Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 E-mini futures broke above 4000 for the first time since mid-September, as the last wave within an upward correction continues. That last wave is in its final subwave. In Elliott wave terminology, wave C{-9} within wave C{-8} within wave 2{-8} is underway. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose sharply overnight, reaching into the 3990s.

What does it mean? The rise that began on October 3 from 3704.25 is the final leg of an upward correction that began on October 13. I’ve reanalyzed the subwaves of the correction, relabeling the decline from October 28 as the second wave in the correction and the present rise as the third wave, raising them by one degree larger than prior analyses had it.

I made that decision based on the power of the present rise, which has carried the price to the area of the 61.8% Fibonacci retracement level. The present rise is in its third wave internally and will have five subwaves when complete. The rise will be followed by a pullback and then an additional upward movement, most likely reaching above the endpoint of the third wave.

The Fibonacci retracement levels are shown on the chart in red.

What are the alternatives? The upward correction is taking the form of a Zigzag. We know this because its first wave had five subwaves. In a Zigzag, the third wave also must have five subwaves. If the present rise ends with only three subwaves, then yesterday’s analysis was correct: The present rise is one degree smaller than today’s analysis would have it.

[S&P 500 E-mini futures at 3:30 p.m., 230-minute bars, with volume]

What does Elliott wave theory say? The upward correction is wave 2{-7}, the second of five waves within downtrending wave 3{-6}, which began on August 16 from 4327.50. Wave 2{-7} is taking the form of a Zigzag, with a rising A wave composed of five subwaves, a declining B wave with three subwaves and a rising C wave with five subwaves.

Internally, wave C{-8} within wave 2{-7} is now underway and is in its rising third wave, C{-9}.

When wave C{-9} is complete, it most likely will also be the end of the upward correction, unless wave 2{-7} forms a compound structure, linking two or three corrective patterns together. A simple structure is more likely for a 2nd wave.

In any event, wave 2{-7} will be followed by a powerful downward movement, wave 3{-7}, which will carry the price below the starting point of the preceding 2nd wave, 3502, and almost certainly significantly below that level.

The Elliott wave analysis suggests that traders would do best to take the happy talk accompanying the present rise with a great deal scepticism.

Today’s new analysis took what had been waves at the {-9} level within wave B{-8}, which began on October 28, and promoted them to the {-8} level. The former analysis had wave B{-8} as still underway, putting it in its rising middle wave, B{-9}, internally.

If wave C{-9} turns out to be the final wave within wave C{-8}, then something else is happening, most likely the scenario outlined in yesterday’s principal analysis. The alternative to today’s principal analysis consider the present rise to be rising wave B{-9} within declining wave B{-8}.

A chart of the former analysis can be found in yesterday’s Trader’s Notebook.

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)
  • C{-8} Subminuscule, 11/3/2022, 3704.25 (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, November 11, 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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