Wednesday, March 24, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued its three-wave downward correction, having reached a low of 3898.25 on the futures so far today, and is presently in its final leg, wave C of Subbitsy degree within wave 2 of Bitsy degree. The correction is occurring within a rising wave, the 5th of Subminuscule degree. I’ve updated the chart below.

The completion of wave C will mark the beginning of wave 3 of Bitsy degree, which will carry the price into the 3940s and perhaps even higher.

10:30 a.m. New York time

Trade results. I’ve updated my NIO Trade post with results and an analysis of what went right.

9:45 a.m. New York time

My trade. I’ve exited my short iron condor options spread on NIO for 50% of maximum potential profit, which was my target price. I shall update the NIO Trade entry analysis shortly.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight in the second leg of a downward correction.

What does it mean? The correction is likely to reach completion quickly and will be followed by a rise to new highs.

What are the alternatives? My prior analysis had suggested, as an alternative, that the rise from March 19 might have been the prelude to a third corrective pattern, but I’m taking that off the table and have no alternative analysis at this point.

[S&P 500 E-mini futures at 3:30 p.m., 10-minute bars, with volume]

What does Elliott wave theory say? I’ve moved the chart in for a close-up so as to better track the subwaves of the rise from March 19. The price channel (red lines) is for Subminuscule degree, which began on March 9. (See yesterday’s post to view the full channel.)

So here’s where we are. Within uptrending wave 5 of Subminuscule degree, wave 1 of Bitsy degree ended yesterday, March 23, with a truncated 5th wave of Subbitsy degree at 3930.50, and Bitsy wave 2 began. Within wave 2 of Bitsy degree, downtrending wave A of Subbitsy degree fell sharply to completion yesterday, and subsequently the price rose in wave B of Subbitsy degree, which is still underway.

Second waves are generally simple Zigzags, dramatic in their scope and over quickly. Once Bitsy wave 2 is complete, wave 3 of Subminuscule degree will begin its rise. Third waves tend to be energetic, and I expect this 3rd wave to carry the price significantly closer to the price channel’s upper boundary.

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 24, 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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