Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued to climb during the session, reaching above 4276 on the futures. The rise above the overnight high confirms this morning’s principal analysis; the overnight correction has indeed been followed by a resumption of the uptrend.

As has been the case recently, any fresh peak could be the end of the uptrend, which has met of the requirements of Elliott wave analysis. On the other hand, it might still push higher.

In Elliott wave terminology, the present wave set is wave 5{-14} within wave 5{-13} within wave 5{-12} within wave 3{-11} within wave 3{-10}, that last, largest wave of the set having begun on July 14.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose to a higher high in overnight trading, 4260.50, and then pulled back a bit.

What does it mean? I’ve analyzed the pullback as a downward correction within the ongoing rise that began on August 9, part of a larger uptrend that began on July 14. The correction likely will be followed by a push to a higher high.

What are the alternatives? The overnight high could have ended the August 9 rise. If so, then it also means the end of the larger rise from August 2, and the still larger uptrend from July 18. The further the price declines today and early next week, the more likely it is that this alternative matches the chart.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]

What does Elliott wave theory say? Under my principal analysis, the overnight high marks the end of the 3rd internal wave, 3{-14}, within wave 5{-13}. The pullback is wave 4{-14}, and it will be followed by uptrending wave 5{-15}, the final wave within wave 5{-13}. Wave 5{-15} is likely to push above the overnight high, although the 5th wave could be truncated, in which case it will end below that prior high.

Under the alternative analysis, the overnight peak is the end of wave 5{-14}, and also the end of parent waves 5{-13}, 5{-12} and 3{-11}. It will be followed by a decline that will correct a portion of the rise that began on July 18.

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, August 12, 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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