Thursday, November 5, 2020

3:35 p.m. New York time

Half an hour before the closing bell, the S&P 500 has moved beyond the upper boundary of the price channel, a signal that Minute wave A, which began on September 30, is nearing completion. (No afternoon chart update today.)

9:45 a.m. New York time

What’s happening now? The S&P 500 index took another step to the upside, drawing near to the upper boundary of the price channel that began on September 2, when the index peaked at 3588.11

What does it mean? The rise that began on October 30, from 3233.94, is nearing its end.

What are the alternatives? The price could move briefly above the upper boundary — an action called an overthrow — and that would signal an end the rise and a resumption of the decline. An overthrow isn’t mandatory and the price could reverse while still below the boundary.

[S&P 500 index, hourly bars]

What does Elliott wave theory say? By my count the index is completing wave A of Minute degree within wave 4 of Minor degree, an upward correction that began on October 30. All of this is happening within wave 3 of Intermediate degree, which in turn is a subwave of wave 1 of Primary degree. Primary 1 began on September 2, ending a rise that began in 1974 and beginning a declining dominant trend that will be with set the direction of the market for years.

Minute wave A will be followed by a decline, Minute B, and then by a final upward movement, Minute C. The end of wave C will either mark the completion of Minor wave 4, ushering in a Minor 5th wave decline down to the 3100s, or wave C will be followed by an X wave, a separator of two corrective patterns that are parts of a combination correction.

My trading strategy. I won’t enter a new options position until Minor wave 5 has begun. I suspect that the December options are off the table, since it will take a bit of time for waves B and C to complete their work. I shall continue to hold my bear-oriented shares of the exchange-traded fund SDS.

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, November 5, 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.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at