Wednesday, March 10, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued its rise, reaching a high of 3916.25 so far. That level is below the starting point of the downtrend, 3959.25. I’ve updated the chart below.

10:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to rise in the final leg of an upward correction, reaching a high so far today of 3911.50, which is 47.75 points below the starting point of a downtrend on February 15.

What does it mean? The completion of the upward correction will be followed by an energetic resumption of the downtrend.

What are the alternatives? If the price moves above 3959.25, the beginning the downtrend, then the principle analysis is invalid and must be redone to account for a continuation of the uptrend that began in February

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

What does Elliott wave theory say? If the price rises another 48 points, then the 4th wave of Subminuscule degree will exceed the beginning of wave 1 of Subminiscule degree. This isn’t allowed in Elliott wave theory. Should it happen, then all of the drama since the February 15 peak has been a downward correction within an uptrending 5th wave in the rise since February 23 of last year. I count that year-long rise as having completed it’s 5th wave of Minor degree. However, all that has happened since the February 15 peak last month has been movements of small degree, seven and eight levels below Minor degree.

The 3rd wave of Subminuscule degree is longer than the 1st wave, so there’s no danger that this structure will violate the Elliott wave analysis rule that says the 3rd wave cannot be the shortest wave in the direction of the trend.

Elliott wave analysis doesn’t produce predictions. It’s not a crystal ball. Instead, it provides a language for describing the state of the chart at any given moment. So we must wait and see whether that February 15 peak stands or is exceeded.

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
  • {-8} Subminuscule
  • {-9} Bitsy
  • {-10} Subbitsy

By Tim Bovee, Portland, Oregon, March xx, 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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