SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose during the day, reaching a peak of 4420.50 on the futures, 4429.97 on the index. Late in the day it reversed, falling slightly. All of this is happening within uptrending wave 3 of Minuscule degree within wave 1 of Submicro degree. That is, the late-day decline is a correction within an uptrend. No change in the analysis. I’ve updated the chart.

2:30 p.m. New York time

My trades. I’ve entered a short bull put spread position on SPY and a long call option on GM, and exited a long put on XLY.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued climbing overnight, exceeding the high of October 1.

What does it mean? The break beyond the range of the correction than ran from October 1 to October 6 adds weight to a scenario that says the correction has ended and a rise is underway that will eventually exceed the September 3 high of 4549.50.

What’s the alternative? If the price reverses and falls back to the 4270s, then the alternative scenario comes into play: The present rise separates two corrective patterns in a compound structure.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]

What does Elliott wave theory say? Under my principle analysis, the rise that began yesterday is wave 3 of Minuscule degree within wave 1 of Submicro degree within 5th waves of successively higher degrees — Micro, Subminuette and Minuette — within wave 5 of Minute degree within wave 3 of Minor degree, which began on October 30, 2020.

The September 3 peak ended wave 3 of Micro degree, and wave 4 of Micro degree ended on October 1. The present wave 5 of MIcro degree will eventually reach to new heights, beyond the end of the preceding 3rd wave.

If the price reverses before reverses from its present level, plus or minus, then wave 4 of Micro degree is still underway and is forming a compound structure. Under this alternative scenario, the present wave is wave X of Submicro degree and will be followed by another corrective pattern, most likely a Zigzag or a Flat.

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, October 7, 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.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.