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.

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.

Read More »

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 E-mini futures have eased up to a higher high this afternoon, so wave C of Micro degree still had a bit more rise in it. I’ve updated the chart below.

10:15 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives completed the upward correction that began December 12, or at least the first pattern within it if the correction should prove to be a compound structure. The peak, attained in overnight trading, was 3701.75 on the E-mini futures, and 3698.97 on the index.

What does it mean? Completion of the correction in the Subminuette degree means the beginning of the final Subminuette wave down to below the 3620 mark, and perhaps significantly below.

What is the alternative? If the overnight high is only the end of the first pattern within a compound correction, then the price will fall in an X wave that separates patterns, and will be followed by either a another corrective pattern. An X wave has three subwaves.

What does Elliott wave theory say? The correction that may have peaked overnight, close to 8 a.m. New York time, is the Subminuette 4th wave, a variety of corrective wave that is prone to compounding. If the decline that began this morning is the beginning of the next Subminuette wave — wave 5 — then it will have five subwaves of Micro degree. If the decline is an X wave, it will have three subwaves.

All of this is happening within wave 4 of Minor degree, a downtrending corrective wave, which in turn is within uptrending wave 5 of Intermediate degree.

My trading strategy. Here’s how I approach the complex nested waves structures in Elliott wave analysis: If it’s a short-term play, such as options, I’m paying attention to the Subminuette degree in order to profit from the Minuette degree. If its a longer-term play, such as shares, I’m paying attention to the Minute degree in order to profit from the Minor degree.

Read More »

3:40 p.m. New York time

20 minutes before the closing bell. The S&P 500 continued its C-wave rise in the Micro degree and then reversed slightly, which may or may not indicate the rise is over. I’ve updated the chart below.

10:30 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives reversed after a three-wave decline and rose, although remaining below yesterday’s high.

What does it mean? The reversal clarifies that the upward correction that began December 11 is still underway, completing its middle wave in overnight trading and rising in its third, and possibly final, wave.

What does Elliott wave theory say? Wave A of Micro degree began its rise December 11 and ended on December 14, beginning the declining wave B, which ended last night around midnight. The present rise is Micro wave C. All of this is happening within wave 4 of Subminuette degree within wave 5 of Minuette degree.

A 4th wave correction tends to trace a sideways movement — a three-wave Flat rather than a three-wave Zigzag — and quite often will trace a compound pattern, gluing on another Flat or a Zigzag, connected to the first pattern with an X wave. There’s no way to tell at this point whether Subminuette 4 will extend through compounding.

Read More »

3 p.m. New York time

One hour before the closing bell. The S&P 500 and its derivatives fell after peaking at 3691.50. That level marks the end of wave 4 of Subminuette degree and the beginning of Subminuette wave 5. I’ve updated the chart below.

6:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures gapped up by 18 points when trading resumed Sunday evening New York time. The upward correction continued to rise another 15 points in overnight trading before reversing.

What does it mean? Internally, the rise from Friday’s low has three subwaves, suggesting that the correction is at or nearing its end. Once it is complete, the next move will be to the downside.

What does Elliott wave theory say? The upward correction that began December 11 is wave 4 of Subminuette degree. It breaks down into three subwaves, as is normal for corrective patterns. The final subwave, the C wave of Micro degree, breaks into five subwaves. So it’s very late in the game for the parent 4th wave.

The end of wave 4 will kick off a downtrending wave 5 of Subminuette degree, which will decline past — perhaps significantly past — the end of the preceding 3rd wave, at 3620.75. The end of wave 5 will also complete wave A of Subminuette degree within wave 5 of Minuette degree and wave 5 of Minute degree, which in turn are within wave 4 of Minor degree.

My trading strategy. I’m holding my bear positions.

Read More »

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 closes the week continued to run just below the upper boundary of a Diagonal Triangle of Intermediate degree that began two years ago.

10 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives declined overnight by about 60 points, reaching 3620.75 on the E-mini futures and then bounced by 10 points.

What does it mean? Thursday’s high ended an upward correction within the downward trend that began December 8. Today’s overnight drop is the main leg of downtrend. These are all early steps in a downward correction of greater magnitude. this morning’s bounce upward will be followed by a final downwave within the three-day-old downtrend.

What does Elliott wave theory say? The decline since yesterday is wave 3 of Subminuette degree, several subwave levels down from Minute wave A within Minor wave 4 to the downside.

Read More »

The platform for Private Trader is no longer sizing charts correctly. So until the problem is resolved, you’ll be seeing impressively gigantic charts in my posts.

3:30 p.m. New York time

Half an hour before the closing bell. Micro wave 5 and its parent, Subminuette wave 1, both to the downside, are complete. Subminuette wave 2 to the upside has begun. The entire structure will eventually resolve itself into Minute wave A within Minor wave 4, a downward correction. I’ve updated the chart below.

9:55 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives continued their fall overnight, interspersed with a small-scale upward correction. The low of 3644 on the E-mini futures was reached soon after the opening bell.

What does it mean? The first small movement to the downside is in its final stage and will be followed by an upward correction that could take back much of the decline from the high of 3714.75 reached on December 8. Although there’s no requirement that it be that steep; a shallow correction is perfectly within the rules of Elliott wave analysis.

What does Elliott wave theory say? I’ve labeled yesterday’s steep decline was wave 3 of Micro degree, although that assessment may well move up a degree or two as the downtrend develops. The futures traced a shallow sideways correction, Micro wave 4, in overnight trading, and then began Micro wave 5, the final subwave of Subminuette wave 1 to the downside.

