Tuesday, January 12, 2020

3:30 p.m. New York time

I have updated IWM Analysis with results, and updated the S&P 500 chart, below, half an hour before the closing bell.

2:50 p.m. New York time

I’ve exited my short bear call options spreads on IWM, for a loss. I’ll update the entry analysis with results.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continue a shallow correction that began January 8. The price is presently working through the middle wave of the three-wave pattern.

What does it mean? The end of the downward correction will be followed by a push to a new high.

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

What does Elliott wave theory say? The correction is wave 4 of Micro degree within wave 5 of Minuette degree within wave 3 of Minuette degree. The present subwave is wave B of Submicro degree within a Flat structure. In Flats, wave B must retrace 90% of the preceding wave A.

My trading strategy. My short bear call options spread on IWM remain about 17 points above the profit zone. I shall make a decision about when to take the loss.

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 12, 2021


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.