Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued to rise during the session, reaching a peak so far of 4451 on the futures. In Elliott wave terms, wave 4{-8} to the upside has moved beyond the start of the preceding wave 1{-8} to the downside. And that’s OK. There’s no rule or guideline that prohibits it. Given the wide swing, wave 4{-7}, which began on February 24, is still under way and is forming a Triangle of some sort, but I’m not yet willing to go with that as the principal analysis. Bottom line: No change in the analysis from this morning. I’ve updated the chart.

10:25 a.m. New York time

FDX earnings play exit. I’ve exited my short bull put options spread on FDX for 41% of maximum potential loss. Analysts expectations, as consolidated by Zacks, anticipated a 70% of an earnings surprise to the upside. Earnings came in below estimates and the stock price fell sharply. I’ve updated the trade analysis with results.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded slightly below yesterday’s high in overnight trading.

What does it mean? The upward correction that began on March 15 from 4129.50 is still underway

What’s the alternative? The correction could have ended at yesterday’s high. The rise can be seen as having completed its minimum requirements, but there are ambiguities.

[S&P 500 E-mini futures at 3:30 p.m., 160-minute bars, with volume]

What does Elliott wave theory say? The upward correction is wave 4{-8}. By my count it is ni its 5th and final wave internally. However, the structure is a bit messy, so other counts are also plausible.

Wave 4{-8} may have ended at yesterday’s high, 4393.25. The subsequent decline is wave 5{-8}, which will complete the parent wave 5{-7}, which in turn will be followed by a larger correction, wave 2{-6} to the upside.

The preceding wave 3{-8} was exceptionally short, at 197.25 points. A third wave can’t be shorter than both its 1st and 5th wave companions in the trend, and wave 5{-8} cant be longer than that length, setting an end point of 4196 or higher.

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)
  • 4{-8} Subminuscule, 3/3/2022, 4129.50 (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 18, 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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