Wednesday, January 20, 2021

12:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued its rise throughout the trading session. The E-mini futures had reached a high of 3849 as the closing bell approached, and the index, a high of 3856.25. The index broke above the 1.382 Fibonacci retracement level. By my principle count, wave 1 of Submicro degree continues, within wave 5 of Micro degree. I’ve updated the chart below.

9:55 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to rise overnight, reaching a high of 3816.25 by the opening bell.

What does it mean? The upward push, when complete, will mark the end of the middle wave up within the rise that began October 30 from 3225. One possible endpoint would be the 1.382 Fibonacci retracement level, at 3864.88, although the rise could go higher. The end of the middle wave will be followed by a downward correction, although likely a shallow one.

[S&P 500 E-mini futures at 3:30 p.m.. New York time, 1-hour bars, with volume]

What does Elliott wave theory say? The rise overnight is wave 1 of Submicro degree within wave 5 of Micro degree within wave 5 of Subminuette degree within wave 3 of Minuette degree, all within wave 5 of Minor degree. The shallow correction that will follow the end of this rise will be wave 4 of Subminuette degree.

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
  • {-6} Submicro

By Tim Bovee, Portland, Oregon, January 20, 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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