Thursday, December 17, 2020

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continue to trade above the upper boundary of the Diagonal Triangle that began in December 2018 and that continues to define, roughly, the upper boundary of the present rise, the 5th wave of Intermediate degree. In today’s trading the price briefly dropped below the boundary but quickly bounced back, while remaining below the high, 3717.50 (3725.12 on the index), that may mark the peak of the upward correction, wave 4 of Subminuette degree. I’ve updated the chart below.

9:35 a.m. New York time

What’s happening now? In the hour before the opening bell the S&P 500 E-mini futures index rose to 3717.50 and reversed.

What does it mean? That level fulfills all of the qualifications of the final subwave of the upward correction that began December 11. However, the upward correction could move still higher, it could reverse and then add another corrective pattern, or it could signal the end of the upward correction and the beginning of a downtrend reaching into the 3600s or below.

[S&P 500 E-mini futures at 12:31 a.m., 20-minute bars, with volume]

What does Elliott wave theory say? The upward correction is wave 4 of Subminuette degree, which is in its 5th wave and may in fact have completed it. The subwave is wave C of Micro degree, and within it are five subwaves, as required by the rules of Elliott analysis.

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, December 17, 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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