Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 resumed its rise during the session, reaching above the weekend high of 3957.75, to upper 3900s. Uptrending wave C{-14} within an upward correction, wave 2{-13}, continues. 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 traded in a narrow range overnight, covering fewer than 50 points low to high.

What does it mean? The pause is a small-sized correction within the rising third leg of a larger upward correction that began June 30. That rise will resume when the small-sized correction is complete. When the third leg of the larger correction is complete, the most likely next step is for the downtrend that began on June 28 to resume.

What are the alternatives? There are two.

Alternative #1: The third leg of the upward correction ended at the overnight high, 3848.75, and the downtrend that began on June 28 has resumed.

Alternative #2: The decline that began on June 28, rather than being a downtrend, is instead part of a compound correction that began on June 14 and is still underway.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, the overnight pause is wave 4{-15}, a correction within rising wave C{-14}, which in turn is the third and possibly final wave within wave 2{-13}, a downtrend that began on June 28 from 3950. All are subwaves of downtrending wave 1{-12}, which began on June 28.

It’s possible that wave 2{-13} will form a compound structure, and if it does, wave C{-14} will be followed by a connector, wave X{-14}, and then a second corrective pattern. Compound structures are less common within 2nd waves, compared to 4th waves, and I consider such a structure to be unlikely at this point. Nonetheless, it’s not beyond the realm of possibility.

Under the first alternative, the upward correction, wave 2{-13}, ended overnight at 3848.75 and an energetic decline, wave 3{-13}, is taking its first tentative steps. I would expect wave 3{-13} to fall below 3741.25, the end of the preceding wave 1{-13}, and perhaps significantly lower.

Under the second alternative, the larger upward correction that began on June 14, wave {4-11}, is still underway and is forming a compound structure. The June 28 peak marked the end of wave C{-12}, also ending the first corrective structure within wave 4{-11}. The decline that followed is wave X{-12}, a connector wave, and the first wave of a second corrective structure, wave A{-12}, is now underway.

The three scenarios are subwaves of wave 3{-10}, which began on June 2 from 4189, within wave 5{-9}, which on May 30 from 4202.25.

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.

  • S&P 500 Index:
  • 5{+3} Supercycle, 7/8/1932, 4.40 (up)
  • 5{+2} Cycle, 12/9/1974, 60.96 (up)
  • 5{+1} Primary, 3/6/2009, 666.79 (up)
  • 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)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 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, July 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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