Thursday, January 28, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 E-mini futures peaked at 3823.50 and then reversed. I count that long rise as wave 3 of Subminuscule degree within wave 1 of Minuscule degree. The very low level correction, a 4th wave, that has begun will be shallow, and then the rise will resume in a 5th and final wave. I’ve updated the chart below.

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined after the closing bell yesterday to 3703.50 and then reversed, climbing back to the 3775 at the opening bell today and then continuing to rise.

What does it mean? Yesterday’s low marks the end of the downward correction that began January 26 from a 3862.25 high. The subsequent rise will exceed that high, perhaps reaching the region of 4009.25, which is the 50% retracement level of the decline that ended February 23, 2020.

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

What does Elliott wave theory say? The January 27 low marks the end of wave C of Minuscule degree and its parent, wave 2 of Submicro degree. Wave 3 of Submicro degree, rising in the direction of the trend, is now underway and appears to be in the 3rd subwave of Submicro 3.

Within ascending order of degree, all of this is happening within wave 5 of Micro degree within wave 5 of Subminuete degree within wave 3 of Minuette degree within wave 5 of Minute degree within wave 3 of Minor degree. Minor 3 began on February 23, 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
  • {-6} Submicro
  • {-7} Minuscule

By Tim Bovee, Portland, Oregon, January 28, 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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