SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 E-mini futures fell to 4055.50 and then reversed, rising slightly. The B-wave low was was beyong a 79% retracement of the preceding A wave within the wave 2 of a Bitsy degree upward correction that began on May 13. B waves in a Zig-zag pattern tend to retrace no more than 79%, but it’s a guideline, not a firm rule. The rapid retreat from the low suggests that upward wave C within Bitsy wave 2 has begun, although it’s not a certainty.

“Nothing is but what is not.” –William Shakespeare, “Macbeth” (1605).

10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to decline, reaching into the 4060s in overnight trading, more than 100 points below the May 18 peak of 4179.30

What does it mean? The lower the price goes, the stronger the argument that the upward correction that began from 4029.25 on May 13 has ended, and the middle leg of the downtrend that began on May 9, from 4238.25, has begun. The price remains above 4029.25, the end of the 1st leg of the downtrend. A decline below that level confirm that the upward correction has ended.

What’s the alternative? Until then, the possibility remains that the upward correction is still underway and the price will resume its rise, moving above 4179.30, the peak attained on May 18.

[S&P 500 E-mini futures at 3:30 p.m., 210-minute bars, with volume]

What does Elliott wave theory say? By my principle count, wave 2 of Bitsy degree is still underway, with the decline from May 18 being wave B within wave 2.

B waves tend to retrace no more than 79% of the preceding A wave, which in this case would put the maximum retracement at 4060.75 on the futures. The low so far today has been 4061. So if the principle count is correct, a C wave to the upside has begun or will be beginning soon.

Under the alternative count, the decline from the May 18 peak is wave 3 of Bitsy degree. Third waves tend to be the most energetic of a trend, and wave 3 will carry the price below the end on May 13 of the the preceding wave 1 of Bitsy degree. A move below below 4029.25, the end of wave 1, will confirm that the alternative count is correct and wave 3 is underway.

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 19, 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.

Creative Commons 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.