Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the session, to 3704.25, and then reversed, rising into the 3750s. In Elliott wave terminology, descending wave B{-8} is underway. It is the middle subwave of an upward correction that began on October 13, wave 2{-7}.

Just based on the short time that has passed since wave B{-8} began, it appears to be in its initial subwave, A{-9}. But there is always much ambiguity over degree labeling early in a price movement, so the subwave may be further along than that..

I’ve updated the chart, adding blue dashed lines showing the upper and lower boundaries of the wave B{-8} target range. So far this session, the price has remained below the upper boundary and within the target range.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell sharply overnight, reaching the 3720s, about 200 points below the October 28 high.

What does it mean? The downward middle wave of an upward correction that began on October 13 is now underway. It is part of a downtrend that began on August 16.

What are the alternatives? The correction will have three subwaves, unless it forms a compound structure linking two or three corrective patterns together. This correction is the first of two upward corrections within the present downtrend, and it is the second correction that is more likely to be compounded.

Chart note. I’ve superimposed a Fibonacci ladder on the chart, in red, to better track the retracement by the correction of the decline since August 16.

[S&P 500 E-mini futures at 3:30 p.m., 200-minute bars, with volume]

What does Elliott wave theory say? Downtrending Wave B{-8} within an upward correction, wave 2{-7}, began on October 28 from 3924.25. The 2nd wave is taking the form of a Zigzag, with five waves within with A.

In Zigzags, the B wave tends to retrace between 38% and 79% of the distance covered by wave A. Wave A{-8} covered 422.25 points, ending at 3924.25. Therefore, the price target ranges from 3764 to 3591. The price at the opening bell is already within the target range. That’s a tendency, not a rule, so wave B could break below 3591.

Wave B{-8} will have three internal waves. Internally, wave A{-9} ended yesterday at 3907, and wave B{-9} began from that point. So by that count, wave B{-9} is not yet complete.

Wave B{-8} will be followed by uptrending wave C{-8}, the final wave in the Zigzag corrective pattern, with five subwaves. Wave C{-8} will most likely be the final subwave within wave 2{-7}, unless the upward correction forms a compound structure. If it does, wave C{-8} will be followed by a downward connective wave, X{-8}, and then a second corrective pattern.

In any case, wave 2{-7}, including wave B{-8}, will remain above 3502, the correction’s starting point.

This is all happening with wave 3{-6}, a downtrend that began on August 16, that in turn is enclosed in a series of nested 1st waves, from 1{-5} up to 1{-2}. They are all subwaves of wave 4{-1}, the next-to-the-last wave within a very large expanding Diagonal Triangle, wave 5{0}, which 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, 10/28/2022, 3924.25 (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 3, 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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