Farewell, 2020

After the closing bell

In the end, the S&P 500 and its derivatives bumped up slightly to set a new high. To me, it looks like the beginning of wave 5 of Micro degree within wave 5 of Subminuette degree.

[S&P 500 E-mini futures, 3-hour bars, with volume]

Stepping back to a broader view, we can see how far along the price has come since the present Diagonal Triangle began on December 26, 2018. The Triangle wave 5 of Intermediate degree, and each bounce up or down to a triangle boundary is a Minor wave. By my count, the S&P 500 is working on wave 5 of Minor degree. A Diagonal Triangle has five waves internally, so the end is near.

[S&P 500 index, daily bars]

And finally, the long view, showing how we got to where we are: Intermediate wave 5 within Primary 5 within Cycle 5 within wave 5 of Supercycle degree. Looking back at the close-up chart at the top, I’m struck by the fact that the whole house of cards stretching back 91 years is poised to come tumbling down when today’s Submicro wave 5 within Micro 5 within Subminuette 5 within Minuette 5 within Minute 5 within Minor 5 reach an end. Perhaps even next year.

[Dow Jones Industrial Average, quarterly bars]

Of 2020, I doubt that any of us can say it was pleasant or easy. But when I look at this long-view chart, honestly, all of the crashes and crises and Sturm und Drang we’ve seen in 2020 — this year of roughhouse politics and plague — in the grand sweep of history seem fairly small in their impact on the markets. After all, we’ve been in an uptrend since the Black Tuesday crash of October 29, 1929, and that uptrend, despite all that has happened since, remains intact as 2020 comes to an end.

By Tim Bovee, Portland, Oregon, December 31, 2020

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
  • {-4} Subminuette
  • {-5} Micro

Disclaimer

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.

License
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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 www.timbovee.com.