Wednesday, April 7, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continues to trade in a narrow range, working its way through wave 4 of Submicro degree. I’ve updated the chart.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures began a sideways correction after Tuesday’s high, the second correction within the rise that began on March 25 from 3843.25.

What does it mean? The uptrend from late March is in its final stages. It will be followed by a larger shallow downward correction within the rise that began March 4 from 3720.50.

What are the alternatives? It’s possible that a correction did not begin with Tuesday’s high and that the price will move higher before the correction begins.

[S&P 500 E-mini futures at 3:300 p.m., 80-minute bars, with volume]

What does Elliott wave theory say? The rise from March 25 is wave 3 of Submicro degree, and within it Tuesday’s peak marked the end of wave 3 of Minuscule degree. The present Minuscule wave 4 will be followed by a 5th wave push to the upside that will at the least exceed 4101.75, perhaps by a significant distance.

There is no limit on how far a 5th wave can go, as long as it doesn’t leave the preceding 3rd wave as the shortest of the three movements in the direction the trends, waves 1, 3 and 5.

If that Minuscule 5th wave moves above 4101.75, then its parent wave 3 of Submicro degree will be longer than the preceding Submicro wave 1, removing all limits on how far Submicro 5 can rise, except for the need that it be proportional with other movements of the same degree.

If Minuscule 5 stays below 4101.75, then Minuscule wave 1 will be longer than wave 3, and wave 5 will be limited to the length of wave 1, which is 258 points.

It’s less complex than it might seem: Under Elliott wave analysis, a 1st wave or a 5th wave of a series must be shorter than the 3rd wave. It’s one of the strictly no-compromise, no fudging rules in Elliott.

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, April 7, 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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