SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose slightly during the session and then reversed slightly, and has continued to trade above its overnight low, as wave 5 of Minuscule degree continues to work through the early stages of its rise. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined to a low of 4317.25 in overnight trading and then rose into the 4360s.

What does it mean? The three-leg pattern of the decline completes the correction that began on October 7, and the price has begun a rise that will eventually exceed the September 3 high of 4549.50. I have some uncertainty over whether the correction is indeed over, for reasons described in the alternative scenario.

What’s the alternative? It is possible to count the decline from October 7-12 as completing only the first leg of the correction, with an upward move (now underway) followed by another downward move. It is also possible that the rise that began last night is a separator wave that will be followed by a second corrective pattern in a compound structure, extending the correction and putting off the eventual rise to a new high.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? Under my principle analysis, the decline from October 7-12 is wave 4 of Minuscule degree, with three waves of Subminuscule degree internally, A-B-C. Under my alternative analysis, that decline is wave A of Subminuscule degree with three waves of Bitsy degree internally. As always with Elliott, degree identity involves a lot of ambiguity that is often resolved only after the price movement is complete. It’s also possible, under the first alternative scenario, that Subminuscule waves A through C don’t complete the 4th wave correction, and instead, the rise that began last night is an X wave, which will be followed by a second corrective pattern in a compound structure.

Whichever scenario plays out, the correction will be followed by a 5th wave rise of Minuscule degree that will complete the parent, wave 1 of Submicro degree, whose parent, grandparent and great-grandparent waves, up four levels to Minute degree, are all 5th waves, within wave 3 of Minor degree, which began at the end of the pandemic crash last year, on February 23.

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 12, 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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