SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the day and then rose a bit, to 4199 on the futures. The price then dropped back by a few points. No change to my analysis from this morning. I’ve updated the chart.

9:55 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose slightly in overnight trading and then curled over in what appears to be a resumption of the decline that began yesterday from 4212.75.

What does it mean? Although it’s impossible to be certain this early in the game, the decline appears to be the early steps in the resumption of the downtrend that began on May 9. It eventually will reach below 4029.25, the start of an upward correction that ended yesterday.

What’s the alternative? It’s a period of vast uncertainty in the markets.

1) Possibly, the decline is a small downward correction within the larger upward correction that began on May 9. If that’s the case, then the price will reverse and reach above 4212.75.

2) Or, it could be that the decline is a separator in a compound correction, following the end of one corrective pattern and the preceding that start of another. In which case, we’ll see more bouncing around within a relatively narrow range.

3) And if the price reverses and rises above the start of the larger downtrend that began on May 9 from 4238.25, then the uptrend that began last year is still underway and higher prices lie ahead.

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

What does Elliott wave theory say? So, here’s the lineup as succinctly as I can put it.

Principle: Wave 3 of Subbitsy degree within wave 1 of Bitsy degree began on May 25 and will see a signifiant decline.

Alt 1: Wave 2 of Subbitsy degree within wave 1 of Bitsy degree is still underway and will see a further rise.

Alt 2: Wave X within wave 2 of Subbitsy degree is underway and will be followed by another corrective pattern.

Alt 3: Wave C of indeterminate degree within uptrending wave 5 of Subminuette degree is underway and will be followed by a rise above the May 9 high of 4238.25, continuing the uptrend that began last year after the crash early in the pandemic.

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 6, 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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