Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures traded within a narrow range during the session, so far less than 45 points wide. No change in the analysis. I’ve updated the chart.

10:10 a.m. New York time

PFE earnings play entry. I’ve entered short bull put options spread on PFE timed to coincide with the company’s earnings announcement Tuesday before the opening bell. I’ve posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures have hovered just below the 50% retracement level since trading resumed Sunday afternoon.

What does it mean? By my principal analysis, the third and likely final leg of the upward correction that began on January 24 has internally entered its final rise, which will likely carry the price above the February 2 high, 4586, and higher. The price will remain below the January 4 starting point of the downtrend, 4808.25. The correction will be followed by a resumption of the downtrend that will carry the price below the January 24 start of the correction, 4212.75, and perhaps significantly below that level.

What’s the alternative? There are two alternatives.

Alternative #1: It remains possible that the February 2 high marked the end of the correction and that the downtrend has resumed. A move below 4212.75 would verify this analysis.

Alternative #2: The end of the final leg of the correction will be followed by a declining wave and then a second corrective pattern, in a compound pattern. Compound corrections can string together as many as three corrective patterns.

[S&P 500 E-mini futures at 9:35 a.m., 80-minute bars, with volume]

What does Elliott wave theory say? The correction, wave 2{-7}, is internally in its third and final wave, C{-8}. The C wave has five waves within it, and by my principal analysis began wave 5{-9} from the February 4 low. The resumption of the downtrend following wave 2{-7} will be wave 3{-8}, an energetic decline that will carry the price below 4212.75 and perhaps shockingly lower.

Alternative #1: Wave 2{-7} ended with the February 2 high and wave 3{-7} is taking its first tentative steps.

Alternative #2: Wave C{-8} will be followed by wave X{-8} to the downside and then by wave A{-8} of a second, three-wave corrective pattern. The X{-8} wave will remain above 4212.75, the January 24 low.

We Are Here.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

  • 5{0} Intermediate, 12/21/2018, 2316.75 (up)
  • 3{1} Minor, 3/23/2018 2174 (up)
  • 5{-2} Minute, 10/4/2020, 4267.50 (up)
  • 4{-3} Minuette, 1/4/2022, 4808.25 (down)
  • A{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 1{-6} Submicro, 1/4/2022, 4808.25 (down)
  • 2{-7} Minuscule, 1/24/2022, 4212.75 (up)
  • C{-8} Subminuscule, 1/26/2022, 4263.75 (up)
  • 5{-9} Bitsy, 2/4/2022, 4438.50 (up)

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, February 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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