SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued to rise during the trading day, reaching 4509.25 so far on the futures, 4512.45 on the index. No change in the revised analysis. I’ve updated the uppermost of the two charts.

10:45 a.m. New York time

Revised analysis. The S&P 500 rose sharply to new highs as Federal Reserve Chairman Jerome Powell spoke about the Fed’s policies at the online-this-year Jackson Hole Symposium. The rise means that the low-level correction discussed in this morning’s analysis ended at yesterday’s low and the push to higher highs, also discussed earlier, is now underway.

The alternative analysis would treat the quick rise as a wave separating two corrective patterns in a compounds correction. With the present evidence, I can’t choose between the two. If the price quickly retreats, then the separator wave scenario will become the principal analysis.

In terms of Elliott wave analysis, yesterday’s low marked the end of wave C of Subbitsy degree within wave 4 of Bitsy degree, and the subsequent rise is wave 5 of Bitsy degree, whose whose completion will also mark the end of two 5th waves of increasingly higher degree, Minuscule and Submicro, and of their parent, wave 3 of Micro degree.

Here’s the new chart. I’ve retained the former, now out-dated chart below as reference.

[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]

10 a.m. New York time

What’s happening now? The low level correction that began August 24 on the S&P 500 E-mini futures completed its first downward wave in overnight trading and is now in its upward second wave.

What does it mean? The final wave of the three-wave pattern will be a downward movement. The end of the correction will be followed by a push to new highs.

What’s the alternative? Corrections tend to come in groups of three waves internally, although often they extend in compound patterns. So whether this three wave pattern will be the end of the correction is still an open question. If it extends, then the final wave of the first pattern will be followed by a separator wave to the upside, and then a second corrective pattern, most likely also of three waves internally.

[Outdated: S&P 500 E-mini futures at 10:02 a.m., 20-minute bars, with volume]

What does Elliott wave theory say? The low overnight marked the end of wave A of Subbitsy degree within wave 4 of Bitsy degree, a correction within wave 5 of Subminuscule degree. Bitsy wave 4 will be followed by a 5th wave of the same degree, whose completion will also mark the end of two 5th waves of increasingly higher degree, Minuscule and Submicro, and of their parent, wave 3 of Micro degree. At the lowest level, Subbitsy wave B is now underway and will be followed by a downward movement, Subbitsy wave C.

The question is what will happen at the end of Subbitsy wave C. If the correction proves to be a simple three-wave pattern, then the end of C will mark the beginning of Bitsy wave 5’s journey to new highs. If the correction proves to be a compound pattern, then Subbitsy C will be followed by a separator wave, labelled X and then another corrective pattern of Subbitsy degree, most likely a Zigzag or a Flat, although a triangle of some sort is also possible

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 27, 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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