SP500 Analysis

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 declined during the session, reaching 4642 at the low point of the futures. I’m counting the overnight peak, 4743.25, as being the end of wave 3 of Bitsy degree, and the subsequent decline as a 4th wave correction. This early in a trend it’s hard to say what degree the waves are. The patterns are clear, but not where they fit into the bigger picture. The overnight peak could just as well be a degree or two lower that I’ve marked it. Nonetheless, no change in the analysis. I’ve updated the chart.

2:30 p.m. New York time

My trades. I’ve entered two short iron condor positions timed to coincide with earnings announcements and have published analyses, of FDX and DRI.

10:15 a.m. New York time

Trade exit. I’ve exited my short iron condor earnings play on LEN for a 12.5% profit before fees and have updated the analysis with results.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a new all-time high, 4743.25, in overnight trading, eclipsing the prior peak, 4740.50, attained on November 22.

What does it mean? The downward correction that began on November 22 ended on December 14, and the final leg of the uptrend that began on October 6, from 4273.75, is now underway.

What’s the alternative? I have none at this point. The chart has a great deal of clarity.

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

What does Elliott wave theory say? The new peak means that wave 4 of Subminuscule degree — subscript {-8} — ended on December 14 with a seriously shortened C wave, internally, and that Subminuscule wave 5 began on that date, and this morning before the opening bell eclipsed the end point of wave 3 of Subminuscule degree on November 22. Fifth waves have no limits, beyond those imposed by the need for them to be proportional to the rest of the larger wave of which they are a part. So this 5th could go high, or end quickly. There’s nothing in Elliott at this point to guide our expectations.

The uptrending higher degrees remain unchanged: Minuscule 3 {-7} all the way up to Intermediate 5 {0} seven levels higher.

Interestingly, the S&P 500 index has not hit a new peak, and so, not for the first time, we have a divergence between the futures, which trade overnight, and the index, which doesn’t track change between the closing and opening bells.

My trades. I’ll be looking at two symbols as potential earnings plays today. FDX publishes earnings today after the closing bell, and DRI announces on Friday before the opening bell.

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 16, 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.