Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session from the overnight low of 3723.75, which is 17.50 points below the June 30 low. The price then worked its way higher into the upper 3700s.

The present downtrend is wave 3{-12}, and the June 30 low was the end of wave 1{-12}. The lower low set overnight confirms the principal analysis: The downtrend that began on June 28, wave 5{-11}, has resumed.

No change in this morning’s analysis. I’ve updated the upper, near-term chart.

10:45 a.m. New York time

Earnings play: One exit, two entries. As the new earnings season kicks off, there are again more trading possibilities. Three trades today, all using options that complete their run on August 19.

I exited my position on MS, a day after entry, for 24.6% of maximum potential profit and have updated the analysis with results.

I entered a bull put vertical spread position on C and posted an analysis of the trade.

For the other new position, I entered a bear call vertical spread on STT, also posting an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell in overnight trading, reaching into the mid-3700s.

What does it mean? The decline has gone sufficiently deep to suggest the need for a re-analysis of the chart. Under the new analysis (the former alternative #1), the upward correction ended at the July 8 peak and the downtrend that began on June 28 has resumed. It will carry the price further down by a significant amount.

What is the alternative? The price has not yet moved below the starting point of the upward correction that began on June 30. A move below that point, 3741.25, would confirm that the downtrend has resumed. And so the alternative is the former principal analysis: The decline from the July 8 peak is the next-to-the-last segment of final leg of an upward correction that began on June 30 from 3741.25.

The Charts. The upper chart is a shorter-term view of the S&P 500 futures, running from late May. The lower chart is a longer-term view of the S&P 500 index, running from late late December 2018, the starting point of an expanding Diagonal Triangle that is still underway.

[S&P 500 E-mini futures at 3:30 p.m., 105-minute bars, with volume]
[S&P 500 index at 9:34 a.m., 2-day bars]

What does Elliott wave theory say? The decline from July 8 is wave 3{-12}. Third waves tend to show a lot of energy and are almost the longest portion of a price trend. The preceding 1st wave was 208.75 points in length. A decline equal to that length would carry the price down to the lower 3700s; double the length, to mid 3400s; and triple the length, to the upper 3300s. None of those scenarios are unexpected, since 3rd waves have no limits under the rules of Elliott wave analysis.

Big picture: Wave 3{-12} is a subwave of wave 5{-11}, which began on June 28 from 3950, which in turn is a subwave of wave 3{-10}, which began on June 2 from 4189, and the larger wave 5{-9}, which began on May 30, from 4202.25. At this point the increasingly larger degrees pick up with wave 5{-8}, which began on April 21 from 4509, and the other parent waves listed in the “We Are Here” section below, which stretches back to wave 5{+3}, which began in 1932 and is still underway.

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 14, 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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