SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The price hit the lower boundary of the expanding triangle that began on August 31, pushing it lower, and then reversed. I’ve marked the chart with a principal analysis that says that the new low, 4492, is the end of wave C and the subsequent rise is wave D. If the price moves below 4492, then wave C is still underway. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined sharply in overnight trading, reaching a low of 4497 before reversing. The decline redefined downward the lower boundary of the expanding triangle that began on August 31.

What does it mean? The overnight low marked the end of the third leg of the triangle and the beginning of the fourth leg, which will carry the price into the region of the upper boundary, which is present around 4555. It will be followed by a decline back to the lower boundary, the 5th and final leg of the triangle. After that end of the correction, the price will rise to new highs as the uptrend resumes.

What’s the alternative? The third leg might not be finished, and in that case, the price will reverse again and push lower, again redefining the triangle’s lower boundary.

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

What does Elliott wave theory say? The expanding triangle’s boundaries — the price channel — are defined by drawing lines connecting the peaks for the upper boundary and the lows for the lower one. The upper boundary connects the beginnings of waves A and C. Those waves are complete and the upper boundary won’t change. The lower boundary connects the end of wave A and the end of wave C. As we learned last night, wave C was not yet complete at yesterday’s closing bell; the price pushed lower, as did the end of wave C and the more recent definition price of the lower boundary.

Under my principal analysis, I’ve marked the overnight low as the end of wave C {-11} within wave 4 of Subbitsy {-10} degree. (The numbers within the curly brackets are subscripts. See the chart or the menu page Analytical Methods  for a list and names and subscripts.)

Wave D {-11} to the upside is now underway. It’s completion near the upper boundary will be followed by wave E {-11} back to the lower boundary, whose completion will mark the end of Subbitsy wave 4 and the beginning of Subbitsy wave 5. The end of Subbitsy wave 5 will also be the end of a series of 5th waves of increasingly large degree, up four levels to Submicro degree. Up one more degree, it will be the end of wave 3 of Micro degree, began on May 19. The 3rd wave will be followed by a 4th wave correction.

Under my alternative analysis, wave C {-11} is still underway, as is its parent wave, the 4th of Subbitsy degree. This analysis will come into play if the price declines below 4497 — the overnight low — before reaching the region of the expanding triangle’s upper boundary.

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 8, 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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