be the best conclusion from the chart, and “alternative analysis” for the next best read. But “primary” is also a degree of analysis within the Elliott system. So from today onward, I shall use “preferred analysis” rather than “primary”.

What about my trades? Awaiting the end of Primary wave 2 before I resume trading. I prefer to trade with the larger trend, which has been down since February.

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 29, 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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