Friday, April 9, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved higher today, so far to 4111.25 on the E-mini futures and 4119.03 on the index. No change in the analysis. I’ve updated the chart below.

10:05 a.m. New York time

What’s happening now? In overnight trading, the S&P 500 E-mini futures reached a new high, 4102.50, briefly moving past a milestone that removes a hard limit on how high the future final push to the upside of the rise from March 4 can go. The price quickly retreated from that high, trading sideways at the opening bell.

What does it mean? The new high confirms that the uptrend that began March 25 is still underway. When complete, it will be followed by a shallow correction.

What are the alternatives? It’s possible that the new high completes the rise from March 25 and the correction has already begun.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? The milestone past overnight relates to a hard rule in Elliott wave analysis: No 3rd wave can be shorter than both waves 1 and 5 in a trend. Wave 1 of Submicro degree began on March 4 from 3720.50 and was 258 points long. Wave 3 of Submicro degree began on March 25 from 3843.25 and as of the new overnight high is 259.25 points long — so far.

If wave 3 had been shorter than wave 1, then the future wave 5 would have to be shorter than wave 3 in order to prevent wave 3 from being the shortest wave.

The new high, 4102.50, confirms that wave 3 of Submicro degree is still underway. Internally, wave 5 of Minuscule degree may still be under way (the principle analysis) or may have ended at the new high high (the alternative, less likely analysis).

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 9, 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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