Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures spent most of the trading session in the lower 3800s, staying above the 3752 low reached overnight.

Elliott wave analysis shows that wave C{-14}, the final subwave within an upward correction, wave 2{-13}, is still underway.

No change in this morning’s analysis. I’ve updated the chart.

9:55 a.m. New York time

MS earnings play entry. I’ve entered a short bear call vertical spread on MS using options at trade for the last time on August 19 and have posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures swung wildly as U.S. inflation numbers were released, rising to 3873 and falling to 3838.75 within the span of a minute. The price change slowed thereafter but continued to fall, reaching 3752 before rising back into the upper 3700s before the opening bell.

What does it mean? The pre-dawn swing is consistent with the declining, somewhat ambiguous five-wave pattern that has developed since the July 8 peak. Under my principal analysis, the decline from that peak is the next-to-the-last segment of final leg of an upward correction that began on June 30 from 3741.25.

What are the alternatives? There are two:

Alternative #1: The upward correction ended at the July 8 peak and the downtrend that began on June 28 resumed. A decline below 3741.25 would verify this alternative.

Alternative #2: The correction is forming a compound structure, linking two or three corrective patterns together. The July 8 peak was the end of the first corrective pattern, and the subsequent decline is connecting wave that will be followed by a second corrective pattern. For this scenario to be valid, the decline from July 8 must be counted as three subwaves, which is possible at this point, although not my preferred count.

[S&P 500 E-mini futures at 3:30 p.m., 105-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave 4{-15} is underway, a three wave correction that will be followed by wave 5{-15}, a push to the upside that likely will exceed the July 8 high of 3922. The end of wave 5{-15} will also end its parent, wave C{-14}, which in turn will end the larger upward correction, wave 2{-13}.

Under Alternative #1, wave 2{-13} ended at the July 8 high, and wave 3{-13} is underway and will carry the price below 3741.25, the end point of the preceding 1st wave.

Under Alternative #2, the first corrective pattern within wave 2{-13} ended at the July 8 high, and the ensuing decline is wave X{-14}, a connector wave that will be followed by a second corrective pattern in a compound correction.

This is all happening within downtrending wave 1{-12} within wave 5{-11}, which began on June 28. The parent wave is wave 3{-10}, which began on June 2, within wave 5{-9}, which began 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 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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