Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 declined during the session, reaching below the pre-session low. The second alternative from this morning has proven to be correct. The upward correction that began on May 2, wave 2{-10}, is still underway. Within it, wave B{-11} may still be underway, or it may have ended at the session low so far, 4062 on the futures — the wave pattern is somewhat ambiguous.

This morning’s chart somehow never made it in to the post, although it did show up on the Twitter update (@timbovee) and the Facebook update (@PrivateTrader). For this update, I’ve added in chart a showing the S&P 500 futures as of 3:30 p.m.

2 p.m. New York time

MGM earnings play exit. I’ve exited my short bull put vertical spread for 57.1% of maximum potential loss 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 reached a low on Thursday of 4099.25, dawdled sideways for much of the night, and then rose as the opening bell approached.

What does it mean? Thursday’s low was the end of the middle wave of the upward correction that began on May 2.

What’s the alternative? It’s possible that the correction is of a larger scale that it first appeared to be.

It’s also possible the middle wave may not have ended.

[S&P 500 E-mini futures at 3:30 p.m., 45-minute bars, with volume]

What does Elliott wave theory say? The upward correction is wave 2{-10} within downtrending wave 3{-9}, which began on April 28. The sharp decline from Wednesday to Thursday was the middle wave, B{-11}, within the three-wave correction, and this morning’s rise is the first step within wave C{-11}. Under the rules of Elliott wave analysis, wave 2{-10} cannot exceed the end of the preceding 1st wave, meaning that the April 28 high, 4305.50, is an absolute ceiling for wave C{-11}.

Alternatively, wave 3{-9} ended on May 2 at 4056, the upward correction is wave 4{-9}, the decline that ended Thursday was the middle internal wave, B{-10}, and the present rise is wave C{-10}. Fourth waves, under the Elliott wave rules, can exceed the start of the preceding 1st wave, and so a price rise above 4305.50 will signal that this alternative count is correct.

I discussed the issue detail in the Elliott wave section of yesterday’s Trader’s Notebook.

Under the second alternative, wave C{-11} has not yet begun and wave B{-11} will dip still lower. This scenario will be confirmed if the price drops below 4099.25.

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)
  • 5{-8} Subminuscule, 4/21/2022, 4509, (down)

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, May 6, 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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