SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The counter-trend rise within a downward move that began on December 12 continues. Internally, the decline shows three clear waves. A downtrend in Ellliott wave analysis has five waves when complete. A corrective wave, including a wave connecting to corrective forms within a compound structure, has three waves total.

If the present 3rd wave internally reverses and resumes the downtrend to lower levels, then most likely we’ll be seeing a 5th wave within wave 1 of Subdeci degree {-12} within wave 1 of Deci degree {-11}. If the 3rd wave reverses without a significant decline to lower levels, then we’ll most likely be seeing a C wave within wave X of Subdeci degree in a compound correction, wave 4 of Deci degree.

No change in the analysis. I’ve updated the chart.

1:30 p.m. New York time

Earnings play. I’ve entered a short iron condor position on LEN, which announces earnings after the closing bell today, and have posted an analysis. I also analyzed JBL, which announces earnings tomorrow before the opening bell, but it produced a higher risk/reward ratio than I like, and so I passed on it.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose slightly from yesterday’s low of 4596.25, reaching a high so far of 4638.25 in overnight trading.

What does it mean? The reversal upward is a correction within a downtrend that began on December 12 from 4596.25 and that will carry the price into the 4490s and below.

What’s the alternative? The reversal is an upward correction within a shallow downward movement that will connect the now complete corrective pattern that began on December 1 with a second corrective pattern in a compound structure.

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

What does Elliott wave theory say? Under my principal analysis, the decline that began on December 12 is wave 1 of Subdeci degree — subscript {-12} — within wave 5 of Deci degree {-11} within wave 3 of Subbitsy degree {-10}. The whole structure is part of a larger correction, standing within wave A of Bitsy degree {-9} within wave 4 of Subminuscule degree {-8}, a downward correction that began on November 22.

The alternative analysis notes that corrections sometimes form complex structures composed of several corrective patterns. Such a compound correction is a possible pattern for wave 4 of Deci degree. If such proves to be the case, then Deci 4 did not end on December 12, coincident with the end of its internal wave C. Instead, wave C ended the first corrective pattern, and the present decline is an X wave that connects the completed pattern with another pattern yet to come, mostly likely taking the form of a Flat or a Zigzag.

My trades. Today I’ll be looking at two potential earnings plays: LEN, which announces today after the closing bell, and JBL, which announces Wednesday before the opening bell. For a rundown of the methods I’ll be using, including a preliminary rule set, see my post “How to Play Earnings“, which went up on December 10.

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it this way 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 15, 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.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.