Friday, October 23, 2020

3:40 p.m. New York time

I’ve replaced this morning’s chart with one for 22 minutes before the closing bell. The S&P 500 is in stages of Minor wave 1 to the downside.

9:40 a.m. New York time

What’s happening now? The S&P 500 index and the E-mini futures continue their small upward correction within the dominant downtrend.

What does it mean? An analysis of the movements within the upward correction suggests that it is nearing its end.

[S&P 500 E-mini Futures, 25-minute bars]

What does Elliott wave theory say? The present position is uptrending wave 4 of Minor degree within downtrending wave 3 of Intermediate degree. By my count of wave 4’s internals, it is tracing wave 5 of Minute degree, indicating that it is near completion. And indeed, a small step down immediately after the opening bell this morning suggests the possibility that wave 4 has ended, at a high of 3462.50. If the price moves above that level, then wave 4 is still in progress.

My trading strategy. I continue to hold my options and shares positions in anticipation of a continuation of the downtrend.

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, October 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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