Friday, October 30, 2020

10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures hit a low of 3226 in overnight trading and then began to rise within an upward correction that is part of a larger downward trend.

What does it mean? The rise that began last night could carry to 3334 and beyond on the futures chart.

[S&P 500 E-mini futures, 10-minute bars]

What does Elliott wave theory say? The overnight rise is wave C of Subminuette degree within wave 4 of Minuette degree. A C wave under the Elliott rules can move beyond the end wave A. In this instance wave B moved below the start of wave A. When both B and C envelope A, it is called an expanded Flat. In any case, the pattern suggests that we may have a rise in price to usher us into Halloween night and the weekend.

My trading strategy. This is the day I exit profitable options positions. A glance at the chart at the opening bell told me that my short bear call options spread position on IWM is unlikely to show additional profit today, so I exited immediately, at 39.5% of maximum potential profit. My goal for spreads is 50% of max. So, not the best but not too shabby. I’ll update IWM Analysis with detailed results later today.

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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