Thursday, January 7, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 price inched higher, reaching 3803.25 on the futures as the closing bell approached. I’ve updated the chart, below.

11 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose to within 65 points of the lowest of three Fibonacci retracement levels are my price targets for the rise that began in February. It has so far reached 3,800 as of this post.

What does it mean? Completion of the rise will mean that the middle wave, usually the strongest of the five-wave structure, has reached an end and will be followed by a decline, perhaps a shallow on.

[S&P 500 E-mini futures at 3:30 p.m., 3-hour bars, with volume]

What does Elliott wave theory say? Wave 3 of Minor degree began on February 23. The subwaves, from larger degree to smaller, are wave 5 of Minute degree, wave 3 of Minuette degree and wave 5 of Subminuette degree.

Completion of Minor wave 3 will be followed by Minor wave 4, the wave position that tends toward a shallow structure and one that link several corrective patterns together in a time-consuming compound correction.

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, January 7, 2021

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.

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Based on a work at www.timbovee.com.