Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued rising by small increments during the session, reaching into the 3990s. Wave A{-13} within wave 4{-12} is still underway. No change in the analysis. I’ve updated the chart.

1:30 p.m. New York time

NEE earnings play entry. I’ve entered a bull put vertical spread on NEE, using options that trade for the last time on August 19, and have posted an analysis of the trade.

10:15 a.m. New York time

AN earnings play exit. I’ve exited my bull put vertical spread on AN for a wash — neither a profit nor a loss. That works out to 44.9% of the maximum potential loss on the position. I’ve updated the trade analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded narrowly in the upper and mid-3900s overnight, rising slightly above Wednesday’s high, to 3979, as the opening bell approached.

What does it mean? The rising first leg within the upward correction that began on July 14 is still underway.

What is the alternative? The first leg has met all of the requirements for completion, and so any high and reversal could signal that the upward correction has ended and the declining second leg has begun.

[S&P 500 E-mini futures at 3:30 p.m., 125-minute bars, with volume]

What does Elliott wave theory say? An upward correction, wave 4{-12}, began on July 14 from 3723.75. It will have three waves internally.

Under the principal analysis, the first wave within wave 4{-12}, upward wave A{-13}, with five internal waves, is not yet complete. The fact that the A wave had five internal waves means that the correction is taking the form of a Zigzag.

Under the alternative analysis, this morning’s high marked the end of wave A{-13} and the beginning of downward wave B{-13}, which will have three internal waves.

In either case, wave B{-13} will be followed by a third wave, upward wave C{-13}, with five internal waves that will complete the Zigzag corrective pattern. In most cases the end of the C wave will also be the end of the correction. In some cases, the correction forms a compound structure, linking two or three corrective patterns together.

Whether simple or compound, wave 4{-12} will be followed by a downtrending wave 5{-12}, which will most likely carry the price down into the 3600s, and perhaps lower.

This is all happening within downtrending wave 5{-11}, which began on June 8 from 4164. It is the smallest of a series of nested downtrending waves listed below in the “We Are Here” section.

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)
  • 5{-9} Bitsy, 5/30/2022, 4202.25 (down)
  • 3{-10} Subbitsy, 6/2/2022, 4189 (down)
  • 5{-11} Deci, 6/8/2022, 4164 (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 21, 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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