SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 E-mini futures moved to a new high in trading today, bringing itself back in line with the index. The high on the futures so far is 4323.55, and on the index, 4361.71. Long story short: Wave 3 of Minuscule degree within wave 5 of Submicro degree within 5th waves all the up to Minute degree, with wave 3 of minor degree, is still underway.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to rise overnight, reaching 4345.50, less than three points below the July 5 high of 4348. The index set a new high at the opening bell, 4356.46, and continued rising.

What does it mean? The new high on the index creates a divergence between the index and the futures. The principle analysis for the index is that the rise that began June 20 is still underway. The futures, in contrast, are in an upward correction within a larger downward correction that began on June 20.

Which analysis is right? Elliott wave doctrine says each analysis is right for its specific product, but I find that to be absurd. In this case, I consider the index to be the correct analysis — the rise from June 20 is still underway. See further discussion in the Elliott wave theory section below.

[S&P 500 E-mini futures at 9:50 a.m. , 40-minute bars, with volume]

What does Elliott wave theory say? The rise from June 20 is wave 5 of Micro degree. The high of July 5 on the futures ended wave 3 of Submicro degree within the rise, and the ensuing decline and rise are waves A and B within wave 4 of Submicro degree. The index doesn’t trade overnight, so all we can say of it is that the index set a high on July 2, another high on July 6 and yet another today. So why is the index correct? The higher high on this chart is unambiguous — the rise that began June 20 is still underway, and will be confirmed as underway with each new high. The futures set a high on July 5, dropped while the index wasn’t trading and remains below that July 5 high. Since the index can’t be rolled back and since the two products must eventually get back in sync, I expect the futures to reach a higher high, perhaps today, resolving the discrepancy.

The chart labeling reflects the index analysis, showing that the rise from June 20 is still underway.

Learning and other resources. See the menu page Analytical Methods for a rundown on where to go for information on Elliott wave analysis.

By Tim Bovee, Portland, Oregon, July 7, 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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