Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The upward correction that began on April 12 continues, and the corrective pattern is now on its third and final leg: Wave C{-9} within wave 4{-8}. No change in the principal analysis from this morning. The alternative wasn’t confirmed I’ve updated the chart.

11:35 a.m. New York time

WFC earnings play entry. I’ve entered a short bear call options spread on WFC and have posted an analysis of the trade.

11:20 a.m. New York time

JPM earnings play exit. I’ve exited my short bear call options spread on JPM, one day after entry and for 60% of maximum potential profit. I’ve updated the trade analysis with results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in overnight trading, coming close to the 23.6% Fibonacci retracement level, and then retreated, approaching the starting price of the upward correction now underway.

What does it mean? The rise and retreat were part of the middle portion of the upward correction that began on April 12.

What is the alternative? If the price declines below 4382.25, then it raises the possibility that the correction ended at the overnight high, 4428.50. The result would be a misshapen corrective pattern and I don’t believe this alternative to be a likely description of the chart. Nonetheless, it’s improbable, not impossible.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, rising wave C{-9} within an upward correction, wave 4{-8}, is now underway. The overnight rise and fall are subwaves within wave C{-9}.

Under my alternative analysis, wave 4{-8} ended at the overnight high with a very truncated wave C{-9}. The decline that followed, under this scenario would either be a connecting wave — an X-wave — in a compound correction that links two or three corrective patterns together, or the first tentative steps of wave 5{-8} to the downside. As I noted above, I don’t believe this scenario to be at all likely. Nonetheless, it is a possible alternative.

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, 3/29/2022, 4631 (down)
  • 4{-8} Subminuscule, 4/12/2022, 4382.25 (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, April 13, 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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