SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 traded in a narrow range during the session, remaining below the overnight high of 3878.75. No change from this morning’s analysis, and I’ve updated the chart.

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in overnight trading as the final leg of a larger correction continued its downward course. The price has remained above yesterday’s low of 4334.75.

What does it mean? The end of the final leg will mark the beginning of a rise to new highs, or a shorter rise connecting two corrective patterns.

What’s the alternative? I can’t choose between the two alternatives at this point.

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

What does Elliott wave theory say? The overnight rise was wave 4 of Minuscule degree within wave C of Submicro degree with a descending correction, wave 4 of Micro degree. The end of wave C will either mark the end of wave 4, igniting a 5th wave rise above the September 3 high, 4549.50 on the futures. Or wave C will be followed by a small rise, an X wave that will be followed by another corrective pattern.

Earlier in the week there was some ambiguity as to the nature of wave 4: Is it a sideways correction, called a “Flat”, or a directional, called a “Zigzag”. i’ve settled on Zigzag for the following reasons.

Waves A and B of Submicro degree both have five waves internally, at the Minuscule degree. Wave C also appears to be headed for five waves. A Flat pattern internally is three waves within the larger A wave, three within the B and five within the C — often expressed as 3-3-5. A Zigzag pattern internally is 5-3-5.

So what are we to make of the five waves within wave B? The next to the last wave in a correction can take the form of a Triangle, with an undefined number of waves. The internal wave count is often five, but I’ve seen as many as nine. in this case, the five waves within wave B form a Triangle and will be followed by the normal five-wave pattern of wave C within a Zigzag.

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 29, 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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