Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued to rise during the session, reaching into the 3730s on the futures. The rising wave 2{-15} has moved above the start of the preceding wave 1{-15}, from 3733, and so the structure of the parent, wave 5{-14} can’t be a Triangle, according to the rules of Elliott wave analysis. Something else is going on.

As the human foundling Valentine Michael Smith, raised by Martians in Robert Heinlein’s sci-fi classic Stranger in a Strange Land, was wont to say, “Waiting is”.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined to 3613 in overnight trading and then rose back into the 3680s.

What does it mean? The final segment of a downtrend that began on September 22 is underway and is still in its early stages. When complete, it will also end a series of larger downtrends and will be followed by an upward correction of the downtrend that began on September 13.

What is the alternative? It’s possible that the overnight low marks the end of an extremely short final segment in the downtrend that began on September 22. If that scenario plays out, then the upward correction has already begun.

[S&P 500 E-mini futures at 3:30 p.m., 45-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave 5{-13} is underway. It is the final subwave within wave wave 5{-12}, which in turn is the final subwave within wave 5{-11}, and that in turn is the final subwave within wave 3{-10}, which began on September 13. When wave 3{-10} is complete, it will be followed by an upward correction, wave 4{-10}, which will retrace a portion of the decline from 4051.25.

Under the alternative analysis, wave 5{-10} ended at the overnight low, 3613, and wave A{-11} within wave 4{-10} has begun.

There are ambiguities impacting both analyses. Wave 5{-14}’s first internal wave, wave 1{-15}, has three subwaves. That’s the form of either a downward correction, which doesn’t match the context on the chart, or of a Triangle form of some type, which does match the context. There is a blip of a wave which can bring internal count to five subwaves, but then wave 3{-15} is overly short — a 3rd wave can’t be shorter than both the 1st and 5th waves that surround it.

For the moment my best choice is to leave the internal structure of wave 5{-14} unresolved, in the certain expectation that the market will resolve all ambiguities as it progresses.

When wave 4{-10} is complete, it will be followed by downtrending wave 5{-10}, which will be the end of wave 1{-9}, which began on September 13 from 4175. All of this is occurring within a series waves within waves of increasing size, up to wave 4{-1}, which began on January 4 from 4818.62 on the index.

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 28, 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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