Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has traded sideways during most of the session, in the 3770s on the futures, and as the closing bell approach the price rose to the 38.2% Fibonacci retracement level, in the low 3800s. No change in 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 broke above the narrow range within which it ended the week, returning to the low 3800s.

What does it mean? The downward middle wave within an upward correction that began on October 13 is underway. That middle wave, when complete, will have three subwaves. The first subwave appears to be complete and the second subwave is in progress.

What are the alternatives? If I squint my eyes and use my imagination, I can sort of make a case for the middle wave of the upward correction having ended at the November 3 low, 3704.25, at the wave A{-9} endpoint on the chart. It seems far fetched, so I’m ranking it as a distant alternative.

[S&P 500 E-mini futures at 3:30 p.m., 220-minute bars, with volume]

What does Elliott wave theory say? Under the principal analysis, wave B{-8}, the second wave within an upward correction, wave 2{-7}, is continuing. The B wave resumed trading overnight near the 23.6% Fibonacci retracement level, which is slightly below the upper boundary of the B wave’s price target range, 3764. The lower boundary of the range is at 3591. The price is approaching the 38.2% Fibonacci retracement level. The preceding wave A{-8} ended near the 50% retracement level.

The Fibonacci levels are marked in red on the chart. The price target boundaries are in blue.

Within wave B{-8}, the middle subwave, rising wave B{-9}, is underway. It will be followed by declining wave C{-9}, which will complete wave B{-8}.

Under the alternative analysis, wave B{-8} ended at 3704.25 on November 3. The subwaves within B{-8} so far seem extraordinarily shallow, and so this isn’t an analysis that I take seriously. Nonetheless, it’s not beyond the realm of possibility.

Under either scenario, the next movement is an upward wave.

The principal analysis labels the rise as wave B{-9}, and it will have three subwaves. The alternative analysis labels the rise as wave C{-8}, and it will have five subwaves. The subwave count will eventually determine which analysis is correct.

Wave 2{-7} is a subwave of downtrending wave 3{-6}, which began on August 16 from 4327.50. The 2nd wave upward correction will be followed by a powerful downtrending wave, 3{-7}, that will carry a price below the October 13 low, 3502, and most likely significantly below that level. After a 4th wave upward correction, wave 5{-7} will carry the price still lower and will complete wave 3{-6}.

Wave 3{-6} will be followed by a 4th wave upward correction and then by downtrending wave 5{-6}, which will likely carry the price lower still.

This is all happening within a nested series of 1st waves, ranging from wave 1{-5} to wave 1{-2}, all of which began on January 4. Their parent wave, which also began on January 4, is wave 4{-1}, the next-to-the-last wave within wave 5{0}, the final wave of an expanding Diagonal Triangle. Wave 5{0} began on December 26, 2018.

The “expanding” part of this Diagonal Triangle means that the highs keep getting higher and the lows lower, creating a sideways pattern that gets broader over time. After wave 4{-1} is complete, the final wave within the triangle, wave 5{-1}, will carry the price to new heights.

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 7, 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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