Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 peaked at 9:35 a.m., at 4509 on the futures, and then began a rapid decline, the middle leg of the upward correction that began on April 17.

Declining wave B{-10} within wave 4{-9} is now underway. The correction is taking the form of a Zigzag, and a B wave in a Zigzag often will retrace up to 78% of the preceding A wave, which gives a target of 4389.27, about where the price is as I write this sentence (at 3:17 p.m.). B waves never move below the start of the preceding A wave, which would be 4355.50 in this case.

Wave B{-10} will be followed by a C wave that will likely carry the price higher than the end of the preceding A wave, at 4509. But not much higher. A 4th wave never moves beyond the end of the preceding 1st wave — 4519 in this case. If it does, then the chart will demand a re-analysis.

9:55 a.m. New York time

DOW earnings play exit. I’ve exited my short bull put options spread for 50.9% of maximum potential profit and have 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, reaching the neighborhood of 4500 at the opening bell.

What does it mean? The upward correction that began on April 17 continues. The first leg of the correction had met all of the requirements for completion in yesterday’s session. However, a brief decline quickly reversed, proving it to have been a decline within an ongoing upward movement.

What’s the alternative? None at the moment. The task at this point is to identify the end of the first leg of the correction, and that depends upon the internal structure of the rise that began yesterday. More below in the Elliott wave theory discussion.

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

What does Elliott wave theory say? My market close analysis saw the first wave, A{-10} within the upward correction, wave 4{-9}, as having ended at the peak before the price turned down. The correction is taking the form of a Zigzag, and the A-wave in that form has five waves internally. However, the price swiftly reversed to the upside in overnight trading, and wave 5{-11} within wave A{-10} is still underway. Under my revised scenario, yesterday’s peak was the end of wave 1{-12} within wave 5{-11}, the dip was wave 2{-12}, and the resumption of the rise — where we are this morning — is wave 3{-12}.

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)
  • 1{-8} Subminuscule, 3/29/2022, 4631 (down)
  • 4{-9} Bitsy, 4/17/2022, 4555.50, (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, April 21, 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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