Live: Thursday, August 6, 2020

10 a.m. New York time

What’s happening now? The rise of S&P 500 E-mini futures this week internally looks very much like the final move up before the downtrend resumes.

What does it mean? By my analysis, the main trend has been downward since February 19. The upward movement that began in March has been a countertrend correction. The resumption of the main trend will carry the price down to a significantly lower low that we’ve seen so far this year.

Screen Shot 2020-08-06 at 6.58.10 AM
S&P 500 E-mini futures, 4-hour bars

What does Elliott wave theory say? The most recent wave up within Intermediate wave C looks very much like a 5th wave extension at the Minor degree, composed of nine waves at the Minuette degree. If that is in fact what it is, then the rise is almost complete, and maybe ended at yesterday’s peak, 3329.25.

The end of wave C will almost certainly be the completion of the Primary wave 2 correction to the upside and the beginning of Primary wave 3’s powerful push to the downside.

How do I tell when it’s over? I’ve set an alert at 3191.50, the base of the 5th wave extension. When the price declines below that level, I’ll be notified. It will tell me to take a look at the chart and update my analysis.

What is the alternative? At the smaller degree, the extension may have a couple of more steps to go before it’s over. At the larger degree, Primary wave 2 could extend. It has traced a double Zigzag so far, and it could continue on to become a triple Zigzag, which would likely put off the start of Primary wave 3 for a month or more.

What about my trades? Waiting for Primary 3.

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, August 6, 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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