Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell slightly during the session, from the overnight high, 3928 on the futures, into the 3850s. The decline is insufficient to support a choice from among the three scenarios I presented in this morning’s analysis, so I’ve kept the principal analysis in place while repeating the caveat: Any one of the three scenarios has a good chance of describing how the market will play out.

If the price reverses and climbs to a new high, then two scenarios are still in the running within the upward correction, wave 2{-7}. Either wave A{-8} is still underway and is in its final wave, E{-9}. Or instead of the final wave with A{8}, wave C{-9}, the middle wave, is underway and is in its final subwave, E{-10}.

And if that isn’t enough to satisfy our hunger for ambiguity, it could also be that wave A{-8} ended overnight at 3928 and wave B{-8} has begun.

Is Elliott wave analysis fun or what!?! 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 hover around the 50% Fibonacci retracement level as the rise that began on October 13 continues.

What does it mean? The rise is an upward correction, and the first wave within that correction is in its 5th internal wave and therefore is nearing its end. It will be followed by a declining middle wave, and then by a final, rising wave that will end the corrective pattern.

What are the alternatives? At this point each new high could be the end of the first wave within the correction. Or not. I’ve marked the chart to show the first wave continuing, but the odds of either scenario playing are are pretty much equal.

Also, the chart can be counted in such way that the present rise is the middle wave within the first subwave of the correction. That increases the amount of upside that lies ahead.

Chart note. The Fibonacci ladder appears on the chart in red.

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

What does Elliott wave theory say? Wave A{-8}, the first wave within an upward correction, wave 2{-7}, is nearing its end. The corrective pattern has three waves internally. Declining wave B{-8} will follow, and then rising wave C{-8} will complete the corrective pattern, and most likely the correction as a whole, unless it turns out to be a compound structure, linking two or three corrective patterns together.

That’s the principal analysis. Under the alternative analysis, wave A{-8} ended at the overnight high, 3928, and downward wave B{-8} has begun.

And then there’s the pesky problem of assigning a degree to waves. Under the principal analysis, wave A{-8} internally is in its final subwave, E{-9}. An alternative count would see the wave C{-9} rise following the end of wave B{-9} as being a subwave rather than being C{-9} in its entirely.

So under that scenario,

  • the place marked C{-9} becomes A{-10}, D{-9} becomes B{-10},
  • and the longer rise above the 38.2% Fibonacci level becomes C{-10},
  • then a small decline for D{-10}
  • and a so-far small rise for E{-10}, the present wave which, when complete, will mark the end of wave C{-9}.

Under this scenario, we have a wave D{-9} decline ahead, and then a rising wave E{-9} that will complete wave A{-8} within the wave 2{-7} correction.

And enclosing these alternatives is downtrending wave 3{-6}, which began on August 16. It is a subwave of a series of nested 1st waves, each bigger than the last, reaching up to wave 1{-2}. The parent wave of that nested series is wave 4{-1}, the declining 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)
  • B{-8} Subminuscule, 10/16/2022, 3897.50 (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, November 1, 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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