Live: Thursday, July 30, 2020

10:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures pushed downward in overnight trading and continued to fall after the opening bell, piercing the lower boundary of the Minor degree price channel and continuing on with a great deal of energy.

What does it mean? The energy of the fall and the degree to which the price has pierced the lower boundary has tilted in favor of my alternate analysis: The upward correction that began on March 22  from 2174 ended on July 23 at 3284.50.

Screen Shot 2020-07-30 at 7.43.45 AM
S&P 500 E-mini futures, 2-hour bars

What does Elliott wave theory say? The July 24 peak is the beginning of Primary wave 3 to the downside, a movement that will have its ups and downs, as all movements do, but will eventually push well below the 2174 level that marked the end of Primary wave 1 to the downside, the first wave of the major decline that began February 19 at 3397.50.

I had initially read the July 24 peak as the end of Minor wave d within Primary wave 2. I now read it as the end of Minor wave 5 within Intermediate wave C.

Primary wave 3’s first move will be Intermediate wave 1, which will be followed by an upward correction that could come close to the first wave’s starting point. The correction, however, cannot move above 3284.50, where Intermediate wave 1 began.

Moreover, Intermediate wave 1 will be followed by an upward correction, perhaps again challenging the 3284.50 mark, before beginning what will prove to be a downward push of significance.

What is the alternative? It’s still possible, although less probable than I thought yesterday, that the July 23 peak is wave Minor wave 3. If a price reversal upward back into the price channel proves that to be the case, then yesterday’s analysis still stands and we are seeing Minor wave 5 of Intermediate wave C within Primary wave 2. If this is the case, then there will be one more wave up. At that point, either Primary wave 2 will end under the alternate analysis, or it will add a third component to the compound correction it has traced.

What about my trades? The question now, under the principle analysis, becomes, when is the best time to enter? And the answer for me is, near the later stage of Intermediate wave 2. I don’t want to get in now, because I know that I have two uptrends ahead of me: Minor and Intermediate, and both will typically approach the 3350 level. (That’s a tendency, not a rule, and they might not.) So, close watch, but not yet.

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 30, 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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