SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 E-mini futures fell below the September 15 low of 4425.25, so far reaching 4416.25. The decline altered the meaning of the September 15 high of 4478.50 — it’s the end of a rather smallish wave 2 of Bitsy degree and the beginning of the wave 3 decline to new lows. I’ll be looking at that portion of the chart over the weekend and on Monday to try to understand whether there’s a more likely count; the truncation of what I’ve called wave 2 is somewhat inelegant. I’ve updated the near-term chart below.

1:40 p.m. New York time

My trades. This week marked the end of my trading in options expiring October 15. I had positions in BABA and FXI, and exited both for a profit.

Here’s what lies ahead. The next option I’ll trade will expire on November 19, 2021, with expiration day — the day I exit positions no matter how small the profit — coming on October 29. The entry period under my rules stretches from September 28 through October 12, with the optimal entry date being October 5.

And so, I have an 11-day vacation from options, and then I’ll start looking for prospects.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continue their upward correction within a downtrend that began on September 3.

What does it mean? The correction will remain below the September 3 high of 4549.50 on the futures, 4545.85 on the index. When complete, the downtrend will continue.

What’s the alternative? If the rise exceeds the September 3 high, then the uptrend that began May 19, and indeed much earlier, is still underway, and the decline since September 3 is a downward correction within that long-running uptrend.

The Chart. On the top, a near-term chart of the futures since mid-August. On the bottom, a long-term chart of the index since late 2018.

[S&P 500 E-mini futures at 5 p.m., 70-minute bars, with volume]
[S&P 500 index at 9:56 a.m., two-day bars]

What does Elliott wave theory say? In the near-term, there is no change to my analysis posted yesterday, to which I refer you. The futures price has remained above 4425.25 — the low of September 14 — and below the high set on Wednesday, 4478.15.

For the longer term, the S&P 500 index has been tracing an expanding diagonal triangle that began on December 26, 2018. The triangle is a 5th wave of Intermediate degree. Such structures have five internal waves, and at present wave 3 of Minor degree has been under way since February 23, 2020, the low point of the early-pandemic crash. When wave 3 is complete, the price will spend a few years dropping down to the lower boundary of the triangle, which now stands a bit above 2,000 but which will continue to decline, as the upper and lower boundaries continue to move further apart of one another. Minor 3 internally is within wave 3 of Minute degree.

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 17, 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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