Monday, April 19, 2021

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the day to the lower boundary of the price channel of Subminuscule degree. A break below the boundary will be evidence that Subminuscule wave 5 ended on April 16. A break below the April 14 low, 4129.50 on the futures, will provide stronger evidence. I’ve updated the chart below.

10:15 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell from Friday’s peak of 4183.50, to a low in overnight trading of 4154.75.

What does it mean? The peak marks the end of the rise that began on April 7 and the beginning of downward correction.

What are the alternatives? Another possible analysis is suggests that the rise from April 7 is still underway in its late phase, and that the decline overnight is a correction within that rise. I consider this to be a less likely possibility based on the proportionality the decline so far.

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

What does Elliott wave theory say? The high of April 16 (futures: 4183.50, index: 4191.31) marks the end of wave 5 of Minuscule degree and internally, down to Bitsy degree. Above Minuscule, it is also the end of wave 3 of Micro degree and its child wave 3 of Submicro degree. This is all happening within the rising wave 5 of Subminuette degree, which began March 4.

At the higher degrees — MIcro and Submicro — the S&P 500 has entered 4th wave corrections. Fourth waves are followed by 5th waves, to the upside in this case, that finish the trend.

Fourth waves, as is normal within all Elliott wave constructs, are composed internally of uptrends and downtrends. In this case, I’ve labeled the A wave — the first wave of the correction — at the Submicro degree, within wave 4 of Micro degree. An A wave internally can have 5 waves, labeled 1 through 5, if it is a Zigzag, or three waves, labeled A through C, if it is a Flat. I’ve used the numerical labelling within Submicro wave A, but that could change.

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 19, 2021

Disclaimer

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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Based on a work at www.timbovee.com.