Monday, February 8, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved to a slightly higher high — 3903 on the futures and 3909.92 with 30-minutes left in the regular trading session. It’s low for the day was only 16 points on the futures, 17 points and a fraction on the index. A drowsy day on Wall Street. I’ve updated the chart below.

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a higher high in overnight trading and then pulled back in a shallow, short-term correction. The high is 3900.50 on the futures and 3905.74 on the index.

What does it mean? By my count the S&P 500 has one more push to the upside before the larger trend begins a decline.

What are the alternatives? There’s no built-in limit to the upward move. It could rise quite a distance before the uptrend is exhausted. The excellent pattern recognition software in our brains tend see each higher high as the end of the trend, but it’s not necessarily so.

[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]

What does Elliott wave theory say? The last push up to the higher high is a very small level, wave 5 of Subminuscule degree, and internally, one degree lower, I think wave 5 is it’s 4th wave, with a final upward movement ahead.

Working our way up the degree ladder, Subminuscule 5 is a subwave of wave 5 of Minscule degree within wave 5 of Submicro degree within wave 5 of Micro degree within wave 5 of Subminuette degree with wave within wave 3 of Minuette degree. So completion of the tiny wave below Subminuscule, so small a degree that it lacks a name, will trigger completion of a series 5th waves up to Subminuettee degree, which began on December 21.

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, February 8, 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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