Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued falling during the session, reaching a low so far today of 3853 on the futures. Wave 5{-11} is underway. It is the final wave within a downtrend that began on September 13, wave 3{-10}. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a high of 3977.50 on September 15 and overnight declined below the narrow range within which it had fluctuated since September 13.

What does it mean? The upward correction, which took the form of a Horizontal Triangle having five segments internally, ended at the September 15 high. The downtrend that began on September 13 then resumed.

What are the alternatives? None at this point, beyond determining the size of the early waves within the resumed downtrend. Ambiguities always develop, of course. Such is the way of Elliott wave analysis.

[S&P 500 E-mini futures at 3:30 p.m., 25-minute bars, with volume]

What does Elliott wave theory say? Wave 4{-11}, an upward correction, ended on September 15 at 3977.50, and from that point downtrending wave 5{-11} began. Fifth waves vary in their behavior. Sometimes they can extend into nine waves internally and move far beyond the end of the preceding 3rd wave (in this case, 3938.50 on September 13). Or they can be cut short — “truncated” is the term in Elliott wave theory — and fail to reach the end of the preceding 3rd wave. Or they can behave normally, tracing out five internal waves and then moving on.

In this case, wave 5{-11} is already below the end of wave 3{-11}, so there is no truncation. The degrees of the early portion of a trend can be an estimate at best; the time taken by a wave and the distance traveled are the guideposts. On this chart it looks to me like wave 5{-11} internally is in wave 1{-12}, which in turn is within wave 3{-13}.

Wave 5{-11} when complete will also be the end of its parent wave, 3{-10}, and will be followed by wave 4{-10}, a larger upward correction by one degree than the one just completed.

Wave 3{-10} is one of a series of nested ever larger downtrending waves, stretching up nine degrees to wave 4{-1}, which began January 4 from 4818.62. Wave 4{-1} is the next-to-the-last wave in an expanding Diagonal Triangle, wave 5{0}, that began on December 26, 2018.

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. (The smallest waves — Bitsy, Subbitsy and Deci — aren’t named as part of the Elliott scheme.)

  • 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, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (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 16, 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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