Friday, September 25, 2020

3:50 p.m. New York time

As it turns out the alternative count is correct. The S&P 500 index is in Micro wave C of Subminuette wave 4.

11:20 a.m. New York time

I’ve updated SPY Analysis with results.

10:25 a.m. New York time

I’ve exited my short iron condor position on SPY for 14.8% of maximum potential profit and shall update the entry analysis with the exit info later today.

9:05 a.m. New York time

What’s happening now? The final push to the downside by the S&P 500 index, now underway, will complete the decline that began September 16, approaching the lower boundary of the price channel at around 3100.

What does it mean? The end of the decline will be the starting point of an upward correction that will carry the price toward the upper boundary of the price channel, which is presently around 3278.

What is the alternative? Another interpretation of the chart has the upward correction that began September 21 continuing, with the final push to the downside not yet having begun.

[S&P 500 index, 30-minute bars]

What does Elliott wave theory say? By my principle count, wave 5 of Subminuette degree began on September 23 from 3323.25. The 1st wave of Micro degree within Subminuette 5 perhaps ended September 24 at 3209.45, or perhaps is continuing. There are ambiguities.

By my alternative count, the September 23 high was the end of wave A of Micro degree within Subminuette wave 4, and the low of September 24 was the end of Micro B, the the Micro C wave now underway.

My trading strategy. My short iron condor position on SPY is 21 day before expiration, the day I manage profitable trades. My SPY position is profitable, at 14.8% of maximum potential profit. If my principle count is correct, then I should exit now. Any further decline will erode that profit. If my alternative count is correct, then I should hold on to the position in the expectation of further rise, which will bump up my profit by a bit. I’ll make a decision as the day progresses.

I continue to hold my SDS shares.

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, September 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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