SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. When the price today fell below the December 1 low, it validated the alternative analysis from this morning.

The recount was needed because the decline was labeled a 2nd wave, of Subbitsy degree, under this morning’s principal scenario. It dropped below the December 1 low, which was the beginning of the preceding 1st wave. Under the rules of Elliott wave analysis, if a “2nd wave” moves beyond the start of the preceding 1st wave, then it’s not a 2nd wave.

I’ve done a recount, but the B wave problem is back and as labelled, wave B breaks a rule of Elliott wave analysis by failing to retrace at least 90% of wave A.

I’ve updated the upper chart, with the rule-breaking labelled, and will figure this out over the weekend.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to work its way upward in overnight trading, reaching 4606.50 at the opening bell.

What does it mean? Under my principal analysis, the rise is early portion of the middle leg of a downtrending correction that began on November 22.

What’s the alternative? An alternative analysis sees the rise as part of an ongoing first leg of that correction.

Charts. The upper chart is a close-up view of the futures from the November 22 peak onward. The lower chart shows the S&P 500 index for the past three years, including the entirety, so far, of the expanding Diagonal Triangle that began on December 26, 2018 and that is still in progress.

[S&P 500 E-mini futures at 3:30 p.m., 30-minute bars, with volume]
[S&P 500 index at 9:34 a.m., 2-day bars]

What does Elliott wave theory say? Under the principal analysis, the present rise is wave 1 of Subbitsy degree — subscript {-10} on the chart — within wave 1 of Bitsy degree {-9} within wave 4 of Subminuscule degree {-8}.

The alternative analysis sees the price as being in wave 3 of Deci degree {-11} within wave 5 of Subbitsy degree within wave A of Bitsy degree within wave 4 of Subminuscule degree.

More succinctly, the principal analysis sees the correction as being further along than does the alternative analysis.

Subminuscule wave 4 will be followed by a 5th wave that will complete its parent, Minuscule wave 3 — subscript {-7} — beginning Minuscule 4, a larger downward correction, to be followed by a 5th wave rise to new heights, above the peak of 4740.50 attained on November 22.

Working our way up to higher levels, the end of Minuscule 5 will also end the parent wave 1 of Submicro degree {-6}, resulting in 2nd wave correction at that level, and then three more waves to completion. The Submicro degree is key to the market’s present situation, since its completion will also trigger 5th wave completions up to Minute degree {-2}. And the completion of the Minute degree series — three more waves after wave 2 — will complete wave 3 of Minor degree {-1}, the market rise that began on February 23, 2021, at the end of the early pandemic crash. All of this is happening within wave 5 of Intermediate degree, which has no subscript on the chart. Intermediate 5 is the entirety of the expanding Diagonal Triangle that began the day after Christmas in 2018.

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, December 3, 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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