Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has fallen during the session, reaching into the mid-3800s.

I’ve marked the overnight peak, 3909.50, as the end of wave A{-13}, the first leg of the upward correction that began on July 14, wave 4{-12}. Under this principal analysis, downward wave B{-13} is now underway and will have three internal waves.

An alternative is that the decline during the session is an internal wave within wave A{-13}. Given the brevity of the retracement within wave A{-13} shortly after it began, I consider this alternative to be almost as likely as the new principal analysis, above.

I’ve updated the chart.

2:30 p.m. New York time

Earnings plays, one entry and two exits. I’ve entered a short bull put spread on HAL, using options that trade for the last time on August 19 and have posted an analysis of the trade.

I also exited two positions — short bear call spreads that I had entered on Friday. I’ve updated the trade analyses for my options plays on GS and SYF with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose from the upper 3800s into the lower 3900s after trading resumed Friday evening, and then dropped back slightly.

What does it mean? The first leg of the upward correction that began on July 14 continues and may have ended with the overnight high, 3909.50.

What is the alternative? Although the first leg of the correction has met all of its requirements, the price could move higher still.

[S&P 500 E-mini futures at 3:30 p.m., 115-minute bars, with volume]

What does Elliott wave theory say? Wave A{-13}, the first leg of an upward correction, wave 4{-12}, has formed three waves internally, the pattern taken by A waves within Flats, which is the most common form assumed by 4th waves. The B wave — the middle segment — within wave A{-13} appears to be overly short, casting some doubt on the analysis. Nonetheless, I’ve seen such small B waves before, so it’s not a deal-breaker.

The alternative analysis recognizes that although 3909.50 could be the end of wave A{-13}, there’s no rule keeping the price from reversing and going higher.

Wave A{-13} will be followed by a B wave with three internal waves, and then by a C wave with five internal waves. Wave C{-13} will most likely be the final wave within wave 4{-12}. However, it’s possible that the 4th wave will form a compound structure, linking two or three corrective patterns together before reaching an end. If wave 4{-12} is a compound correction, wave C{-13} will be followed by a connector, wave X{-13}, and then the A wave of the next corrective pattern.

When wave 4{-12} is complete, it will be followed by wave 5{-12}, a resumption of the larger wave 5{-11} downtrend that began on June 28, which will likely carry the price into the 3600s and perhaps lower.

Wave 5{-11} is the final wave within wave 3{-10}, which in turn is the middle wave of wave 5{-9}, the final wave within wave 5{-8}, which began on April 21 from 4509. All are downtrending.

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 18, 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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