Trader’s Notebook

3:30 p.m.

Half an hour before the closing bell. See the 2:55 p.m. entry below. No change. Wave 5{-9} continues its decline. I’ve updated the chart again.

2:55 p.m. New York time

S&P 500 futures end upward correction, reverse downward. The S&P 500 futures have ended the wave 4{-9} upward correction and have reverse to the downside, moving below the correction’s starting point. I’ve updated the chart, below.

SPY options spread entry. I’ve entered a short bear call options spread on SPY, anticipating that it will track the S&P 500 to the downside as wave 5{-9} continues. 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 reached a low of 4238 in overnight trading and then reversed, having risen more than 90 points at the opening bell.

What does it mean? The decline from March 3 high was a resumption of the downtrend that began on January 4. Internally, it is in an upward correction that began overnight within its first leg.

What’s the alternative? The ambiguity on the chart as to do with size of the movements being analyzed. Elliott waves are fractal in nature — a five-wave trend contains with it both smaller five-wave uptrends and three-wave corrections. The smaller degree labelings on a chart this early in a trend will be, at best, a guess.

[S&P 500 E-mini futures at 3:30 p.m., 35-minute bars, with volume]

What does Elliott wave theory say? Downtrending wave 5{-7}, a resumption of the downtrending wave 1{-6}, which began on January 4, is now underway. Internally, it is in wave 1{-8} to the downside, and one degree lower, within an upward correction, wave 4{-9}.

In Friday’s analysis I had labeled the smallest degrees on the chart as being of degree {-8}, but given the swiftness of their completion, I’ve pushed them down one degree smaller, to degree {-9}. This is what I meant above about the ambiguity of degrees early in a price trend — there’s simply not enough data to know for a certainty the size of the degree being labeled.

Wave 4{-9}, when complete, will be followed by wave 5{-9} to downside, the final wave within wave 1{-8}. It will carry the price below the 4238 terminus of wave 3{-8}, perhaps significantly below for such a small-degree wave.

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)
  • 5{-7} Minuscule, 3/3/2022, 4101.75 (down)
  • 1{-8} Subminuscule, 3/3/2022, 4101.75 (down)
  • 4{-9} Bitsy, 3/7/2022, 4238 (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, March 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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