Wednesday, April 14, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 pushed slightly higher, to 4144 on the futures and 4151.69 on the index, in the first hours of trading and then fell rapidly to the lower boundary of the trend channel marking the rise from April 7, to a low so far of 4129.50.

By my count that decline marks the somewhat overdramatic end of the wave 4 of Bitsy degree correction. It will be followed by a rise back toward the upper boundary of the channel, now in the low 4150s, and perhaps overshoot the boundary in the final, 5th wave rise of Subminuscule degree. That completion will also be the end of the parent, waves 5 of Minuscule degree, and the grandparent, wave 3 of Submicro degree.

I’ve updated the chart below, showing the trend channel in red, with a vertical grey line marking the opening bell.

10:20 a.m. New York time

What’s happening now? The S&P 500 E-mini futures ended a brief sideways move and rose to a new high of 4142.50 after the opening bell.

What does it mean? The rise that began on April 7 continues in its final phase. It will be followed by a shallow downside correction.

What are the alternatives? The new high could be the end of the rise from early April, but I think that’s the less likely alternative. Based on the form I’m seeing on the chart, there’s still more upside left.

[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]

What does Elliott wave theory say? I’m focusing this today on the internal structures within wave 5 of Minuscule degree, which began on April 7 from 4056.50. My count shows that wave 5 of Bitsy degree — two degrees smaller than Minuscule — began this morning with an unrelenting upward movement that I see as wave 1 of Subbitsy degree. This is happening within wave 5 of Subminuscule degree, which in turn in a child wave of wave 5 of Minuscule degree, which began on April 7.

If today’s rise indeed proves to be wave 1 of Subbitsy degree, then we have several days of upside remaining, as Subbitsy 1 climbs the staircase through a 2nd wave downward correction, a 3rd wave up, a 4th down and a final 5th wave push to the upside.

The end of Subbitsy 5 will trigger a series of endings up the degree ladder, resulting in a new downtrend up to the Minuscule degree and a 4th wave correction up to MIcro degree, whose 3rd wave began on March 4 from 3720.50.

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 20, 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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