SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued to rise through the trading session, reaching 4267 on the futures, 4635.15 on the index. The new highs exceed yesterday’s high, which means that wave 4 of Subbitsy degree within wave 5 of Bitsy degree is complete, and wave 5 of Subbitsy degree has begun. Alternatively, the degree could be smaller than Subbitsy. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures remained below Monday’s peak, 4619.50, as the price traced a sideways pattern.

What does it mean? The shallow correction is the fourth leg of the rise that began October 27 and will be followed by a rise to new highs.

What’s the alternative? The ambiguities have to do with how long the correction might take and how far the price might rise after the correction. I discuss the possibilities in the Elliott wave section, below.

[S&P 500 E-mini futures at 3:30 p.m., 70-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, the rise that began October 27 is wave 5 of Bitsy degree within wave 3 of Subminuscule degree, the larger wave having begun on October 13. Yesterday’s peak marked the end of wave 3 of Subbitsy degree within Bitsy wave 5, and the subsequent sideways movement is wave 4 of Subbitsy degree. After Subbitsy 4 is complete, Subbitsy wave 5 will rise to new highs. When Subbitsy wave 5 reaches its end, the parent, Bitsy wave 5, will be complete, as will the grandparent, Subminuscule wave 3. Subminuscule 3 will be followed by a larger 4th wave correction, most likely one that is shallow, following a Flat pattern.

The ambiguities surround the nature of the corrections, what form they will take and how much time each will consume before completion.

What I have called Subbitsy wave 4 could in fact be a smaller degree, one that must reach completion before its parent or grandparent wave, Subbitsy wave 3, is complete. Degrees in Elliott wave theory always have a bit of ambiguity.

In any degree, 4th waves tend to be Flats, trending sideways, but sometimes they trace Triangles, which can have more verticality, or compound structures, containing two Flats, a Flat and a Zigzag or a Flat and a Triangle in some order.

The same ambiguity applies to the future and larger 4th wave of Subminuscule degree.

So based on the analysis, we know that there will be higher highs in the near future. How high and when it will happen remain uncertain.

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, November 2, 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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