Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P futures have continued to fall during the session, reaching below 4215. The present wave C{-10} has so far remained well above its starting point, 4148.25. Wave 4{-9}, the upward correction that began on March 8, continues, although the alternative, that wave 4{-9} ended at the overnight high, 4326.75, remains a strong possibility. I’ve updated the upper chart.

10:50 a.m. New York time

PFE earnings play exit. I have exited my short bull put options spread on PFE for 25% of maximum potential profit and have updated the trade analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures in overnight trading moved to a new high within the upward correction that began on March 8, reaching 4326.75 so far.

What does it mean? By my principal analysis (yesterday’s alternative analysis), the third leg within the upward correction is still underway.

What are the alternatives? It’s possible that the overnight high marks the end of the correction, and the subsequent, still small downward movement that followed is a resumption of the downtrend that began on March 3.

It’s also possible that the upward correction ended on March 9 and that the resumed downtrend is forming a Diagonal Triangle.

Charts. I’m discussing two charts today in the Elliott wave theory section. The upper chart is near-term look at the S&P 500 E-mini futures, stretching back to late February. The lower chart is a big-picture look at the S&P 500 index from December 2018 to the present.

[S&P 500 E-mini futures at 3:30 p.m., 30-minute bars, with volume]
[S&P 500 index at 9:33 a.m., 2-day bars]

What does Elliott wave theory say? I’ll discuss the near-term chart of the S&P 500 futures first.

Under my principal analysis, the wave 4{-9} upward correction is continuing, and internally is in wave C{-10} to the upside. This was presented as an alternative in yesterday’s post, and as it turns out, the alternative was correct, because of the price moving above the March 9 high, a level that my principal analysis had labeled as the end of wave 4{-9}.

There are several possibilities that could occur after the end of C{-10}, the 3rd wave of the correction.

One would be that wave 4{-9} turns out to be a simple three-wave correction, and the end of C{-10} is also the end of 4{-9} and the start of a wave 5{-9} resumption of the downtrend. I consider this to be the most likely outcome.

Or the correction could form a compound structure, connecting two or three corrective patterns together. If that occurs, then upward wave C{-10} will be followed by a downward connector wave X{-10} and then another three-wave corrective pattern within wave 4{-9}, beginning with a rising wave A{-10}.

And it’s possible, although not likely in my opinion, that yesterday’s principal analysis was correct: Wave 4{-9} ended on March 9 at 4298.25 and the subsequent decline and rise are the first steps of a five-wave Diagonal Triangle within downtrending wave 5{-9}.

Turning now to the big-picture chart of the S&P 500 index.

All of the near-term action discussed above is occurring within the downtrending 4th wave of an expanding Diagonal Triangle that began on December 26, 2018. The “expanding” part of the name means that the upper and lower boundaries progressively move further from each other. When complete the Triangle will have five waves internally. The 4th wave decline will carry the price into the region of the lower boundary, and then a 5th wave rise will move the price back to the by then higher upper boundary to complete the Triangle.

The Diagonal Triangle is uptrending wave 5{0}, which began on December 26, 2018 from 2346.58. Within it, wave 1{-1} ended at 3393.32 in February 2020, the subsequent wave 2{-1} decline — the early pandemic crash — ended at 2191.86 on February 23, 2020. Wave 3{-1}, the massive rise that we’ve seen since the crash, ended at 4818.62 on January 4, 2022. And in our present decline we see the early stages of wave 4{-1}, which eventually will carry the price down to the lower boundary, which is presently in the mid-1900s and moving lower each day. Wave 5{-1} will follow, rising back to the upper boundary, which is presently in the upper 4900s and by the time wave 5{-1} returns could well be in the 6000s.

Basically, wave 4{-1} will feel like the end of the world as we know it, and wave 5{-1} will at the peak will see people dancing in the street, certain that the uptrend will continue forever. Which it won’t. The end of wave 5{-1} will also be the end of wave 5{0}, and the subsequent long-term decline will be a life-altering event for the generations of people impoverished by it, a cautionary tale to tell the grandchildren who in turn will tell their grandchildren about those dark days, the Crash of 20??.

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.

  • Index:
  • 5{0} Intermediate, 12/26/2018, 2346.58 (up)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • Futures:
  • 1{-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, 3/8/2022, 4138.75 (up)
  • C{-10} Subbitsy, 3/8/2022, 4148.25 (up)

Learning and other resources. Elliott wave analysis provides context, not prophecy. As the 20th century semanticist Alfred Korzybski put it 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 11, 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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