SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose to a new high in trading today, 4497.25 so far on the futures, and 4501.08 on the index. The wave 4 correction of Bitsy degree has ended, and wave 5 of Bitsy degree is underway. I’ve updated the chart.

1:45 p.m. New York time

Other analysis. BABA dropped off from its Tuesday high, 174.15, with an opening gap this morning. The price has completed a 1st wave up within an upward correction a long downtrend and is now falling in a downward correction within the upward correction. I’ve posted an analysis.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued their sideways course overnight, remaining below yesterdays high of 4492 on the futures, 4492.81 on the index.

What does it mean? The movement is a low-level correction that will be followed by a rise to new heights.

What’s the alternative? Yesterday’s high marked the end of the rise of August 19, triggering a series of completions up to the rise that began on May 19.

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

What does Elliott wave theory say? The sideways movement from yesterday is wave 4 of Bitsy degree, following the peak at 4492 that marked the end of Bitsy wave 3. Fourth wave corrections tend to be shallow, and this 4th wave so far is adhering to that tendency. It will be followed by wave 5 of Bitsy degree, which will break above the previous peak of 4492, with no formal limits on how high it can go. Ideally, it would hit the upper boundary of the price channel, but that’s a bit of a stretch for a wave of such a small degree.

The end of Bitsy wave 5 triggers completion of a series of 5th waves of greater degree, up three levels to Submicro degree, which in turn completes wave 3 of Micro degree, which began on May 19 at 4055.50 on the index. The ensuing wave 4 of Micro degree will be shallow correction, albeit of far more impactful size than the Bitsy-degree correction we’ve seen since yesterday.

The less likely alternative: Yesterday’s peak at 4492 was the end of wave 5 of Bitsy degree and of the parent waves discussed above, and the sideways movement is a very muddy, tentative step in what will prove to be a significant decline correcting the Minor-degree wave 3 rise that began on February 23, 2020 from 2191.86 on the index.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it in his book Science and Sanity (1933), “The map is not the territory … The only usefulness of a map depends on similarity of structure between the empirical world and the map.” And I would add, we can judge that similarity of structure only after the fact.

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

By Tim Bovee, Portland, Oregon, August 25, 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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