Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 traded in a narrow range during the session. The wave 4{-11} upward correction is still underway. It lie within a series of increasingly larger downtrends — wave 3{-10} within wave 3{-9} within wave 5{-8}. No change in the analysis from this morning. I’ve updated the chart.

10:05 a.m. New York time

HD earnings play entry. I’ve entered a short bull put vertical spread on HD, using options that expire in 32 days, and have posted an analysis of the trade.


Bitcoin analysis. Over the weekend I posted an Elliott wave analysis of Bitcoin. The cryptocurrency, which has been the subject of much bearish anxiety in recent weeks, is on the last leg of a downward correction that began on May 14, 2021 from 65,520. When the correction is complete, the price will rise above last year’s peak, most likely by a significant distance.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose after trading resumed after the weekend.

What does it mean? The rise is a low-level upward correction within the downtrend that began on May 10.

What’s the alternative? It’s possible that the correction is one degree larger than my principal analysis has it. If so, it would mean that the downtrend that began on May 10 ended on May 12, although the larger downtrend that began on April 21 is still underway.

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

What does Elliott wave theory say? Under the principal analysis, wave 3{-10} within wave 3{-9} within wave {5-8} is is still underway. The present upward correction is a subwave of 3{-10}.

Under the alternative analysis, wave 3{-10} ended on May 10 and the low of May 12 is the end of wave 3{-9}. Under this scenario, the upward correction is wave 4{-9}.

For both analyses, a firm rule of Elliott wave theory is guiding the wave count. Wave 3 can never be shorter than both waves 1 and 5 in a trend, and the 3rd wave is almost always the longest of the three. So if I see a 3rd wave that’s shorter the preceding 1st wave, I tend to change the count. True, that change might be unnecessary; the 5th wave could be shorter than the 3rd, and in that case the Elliott wave rule would be satisfied. Nonetheless, the odds are that the 5th wave will be longer than the 1st wave, so changing the count is usually the more accurate decision.

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 16, 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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