SP500 Analysis

4:40 p.m. New York time

After the closing bell. The S&P 500 E-mini futures rose above the morning high, to 4705.25. The all-time high was set on November 22, at 4740.50. The index set a high today of 4713.57, below the all-time high of 4743.83 set on November 19. I’ve updated the upper chart. The analysis, as before, is unchanged.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has remained below its morning high most of the day, trading in a narrow range. No change in the analysis. I’ve updated the upper chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in overnight trading, reaching 4699 at the opening bell, 13 points below the December 8 reversal point.

What does it mean? The upward correction that began on December 1 is still underway, although in its late phase, and has the potential to exceed the December 8 high, 4712. However, it will remain below the November 22 peak of 4740.50. Once the correction has ended, the downtrend will resume and the price will decline to below the correction’s starting point, 4497.75, perhaps significantly below.

What’s the alternative? It’s possible the correction will form a compound structure. Once it ends, the price will decline but will remain above the correction’s starting point, and then will rise in the first leg of a second corrective pattern.

Big picture. The S&P 500 index price remains close to the upper boundary of an expanding Diagonal Triangle that began in December 2018, and the latest leg of the rise that began in February 2020, at the end of the early pandemic crash, is still underway.

Charts. The upper chart shows the near-term view, stretching back to mid-November. The lower chart shows the Diagonal Triangle in its entirety and stretches back to early May 2018.

[S&P 500 E-mini futures at 4:40 p.m., 50-minute bars, with volume]
[S&P 500 index at 9:32 a.m., 2-day bars]

What does Elliott wave theory say? Under my principal analysis, wave C of Subdeci degree — subscript {-12} — is beginning its last wave internally. The end of wave C will also mark the end of wave 4 of Deci degree {-11} and the beginning of a 5th wave that will carry the price below the starting point of the 4th wave, 4497.75. The completion of Deci wave 5 will also be the end of its parent, wave A of Bitsy degree {-9}, the first leg of a larger, downward correction, wave 4 of Submicro degree {-8}, which began on November 22.

Under my alternative analysis, Deci wave 4 will form a compound structure, with wave C of Subdeci degree being followed by a downtrending X wave that will remain above the 4th-wave starting point, and then by a second compound pattern, typically either a Flat or a Zigzag.

Over the long-term, within the expanding Diagonal Triangle that began in December 2018, wave 3 of Minor degree {-1] within wave 5 of Intermediate degree (no subscript) is still underway. Minor 3 began on February 23, 2020, after the crash that marked the beginning of the pandemic, from 2191.86. Internally, its child wave, the 5th of Minute degree, has been underway since October 30, 2020. Once Minor 3 is complete, the subsequent 4th wave should carry price down to the lower boundary of the triangle, presently around 1980 and declining further each day.

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 10, 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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