Wednesday, March 31, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 broke above the high of March 17, so far to 3983.75 on the futures and 3994.41 on the index, following the course of my alternative analysis. That means that the uptrend is still in place. Rather than changing the chart below from this morning, I’ve added in a long-term chart to show where we now stand and shall update the short-term chart for Thursday morning’s post.

Bottom line: The uptrend is still in place. We are presently in wave 5 of Subminuette degree.

[S&P 500 index at 3:32 a.m., daily bars]

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued their so-far-shallow decline from yesterday’s peak.

What does it mean? By my principle analysis, the decline is the early stage of a significant decline from the March 17 peak, 3978.50 on the futures, 3983.87 on the index.

What are the alternatives? If the price should rise above the March 17 peak, then it would invalidate my principle analysis, showing that the uptrend that began in February 2020 is still underway. If the price moves above yesterday’s high, 3971.25 on the futures, then the upward correction that began March 25 is still underway.

[S&P 500 E-mini futures at 9:36 a.m., 30-minute bars, with volume]

What does Elliott wave theory say? Yesterday’s peak was the end of wave 4 and the beginning of wave 5, both of Subminuscule degree, within wave 1 of Minuscule degree, and first waves up several degrees, to Subminuette degree. These are motive ways, moving in the direction of the main trend, which is down. First waves tend to be undramatic, and the following 2nd wave generally takes back much of the ground covered by wave 1. The true drama — “capitulation”, in the language of trading — comes with the 3rd wave.

I’ve added a price channel (red lines) for the Subminuscule degree, with an upper boundary defined by the start of wave 3 and wave 5, and a lower boundary defined by the end of wave 3.

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 31, 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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