Friday, November 6, 2020

3:30 p.m. New York time

I’ve updated the chart to show the S&P 500 half an hour before the closing bell. The price has barely budged as it scrapes along the upper boundary of the trend channel.

6:35 a.m. New York time

What’s happening now? The S&P 500 index continued to dawdle at the upper boundary of the decline that began on September 2.

What does it mean? Nothing significant has changed since yesterday, November 5. I count the rise from October 30 as an initial step in upward correction, to be followed by a downward movement and then a final upward movement, potentially ending the correction and beginning a significant decline in the direction of the main trend.

[S&P 500 index, hourly bars]

What does Elliott wave theory say? Wave A of Minute degree is nearing its end. It is the first wave of a three-wave correction, subwaves of wave 4 of Minor degree within downtrending wave 3 of Intermediate degree.

My trading strategy. I’m declining to open options positions at this point, as I wait for the Minor degree downtrend to resume. I continue to hold shares in the inverse 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 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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