3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued its decline, slipping from the low 4100s to around 4060, in the initial wave of a downtrend that began on May 9. I’ve updated the chart.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures moved slightly lower in overnight trading, to 4095.50.

What does it mean? Yesterday’s analysis stands: The May 9 peak, 4238.25, ended the uptrend that began March 25 and kicked off a significant downward correction.

What’s the alternative? If the price reverses and moves above 4238.25, then the uptrend that began March 25 is still underway. The correction will eventually come, but a new high would move it down the road.

What does Elliott wave theory say? Under the principle analysis, we are seeing the 1st wave of Bitsy degree with a series of higher-degree 1st waves within an A wave of Minute degree. The whole unfolding structure is a 4th wave of Minute degree.

Under the alternative analysis, which becomes valid only if the price reverses to a new high, the present decline would be a small-degree downturn within uptrending wave 3 of Minor degree.

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.

• Elliott wave analysis
• Fibonacci level

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 12, 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.

License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.