Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 resumed its rise early in the session, moving to a new high, slightly above 4300. The reversal confirms the principal analysis. The rise from August 8 is not yet complete. I’ve updated the chart.

1:30 p.m. New York time

HD earnings play entry. I’ve entered a short bull put vertical spread on HD, using options that trade for the last time on September 16, 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 fell after trading resumed overnight, reaching 4249, more than 30 points below Friday’s high, 4282.75.

What does it mean? The rise that began on August 8 from 4133 is nearing its end and indeed may have been completed by Friday’s high. Or not. The two possibilities are of nearly equal probability. My principal analysis, shown in the chart, is that the trend is still underway., based on my practice of assuming a trend is continuing until I have clear evidence to the contrary.

What is the alternative? The rise from August 8 ended on August 12 at 4282.75. The further the price falls, the more likely the alternative analysis becomes.

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

What does Elliott wave theory say? Under the principal analysis, the decline is a downward correction within wave 5{-13}, which began on August 9 from 4113. When the correction is complete, the uptrend will resume, moving beyond Friday’s high, 4282.75.

Under the alternative analysis, wave 5{-13} ended on Friday at 4282.75, a point that also marked the end of a series of parent wave: 5{-12} and 3{-11} within 3{-10}, which began on July 14 from 3723.75. Wave 4{-12}, a downward correction, is underway, having begun at Friday’s high.

This is all happening within uptrending wave 1{-9}, which began on June 17, within a much larger downward movement, wave 4{-1}, which began on January 4 from 4818.62.

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 15, 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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