Tuesday, March 2, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 declined slightly and then rose again during the day, staying within the range of the overnight high and low. That sideways trend suggests that the wave 4 correction of Subminuscule degree is still underway, and within it, wave C of Bitsy degree, and down further, wave 5 of Subbitsy degree. I’ve updated the chart below.

9:05 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continue an upward correction that began on February 26 from 3801.50 and by my analysis are in the last phase of the rise. The high so far today is 3903.50.

What does it mean? The end of the correction will be followed by a resumption of the downtrend that began on February 15 from 3959.25 on the futures.

What are the alternatives? If the price rises above 3959.25, then the corrective pattern that began from that price on February 15 ended earlier than my analysis shows, and I would reassess the chart. I consider this to be a lower likelihood.

[S&P 500 E-mini futures at 3:30 p.m., 15-minute bars, with volume]

What does Elliott wave theory say? The rise from February 26 internally is in wave C of Bitsy degree within wave 4 of Subminuscule degree — were talking very small degrees here, so small that I had to make up the name “Bitsy” for the degree that stands nine levels below Intermediate degree.

And now, a new made-up name, “Subbitsy”, for the degree 10 levels below Intermediate. Within wave C of Bitsy degree, the price has completed four waves of Subbitsy degree and this morning about 4 a.m. began wave 5 of Subbitsy degree. That 5th wave remains below the peak of Subbitsy wave 3, which was at 3912. And although the 5th wave is the end of the rise, and although upward waves generally exceed the previous upward wave in the series, there is no rule in Elliott that requires a 5th wave to exceed the prior 3rd wave. It can fall short, a condition called “truncation” in the Elliott wave terminology.

Truncated or not, the end of Subbitsy 5 will also be the end of Bitsy C and, probably, Subminuscule 4, and the beginning of Subminuscule 5 to the downside, which will fall below, perhaps well below, 3801.50, the end of the previous 3rd wave of Subminuscule degree.

I hedged the end of Subminuscule 4 in the graf above with “probably” because corrective waves sometimes will form combinations of patterns, connecting two Flats, for example, or a Flat and a Diagonal. Fourth waves are especially prone to this. So if Subminuscule 4 forms a simple corrective pattern, then it will end with the Bitsy C peak. If it forms a combination of patterns, then there will be a downward X wave separating the patterns, and then another upward correction pattern.

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, March 2, 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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