Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 peaked during the session and then declined to below the starting point of the upward correction that began on September 23. The correction, wave 4{-14}, began from 3660.25 on the futures and peaked today at 3733.

Under the principal analysis, that peak completed wave C{-15} and its parent, wave 4{-14}. The correction having ended, wave 5{-14} is underway.

Under the alternative analysis, the peak completed wave C{-15} and the first corrective pattern within wave 4{-14}, and the subsequent decline is a connector, wave X{-15}, that will be followed by a second corrective pattern as wave 4{-14} continues. The rules governing Elliott wave analysis allow a 4th wave to fall below the wave’s starting point (in contrast to 2nd waves, where such a break below is disallowed).

The more the price drops, the greater the likelihood of the principal analysis. The more the price rises from this point, the greater the likelihood of the alternative analysis.

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 sideways overnight, staying within a narrow range centered on the 3700 price level.

What does it mean? The relatively small upward correction that began on September 23 continues and is in its third and possibly final leg. When the correction is complete, the downtrend that began on September 22 will resume.

What is the alternative? If the correction forms a compound structure, then the third leg of the corrective pattern will be followed by a connector wave to the downside, and then by a second corrective pattern.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

What does Elliott wave theory say? Rising wave C{-15} within the upward correction, wave 4{-14} is underway.

Under the principal analysis, wave C{-15} will be followed by downtrending wave 5{-14}, the final wave within wave 5{-13}, which began on September 22.

Under the alternative analysis, wave C{-15} will be followed by downward wave X{-15} and then a second corrective pattern and afterward perhaps by a third. When the compound correction, wave 4{-14}, is complete, then wave 5{-14} will begin its decline,

All of this is happening within downtrending wave 5{-12}, which began on September 20, the final wave within wave 5{-11}, which began on September 15. See the “We Are Here” section, below, for a list of current waves larger than the {-11} degree.

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 27, 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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