SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 declined sharply today in the middle wave of a larger decline that began April 29. The price on the E-mini futures reached a low of 4120.50 and late in the day reversed to the upside. I’ve updated the chart, below, moving closer in on the chart and adjusting the count in light of the sharp decline, which was wave 3 of Subbitsy degree within wave A of Bitsy degree. The price reversal to the upside is wave 4 of Subbitsy degree.

Regarding the My Trades section below, the prospect SNAP has seen its implied volatility rank decline below the point where the trade would be worthwhile. So tomorrow, the search continues.

9:55 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined to their lowest point since the April 29 high.

What does it mean? The decline appears to be near the end of the first leg of a downward correction, which will eventually be followed by a return of the uptrend that will carry the price to new highs.

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

What does Elliott wave theory say? The decline that began in Monday’s session is wave 5 of Subbitsy degree within wave A of Bitsy degree, which is the first wave of wave 4 of Subminuscule degree, which began on April 29 from 4211. Subminuscule 4 will most likely take the form of a Flat, and as a 4th wave it wouldn’t be unusual for it to extend in a compound pattern consisting of several corrective forms. Although it may not. There’s no guarantee either way.

These low-degree moves are unfolding within wave 3 of wave 5 of Minuscule degree, which began on April 7, and — working up — are within wave 3 of Submicro degree, which began on March 25 from 3843.25. That means there’s quite a bit of uptrend ahead for the patient, although the S&P 500 is presently in a downward correction.

My trades. By my rules today is the midpoint of the entry gateway for the options expiring June 18. The gate will remain open until May 11. Between trades I moved some of my options-trading funds into HYLB shares in order to capture a dividend, whose record date is tomorrow, May 5. I’ll hold off on entering my options position until May 6, when I’ll exit HYLB, freeing up those funds.

I presently have one (!) prospect that is both sufficiently liquid and has a sufficiently high implied volatility rank to be worthwhile; it is SNAP, and that will be my focus in prepping for my next position.

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, May 4, 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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Based on a work at www.timbovee.com.