Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has traded narrowly during the session, remaining in the low 3900s while reaching above Thursday’s high, 3914.25, to 3922.

The higher high confirms this morning’s principal analysis: Wave C{-14} within an upward correction, wave 2{-13}, is still underway. Within wave C{-14}, I see today’s new high as being part of the final wave, 5{-16} within wave 5{-15}, which is also the final wave within wave C{-14}.

As the baseball great Yogi Berra said, “It ain’t over ’til it’s over.” By my count, it’s almost over. And, potentially, today’s high could be the end of wave C{-14} and its upward correction parent, wave 2{-13}. But its completion is not yet a certainty.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded sideways in overnight trading, dropping sharply with the release of the employment data for June, a 3.6% unemployment rate and 372,000 jobs gained.

What does it mean? Although external events can cause rapid movements in the markets, the patterns that emerge still adhere to the framework of Elliott wave theory.

Under the principal analysis, the final leg of an upward correction that began on June 30 is still underway, although it is nearing its end. When complete, the correction will be followed by an energetic downtrend that will carry the price below the correction’s starting point, 3741.25.

What are the alternatives? There are two.

Alternative #1: Thursday’s high, 3914.25, was the end of the upward correction, and the futures are taking the first tentative steps in the downtrend.

Alternative #2: The third leg of the corrective pattern that began on June 30 ended at Thursday’s high, but the correction is forming a compound structure, in which two or three corrective patterns are linked together. The price movement since yesterday’s high is the beginning of a connector that will link the completed first corrective pattern to a second corrective pattern.

[S&P 500 E-mini futures at 3:30 p.m., 95-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, an upward correction, wave 2{-13}, is underway and is in its 3rd and final wave, C{-14}. Under the first alternative analysis, wave C{-14} and its parent, wave 2{-13}, ended at the July 7 peak, 3914.25. That was yesterday, on Thursday.

Distinguishing between the principal analysis and the alternative #1 depends upon the internal structure of wave C{-14}. The C wave will have five internal waves. I see the Thursday’s high as the end of wave 3{-16} within wave wave wave 5{-15}, the final wave within wave C{-14}. Wave 3{-16} will be followed by a downward 4th wave correction, now underway, and then a final upward push, wave 5{-16}, that normally will reach higher than Thursday’s peak, but it may fall short, a condition known as truncation. The end of wave 5{-16} will also be the end of waves 5{-15}, C{-14} and the full correction, 2{-13}. It will be the starting point of downtrending wave 3{-13}.

If instead the price continues to fall, reaching below 3741.25, then the alternative #1 is correct: Wave 5{-15} within wave C{-14} within wave 2{-13} ended Thursday at 3914.25 and wave 3{-13} is now underway.

Under alternative #2: Thursday’s peak marked the end of wave C{-14}, also ending the first corrective pattern in a compound correction. The subsequent decline is a connector wave, X{-14}, and it will be followed by a second corrective pattern within wave 2{-13}.

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 8, 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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