Monday, February 15, 2021

10:25 a.m. New York time

What’s happening now? U.S. markets are closed for the President’s Day holiday. However, the S&P 500 E-mini futures are trading and moved to a new high overnight, 3951.25, which is 16 points above Friday’s high. The holiday session traded in a very narrow range after rising to that higher level.

What does it mean? The uptrend that began on January 31, from 3656.50, is still underway. The most recent high is 58 points below the next Fibonacci level retracing the large decline of February 2020. That 1.50 Fibonacci level is a not-entirely-reliable price target for the end of the uptrend Once the uptrend is complete, it will reverse in to the early stages of a significant downtrend.

What are the alternatives? The uptrend is in its final stage, but it could very well extend to well beyond the Fibonacci target level. Or it could reverse tomorrow and start the downward journey. At this point there’s no sure to way to tell.

[S&P 500 E-mini futures at 10:22 a.m., 35-minute bars, with volume]

What does Elliott wave theory say? The final wave of a movement in the direction of a trend is the 5th wave. In this case, the 5th wave of Subminuscule degree is nested within a series increasingly larger 5th wave degrees stretching up four levels to wave 5 of Subminuette degree. So the end of Subminuscule 5 will trigger an avalanche of wave 5 completions. This illustrates the fractal nature of the markets.

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 15, 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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