SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued to decline during the day, reach a low of 4332.50 on the futures and of 4340.70 on the index. No change to the analysis. I’ve updated the chart.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to decline from yesterday’s high, 4384.50.

What does it mean? There is some ambiguity. My principle analysis is that the uptrend is still underway. This will be confirmed by a higher high.

What’s the alternative? Or the uptrend could well have ended with yesterday’s high. At this point I consider both analyses to be almost equally likely.

[S&P 500 E-mini futures at 3:29 p.m., 2-hour bars, with volume]

What does Elliott wave theory say? It struck me that it would be useful to pull the chart back to a broader view, so as to not lose sight of the forest for the trees. A difficulty in Elliott wave analysis is always to distinguish between degrees. What one analyst sees as a 2nd wave in the degree under analysis, another analyst sees as a wave of lower degree that can be safely be ignored.

One technique for separating the significant from the insignificant is to overlay the chart with a six-bar moving average — six two-hour bars on the chart above. The moving average is the bright blue line.

So the question is, how many waves can we count beginning with the June 20 low of 4126.75. The moving average shows no declines of significance until July 7, when the price reversed from from a peak of 4353.25. So by this method, the peak is the end of wave 1, and in the broader analytical framework I’ve used, it will be wave 1 of Submicro degree.

The difficulty is that wave 1 seems overly long for such a movement, and the following wave 2 seems two short. Second waves tend to retrace much of the ground covered by the preceding 1st wave. Even if the retracement seems truncated, it’s the largest retracement we have so far on the rise from June 20. And as long as the future wave 3 or wave 5 of Submicro degree is longer than wave 1, then the rules of Elliott wave analysis are satisfied.

Another consideration is that the price is some distance below the upper boundary of the price channel of the degree above Micro, the Subminuette degree. In theory, the price should come close to that upper boundary, which is presently just below 4500 and rising.

Bottom line: The peak of July 14 is within an ongoing wave 3 of Submicro degree within the parent, wave 5 of Micro degree. The uptrend that began on June 20 continues.

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 15, 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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