SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The futures completed a small rise from today’s low and then retreated slightly, staying above the low point, 4562. No change in the analysis at this point. A drop below 4562 would most likely indicate that wave B was still underway, although it would trigger a critical look at the entire structure of the decline that began on November 25. I’ve updated the chart.

2:25 p.m. New York time

A change in the principal analysis. The price of the S&P 500 E-mini futures rose this morning to a 50% retracement of the decline that ended earlier in the day, and then reversed, falling below the November 26 low. In Elliott wave analysis, we have a rule and two tendencies that govern a Flat, the pattern on today’s chart.

Rule #1: Wave B always retraces at least 90% of wave A. Check. That’s what the chart shows.

Tendency #1: Wave B usually retraces between 100% and 138% of wave A. That’s not the case if wave B ended where I marked it in this morning’s analysis, at 4582.

Tendencies #2 and #3: Wave C usually is longer than wave A, by as much as 65%. And wave C almost always ends beyond the endpoint of wave A. Neither of these tendencies is seen on the chart if the rise from 4582 was wave C; it only retraced about half of wave A.

So here’s how I have reanalyzed the chart so that it confirms to the rules and tendencies set forth by R.N. Elliott: Move the end of wave B to the 4562 low reached this afternoon. That satisfies tendency 1 by making wave B longer than wave A, and creates space so that wave C can move above the end of wave A, 4669.75, making C longer than A.

I’ve marked the chart to conform.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures, having peaked yesterday at 4669.75 and then turned to a decline, reaching 4582, five points above the correction’s starting point. It next began a second rise. The rise ended close to a 61.8% retracement of the prior rise, a Fibonacci level that often is where reversals occur.

What does it mean? The upward correction that began on November 26 is now in its third leg. It’s completion could be the end of the correction, or the correction to extend into a complex structure, adding a second corrective pattern. The end of the present rise should be at about the level that the first rise attained

What’s the alternative? I have labelled the decline that began on November 22 as the first steps in a larger downward move, but it’s possible to analyze the decline as a correction within an ongoing upward move that began on October 6.

[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]

What does Elliott wave theory say? Under my principal anaysis, the present rise is uptrending wave C of Deci degree — subscript {-11} — within uptrending wave 4 of Subbitsy degree {-10} within downtrending wave A of Bitsy degree {-9} within downtrending wave 4 of Subminuscule degree. Long story short: It’s an upward correction within a downward correction. That’s all happening within an uptrending wave 3 of Minuscule degree {-7}.

My principal analysis marks the November 22 peak, 4740.50, as the end of wave 3 of Subminuscule degree, but the price hasn’t declined a large distance below that level — only to 4577.25, or 3.5% — and so the alternative analysis is that the decline from that peak is a correction within an ongoing uptrend, wave 3 of Subminuscule 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, in the ever-changing markets, 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 30, 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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