Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved down a bit further, and it’s possible that the final wave internal to wave A{-10} is now underway. At least that’s how I’ve marked the chart. No other change in the analysis. I’ve updated the chart.

3 p.m. New York time

WBA earnings play exit. I’ve exited my options earnings play on WBA for a 27% profit over two days and have updated my analysis with full results.

10:35 a.m. New York time

Trades today. No options trades in sight today.

In shares trades focused on earnings announcements:

  1. I’ve exited my long position on AYI for a 2.4% profit after earnings were published this morning before the opening bell, for an 866% annual rate. The price rose $3.17 above the expected move.
  2. I’ve entered a long position on TLRY, which publishes earnings on Monday before the opening bell. The entry price was $6.50. Based on options pricing, I expect TLRY to move $0.62 either way, or 9.6%, for a range from $5.90 to $7.14. The Zacks ranks is 3-Neutral, and the Earnings Surprise Predictor metric stands at 55.56%.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to trade in a narrow range, between two Fibonacci retracement points, 38.2% and 50% of the preceding rise.

What does it mean? The first wave of a downward correction from the January 4 peak is underway. It will be followed by an upward movement that I expect to remain below that peak, 4808.25, and then a second downward movement to complete the correction. Thereafter, the price will rise to new highs.

What’s the alternative? Corrections on occasion form a compound structure, linking two or three corrective patterns together. Should that occur, it would delay the rise to new heights. Nonetheless, the rise would follow completion of the correction.

[S&P 500 E-mini futures at 3:30 p.m., 2-hour bars, with volume]

What does Elliott wave theory say? The downward correction is wave 4{-9}, and within it, the three-wave pattern is in its first wave, A{-10}. It will be followed by wave B to the upside, which I expect to remain below the prior peak, 4808.25, and then wave C back to the downside. Wave A{-10} internally will have five waves, and it is presently in wave 4{-11}, an upward correction within the larger downward correction. That larger correction, wave 4{-9} will be followed by a 5th wave that will move above 4808.25, perhaps significantly so. At its peak wave 5{-9} will mark the completion of its parent, wave 5{-8}, which began on December 3 from 4492.

The alternative analysis differs only in how many corrective patterns will be within wave 4{-9}. If it works out as a compound structure, then wave C{-10} within 4{-9} will be followed by an X wave, which connections the first corrective pattern from the second pattern that will follow. Compound corrections can contain up to three corrective patterns.

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, January 7, 2022


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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