Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has moved below the overnight low, to 3905 on the futures. The waves on the chart have a disproportionate feel as I’ve labeled them, which is the most likely analysis that I’m able to see. The internal patterns are unclear. It happens. Eventually, the chart regains its clarity.

So this afternoon’s analysis is this: Just as was the case overnight, wave 4{-11} reached a new low, and that low could mean that wave 4{-11} ended at its high point, 3977.50, attained during today’s session. If that high was indeed the end of wave 4{-11}, then wave 5{-11} is underway and will carry the price lower. If not, then we’re still in wave 4{-11}. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to trade in a narrow range overnight, remaining within the high and low of the day before, 3981.25 and 3929.

What does it mean? An upward correction that began on September 13 continues. When it is complete, the downtrend that began on that same day will resume. At this point we’re fishing for an end to the correction. Any new low can mean that the prior high in the correction marked its end and that the downtrend has resumed. The September 13 start of the downtrend came within a larger uptrend that began the same day and that followed a larger upward correction that began on September 6.

Whether it’s the principal analysis or an alternative, this is all happening within a major downtrend that began on January 4.

What is the alternative? It’s possible that the larger upward correction is still underway. Under this scenario, the September 13 high is the end of the first leg of the correction, the subsequent decline — still underway — is the correction’s middle leg, and a future rise that will approach or exceed the September 13 high will be the end of the correction.

[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave 4{-11}, an upward correction within downtrending wave 3{-10}, is underway. It will be followed by downtrendng wave 5{-11}, which will complete wave 3{-10} and will be followed by a larger uptrending correction, wave 4{-10}, and then a larger downtrending wave, 5{-10}, which will complete its parent wave, wave 1{-9}, whose starting point on September 13 was the beginning of the swift one-day decline that followed publication of the government’s most recent inflation figures.

This is all happening within wave 5{-8}, which is a downward reversal that began on September 13.

The present tangle of waves illustrates the fractal nature of any stock chart. Each wave has subwaves and in turn is itself a subwave of a larger wave. And whatever the level, whatever the degree, those waves all follow the same patterns.

Under the alternative analysis, wave 4{-8}, an upward correction that began on September 6, is still underway and is in wave B{-9}, its descending middle wave that began on September 13. It will be followed by rising wave C{-9}, which will probably be the end of the correction and which may exceed the September 13 high.

All of that is occurring within a series of downtrending waves, ranging in size from the smaller, wave 1{-7}, which began on August 16 from 4325.25, to wave 1{-2}, five degrees larger, which began on January 4 from 4818.62.

So if someone asks, “How’s the market doing?”, the short answer is, “Falling”. And I might add, “As it has all year.”

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)
  • 3{-6} Submicro, 8/16/2022, 4325.25 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.25 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (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, September 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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