Monday, November 16, 2020

3:30 p.m. New York time

I’m making a change going forward. I’ll use the S&P 500 E-mini futures chart for detailed charts, and the index chart for the big picture. The futures tend to lead the index. No surprise. The futures trade 24-hours a day, Sunday evening through Friday afternoon, New York time. At major turning points I’ll give both the index and the futures prices.

In the chart below — the futures — I have numbered subwaves of the decline that began November 9 as being of the Subminuette and Micro degrees. That’s purely a guess, as we don’t have enough context to have confidence in labelling the degree. Here’s the futures chart, half an hour before the closing bell.

[S&P 500 E-mini futures, 20-minute bars, with volume]

10:45 a.m. New York time

What’s happening now? The S&P 500 index continues its early work on the second downward retreat within a larger upward correction.

What does it mean? The downward movement, which will approach and perhaps exceed 2000, will be followed by an upward movement back above 3600 and perhaps higher than 3700.

[S&P 500, hourly bars]

What does Elliott wave theory say? The 3645.99 level, was the peak of Minor wave 1, the third wave of a five-wave expanding triangle that began nearly two years ago, and the present retreat from that peak is the early stage of a decline from the upper boundary of the triangle to the lower boundary, presently around 2118. The boundary will be lower by the time the price approaches that level.

My trading strategy. Hold bearish shares; wait to enter new bear call options spread positions.

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 16, 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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