SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose from its low today of 4519.25, remaining below the overnight high of 4945.50. I’ve seen nothing to require a change in my analysis from this morning. I’ve updated the lower charts.

Holiday. Monday is a holiday in the United States — Labor Day — and markets will be closed. I anticipate that the S&P 500 E-mini futures will do some trading during market hours outside the U.S., and I shall post an analysis if there is any change on the chart.

10:10 a.m. New York time

My trades. I’ve entered short bear call options spreads on FXI and BABA.

9:35 a.m. New York time

What’s happening now? The rise of the S&P 500 E-mini futures that brought the price to a new high of 4549.50 at 8:30 a.m. was immediately interrupted by a rapid drop lasting 10 minutes and a partial recovery that took 28 minutes to complete, followed by a decline that so far has remained above the morning’s low.

What does it mean? Whether the drama was an artifact of trading algorithms or something more meaningful in the analysis remains to be seen. On the chart I’ve treated the drop and recovery as very low level movements within a larger uptrend that is still underway.

What’s the alternative? The peak can be seen as the end of the uptrend and the drop and partial recovery as the first tentative steps in what will become a far larger correction to the downside.

Charts. The upper chart is a close-up of the fluctuations of the E-mini futures at the time of Employment Situation Report was released. The lower chart is a combination showing a longer view of the futures, stretching back to mid-August, on the left, and a very long view stretching back to late 2019 on the right.

[S&P 500 E-mini futures at 9:20 a.m., 1-minute bars, with volume]
[Left: S&P 500 E-mini futures, 45-minute bars, with volume. Right: S&P 500 index, 2-day bars.
Both at 3:30 p.m.]

What does Elliott wave theory say? I’ve kept the principal analysis unchanged from yesterday: Wave 5 of Subbitsy degree within wave 5 of Bitsy degree, which are within a series of the 5th waves of increasing degree up to Submicro degree, whose parent, wave 3 of Micro degree, began on May 19.

Under the alternative analysis, the peak at 8:30 this morning was the end of wave 5 of Subbitsy degree, all the way up to the end of wave 3 of Micro degree. Under this scenario, wave 4 of Micro degree has begun.

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, September 3, 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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