Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose during the session, reaching 4036, as a lower degree upward correction within downtrending wave 3{-10}. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in overnight trading, reversing from Thursday’s low, 3855.

What does it mean? The low degree downtrend that began on May 10 continues. The rise is an upward correction and will be followed by another decline, the final leg of the downtrend.

What’s the alternative? It’s possible that the May 12 low, 3855, marked the end of the May 10 downtrend. I’ve rejected this scenario based on the short distance it assigns to the decline from May 10. More on the subject in the Elliott wave theory section, below.

[S&P 500 E-mini futures at 3:30 p.m., 2-hour bars, with volume]

What does Elliott wave theory say? The decline that began from 4069.50 on May 10 is wave 3{-10} within wave 3{-9}.

Under my principal analysis, the May 12 low, 3855, marks the end of wave 1{-11} within wave 3{-10}, and the subsequent rise is an upward correction, wave 2{-11}.

Wave 1{-10} was 350 points long. Under a strict rule of Elliott wave analysis, a 3rd wave can’t be shorter than both the 1st and 5th waves of a trend. So far, wave 3{-10} has covered 214.50 points. It’s possible for a 3rd wave to be shorter than the 1st, as long as the 5th wave is shorter than the 3rd. In this case, I’m skeptical that such a scenario would be playing out. Third waves tend to be the most energetic of all the waves within a trend. Wave 3{-10} is a subwave of another 3rd wave, 3{-9}. I think of it as the 3rd wave of a 3rd wave having extra energy, and I wouldn’t expect to see a 3rd of a 3rd so abysmally truncated.

So my principal analysis has wave 3{-10} as still underway, and wave 2{-11} within it will be followed by wave 3{-11}, a decline that is likely to carry the price significantly below the May 10 starting point of wave 3{-10}.

The alternative analysis labels the May 12 low, 3855, as the end of wave 3{-10}. And for the reasons stated above, it’s possible, but in view view, unlikely.

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 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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