Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has traced out two segments of the small upward correction that began yesterday. The end of the ascending third and likely final segment of the correction will be followed by a resumption of the downtrend that began on September 20.

Switching to the terminology of Elliott wave analysis: Wave 4{-13}, the upward correction, is in its third and likely final internal wave, C{-14}. When that wave is complete, wave 5{-13} will begin its downward course within the parent wave 5{-12}, which began on September 20, and which in turn is a subwave of wave 5{-11}, which began on September 15. There is no change in the principal analysis. I’ve updated the chart.

2:30 p.m. New York time

DRI earnings play exit. I’ve exited my short bull put options spread on DRI for 81.8% of maximum potential loss and have updated the trade analysis with details.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a low of 3766.75 after the closing bell, and then reversed, rising to 3833 overnight.

What does it mean? As the chart has played out in the past few days, it has become clear that the low level upward correction that began on September 19 ended on September 20, and that the downtrend that began on September 15 has resumed. The upward reversal overnight is the start of an upward correction within that downtrend.

What are the alternatives? The main ambiguity on the chart is one I referred to after the mid-August downtrend resumed: How large is each movement in connection with the fractal structure of movements ranging from big to small? Subsequent events could require a change in my present labeling of the degrees, using subscripts in curly brackets. For example, the decline from August 16 is wave 3{-6}, but it could just as easily be larger, wave 3{-5}, or even larger still, wave 3{-4}.

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

What does Elliott wave theory say? I revised my analysis after the close to align with the S&P 500’s path on the chart: Wave 5{-12} is underway and internally is in an upward correction, wave 4{-13}. I also moved the end of a prior upward correction, wave 4{-12}, to a point a few days earlier, September 20. And that peak is the starting point of wave 5{-12}.

Under the principal analysis, wave 4{-13} will be followed by downtrending wave 5{-13}, the final wave within the parent wave 5{-12}. The end of wave 5{-13} will also be the end of wave 5{-12}, and will cascade up two nested waves of increasing size, wave 5{-11}, which began on September 15, and wave 3{-10}, which began on September 13 from 4051.25. An upward correction, wave 4{-10}, will ensue, likely carrying the price back up into the mid- and high-3900s.

All of this is happening within a nested series of increasingly larger waves, all declining, ranging from wave 1{-9}, which began on September 13 from 4175, up to wave 4{-1}, which began on January 4 from 4818.62.

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, 4325.28 (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 22, 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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