Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures moved slightly below yesterday’s low and then inched upwards a bit. The upward correction that began on October 13, wave 2{-7}, continues. Within it, downward wave D{-9} within upward wave A{-9} continues. No change 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 continued trading in a narrow range overnight, reaching a low in the 3670s and then rising to a high in the 3730s.

What does it mean? The sideways movement is a pause within a downtrending 4th wave, part of the 1st wave within an upward correction that began on October 13.

What are the alternatives? If the pause is one degree larger than the principal analysis would place it, then the pause is the first stage of a 5th wave within the correction.

[S&P 500 E-mini futures at 3:30 p.m., 160-minute bars, with volume]

What does Elliott wave theory say? Wave 2{-7}, an upward correction that began on October 13 from 3502. The correction is taking the form of a Zigzag, which is common for 2nd waves. A Zigzag is composed of three internal waves — in this case, wave A{-8} within five internal waves, wave B{-8} with three internal waves, and wave C{-8} with five internal waves.

The principal analysis considers wave D{-9} within wave A{-8} to now be underway, with the sideways movement yesterday and through the night being a correction with wave D{-9}. Wave E{-9}, the final wave within wave A{-8}, will begin once wave C{-9} is complete.

The alternative analysis considers wave D{-9} to have ended at the October 19 low of 3677, and the subsequent, so far shallow, rise to be the early stage of wave E{-9}.

The pause has occurred in the neighborhood of the 23.6% Fibonacci retracement level. Typically, a 2nd wave will retrace a large portion of the ground covered by the preceding 1st wave, with the wave 2{-7} correction’s endpoint coming at the 61.8% Fibonacci level (4012) or even higher, at the 78.6 level (4151).

I’ve placed a Fibonacci retracement ladder on the chart, in red.

After rising wave A{-8} is complete, it will be followed by a declining wave B{-8} and then a rising wave C{-8}, which will complete the corrective pattern. It will also complete wave 2{-7}, unless the correction takes a compound form. If it compounds, wave C{-8} will be followed by a connecting wave X{-8} and then by a second corrective pattern. Compound corrections can have up to three corrective patterns within them.

This is all happening within wave 3{-6}, a downtrend that began on August 16 from 4327.50. It is a subwave of downtrending wave 1{-5} and a nested series of increasingly larger downtrending 1st waves, from degree {-4} up to degree {-2}. One level higher is wave 4{-1}, the next-to-the-last wave within an expanding Diagonal Triangle 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.

  • 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, 4327.50 (down)
  • 2{-7} Minuscule, 10/13/2022, 3502 (up)
  • A{-8} Subminuscule, 10/13/2022, 3502 (up)

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, October 20, 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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