Monday, February 22, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 reversed to the upside in trading today, and then reversed again, back to the downside. The analysis of this morning stands. I’ve updated the chart below.

I also posted a Bitcoin analysis.

Also, more resizing problems with the charts. Thanks, WordPress!

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures completed an upward correction within the decline that began on February 15 and has now resumed the downtrend.

What does it mean? The index and its derivatives are in the early stages of a downtrend that will eventually carry it around 2,000 points below its present levels.

What are the alternatives? If the price reverses and moves above the February 15 high — 3959.25 on the futures, 3950.43 on the index — then the uptrend that began on February 23, 2020 from 2191.86 on the index is still underway.

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

What does Elliott wave theory say? In overnight trading the futures moved below the February 18 low of 3880.50, which was the start of wave 1 of Subminuscule degree. Under the rules of Elliott wave analysis, if the price moves below the start of wave 1, then it’s not wave 2. That rule required that wave 2 be considered to have ended at the February 19 peak, 3931, as a result of the lower low.

All that has ensued since the February 15 peak are the early movements within a downward correction, wave 4 of Primary degree, and within it, from larger to smaller, an A wave of Minute degree and then a series of 1st waves, from Minuette down to Subminuscule.

The entire structure is within a Diagonal Triangle that began in December 2018, with each ensuing wave longer than the one that came before. So Primary wave 4 will eventually carry down to the lower boundary of the triangle, which presently in the 2080s and sinking daily.

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 22, 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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