The next step will be Subminuette wave 2, and in Elliott Wave Theory 2nd waves tend to be Zigzags that correct much of the preceding 1st wave.

Read More »

3:30 p.m. New York time

The S&P 500 continued to decline during the day. I’ve updated the chart, below, with some preliminary wave labels on the decline.

10:20 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives remain above the upper boundary of a two-year-long Diagonal Triangle, peaking at 3714.75 on Tuesday and now curving around toward the downside.In the first 20 minutes of today’s trading the price fell back below the triangle boundary.

What does it mean? Three times so far I’ve had to adjust my analysis of the top of the rise that began in February, and the current top is within the rules of Elliott wave analysis show, as were its predecessors. If this indeed proves to be the top, then the market is preparing for a significant decline.

What is the alternative? It may be that Tuesday’s top will be exceeded, and if that happens, then I’ll adjust the wave count. Elliott wave analysis, after all, is about the implications of what has occurred. It says nothing about the timing of events.

What does Elliott wave theory say? The rise from Tuesday’s low (3664.25) has so far traced five waves, with a bit of ambiguity regarding the first wave. I count that rise as wave 5 of Subminuette degree, leading to a wave 5 completion up to the parent Minute degree, and a wave 3 completion one degree up from there, at the Minor degree.

The fall below the triangle boundary, which happened just minutes ago, marks the beginning of wave 1 of Subminuette degree and, going up the scale, wave 4 of Minor degree.

My trading strategy. I’m continuing to hold my short bear call options spreads and my shares in SDS, an inverse exchange-traded fund based on the S&P 500.

Read More »

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 followed the alternative path that discussed this morning, below. It broke above the upper boundary (red line) of the Diagonal Triangle that began in December 2018, reaching a new high of 3708. I’ve updated the chart below, updating the count to show Minor wave 3 peaking at today’s new high and the decline over the last two days being wave 4 of Subminuette degree. It is possible that the Subminuette wave 5 rise is not yet over, and that’s the new alternative count.

9:40 a.m. New York time

What’s happening now? The S&P 500 index continued to work its way downward overnight, along with its derivatives. The E-mini futures have fallen 32.25 points off of yesterday’s high, down to an overnight low of 3664.25.

What does it mean? The downward movement is the early stage of a downward correction that will attain significant magnitude by the time it’s complete.

What is the alternative? It’s possible that the December 4 peak, 3705, wasn’t the end of the massive rise rise since February 23, when the S&P 500 index sank to 2191.86. There could be more upside ahead if that rise is still underway, but the upper boundary of the Diagonal Triangle that began in December 2018 suggests that there is little upside potential.

What does Elliott wave theory say? Under my principle analysis Minor wave 4 began on December 4 and so far has completed three waves of Subminuette degree, the first steps in Minuette wave 1 within Minute 1 within Minor wave 3. I may end up adjusting the smaller degrees depending upon the length and magnitude of waves to come.

Wave 3 of Subminuette degree ended this morning around 7 a.m. New York time, and Subminuette 4 is rising as the opening bell sounded.

Read More »

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 completed five waves down, completing what I have labelled wave 1 of Subminuette degree, an early step in what will gain clarity as the parent wave, the 4th of Minor degree. I have updated the E-mini futures chart, below.

10 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives continue to trace a sideways pattern in the early stages of a downward correction within an uptrend.

What does it mean? There is very little upside potential on the chart, and the correction is likely to be shallow rather than a sharp downward plunge.

What does Elliott wave theory say? The downward correction is wave 4 of Minor degree within wave 5 of Intermediate degree. The upper boundary of the diagonal triangle that began in December 2018 (see Friday’s post for a chart) sets a loose limit on the upward potential, “loose” because prices will often move beyond such trend lines, in an overthrow, before returning to the area within the trend markers.

Fourth waves tend to be of a structure different than second waves. Wave 1 of Minor degree took the form of a Zig-zag, a steep decline, so wave 4 will most likely be a flat, and perhaps will extend in a compounds structure.

My trading strategy. My short bear call options spreads on IWM, expiring January 15, remain within what will eventually be the profit zone, and so I shall continue to hold the positions. My shares in SDS, an inverse S&P 500 exchange-traded fun, are unprofitable now but will return to profitability after Intermediate wave 5 completes its work.

Read More »

After 4 p.m. New York time

At the close. And as it turns out, the S&P 500, a minute before the closing bell, pulled itself up to a higher high, 3699.20 on the index and 3700 on the E-mini futures.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 remains within five points or so of yesterday’s high, having barely budged throughout the day.

9:35 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives remain at the upper boundary of a Diagonal Triangle that began in December 26, 2018. This morning is is trading slightly below the index’s December 3 peak of 3682.73.

What does it mean? Yesterday’s peak ended the middle wave of the rise that began March 23 from 2191.86. The next move will be significantly to the downside, followed by a rise back up to a new high, ending the triangle.

What does Elliott wave theory say? The December 3 peak marked the end of Minor wave 3 to the upside. The index is now in the early stages of a Minor wave 4 correction within Intermediate wave 5, an uptrending wave.

My trading strategy. I’m continuing to hold both my short bear call spread options positions and my bearish stock positions in the inverse exchange-traded fund SDS, which moves the opposite of the S&P 500;.

Read More »