Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures has continued to rising during the session, reaching the 3760s. Within the first wave of an upward correction that began on October 13, the final wave has begun its rise. In the analytical language of Elliott wave analysis, rising wave E{-9} within rising wave A{-8}, both within the upward correction, wave 2{-7}, are all underway. Aside from the completion of wave D{-9}, this morning’s analysis stands. I’ve updated the chart.

9:41 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined in overnight trading, reaching the 3640s in what is the furthest drop since the sideways trend began earlier this week, and then rose back to the 23.6% Fibonacci retracement level. (The Fibonacci ladder is shown in red on the chart.)

What does it mean? The further the decline, the greater the likelihood that the principal analysis of the last few days is correct: The next to the last segment within the first leg of an upward correction is underway. The correction began on October 13. The decline will be followed by the final wave within the first leg of the correction and likely will carry the price above 3772.25, the high so far within the correction, and perhaps significantly above that level.

What are the alternatives? However, the reversal today to a new high within the correction keeps the alternative analysis alive: The low marks the start of the rising final wave within the correction.

[S&P 500 E-mini futures at 3:30 p.m., 180-minute bars, with volume]

What does Elliott wave theory say? Now underway, declining wave D{-9} within rising wave A{-8} within an upward correction, wave 2{-7}. The preceding wave C{-9} approached the 38.2% Fibonacci retracement level but fell short.The subsequent wave D{-9} fell to the 23.6% retracement level, paused for an internal correction, and then fell further.

Under the alternative analysis, wave D{-9} ended at the overnight low, 3641.50, and rising wave E{-9}, the final wave within wave A{-8}, is now underway.

Wave 2{-7} is taking the form of a Zigzag and will have three waves internally. Rising wave A{-8} is presently underway, wave B{-8} will decline, taking back a portion of the A-wave rise, and wave C{-8} will carry the price still higher. Second waves generally retrace a great deal of the preceding 1st wave, and it would be unsurprising if wave C{-8} and its parent, wave 2{-7}, ended at a Fibonacci retracement level of 61.8% (4012) or 78.6% (4151).

Wave 2{-7} is correcting wave 1{-7}, which began on August 16 from 4327.50, and that starting point is an absolute ceiling on how high wave 2{-7} can go.

This is happening within declining wave 3{-6} within wave 1{-5}, and a series of declining wave up to wave 4{-1}. So if anyone were to ask for a one-word description of the market, I would thoughtfully reply, “Down”. The decline that began on January 4, wave 4{-1} within an expanding Diagonal Triangle that began in December 2018, has a ways further to go.

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 21, 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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