Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved slightly higher during the trading sessions, so far reaching 4626 on the futures, 4631.92 on the index. No change in the analysis. I’ve updated the chart.

1:05 p.m. New York time

MU earnings play entry. I’ve entered a short bull put spread on MU, using options expiring on May 20, and have posted an analysis of the trade.

10:45 a.m. New York time

PVH earnings play entry. I’ve entered a short bear call spread on PVH, using options expiring on May 20, and have posted an analysis of the trade.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to rise in overnight trading, reaching a high so far of 4623.

What does it mean? The upward correction that began on February 24 continues.

What are the alternatives? There are two, unchanged from yesterday

Alternative #1: The correction has met all of the requirements set out by Elliott wave theory, and so any peak, including today’s, could be the end of the correction. The end of the correction will be followed by a significant decline as the downtrend that began on January 4 resumes.

Alternative #2: The present corrective pattern could be followed by a second corrective pattern and possibly a third. In such a compound correction, the first pattern is followed by a connecting wave — a decline in this case — and if the correction extends to three waves, the second wave is also followed by a downward connecting wave. When complete, the downtrend from January 4 will resume.

[S&P 500 E-mini futures at 3:30 p.m., 180-minute bars, with volume]

What does Elliott wave theory say? The question with the upward correction, wave 4{-7}, at this point is boundaries. The wave’s overnight high retraced 100% of the preceding wave 3{-7} — the 4586 mark.

There is an Elliott wave guideline that governs how far wave 4{-7} can go. If the parent structure is a Flat, which this 4th wave appears to be, then the C wave within the 4th wave will typically retrace 100% and 165% of wave A. The retracement so far is a Fibonacci level, 161.8%, so this C wave is well within the guidelines. I’ve placed the Fibonacci grid on the chart to show the wave C{-8} retracement of wave B{-8}.

Wave C{-8} has moved beyond the maximum retracement according to the guideline. But since it’s a guideline and not a rule, it won’t break the Elliott wave model if it goes still 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)
  • 4{-7} Minuscule, 3/3/2022, 4101.75 (up)
  • C{-8} Subminuscule, 3/15/2022, 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 29, 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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