Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 traded narrowly during the session, dropping back into the 3960s on the futures. No change in the analysis. The final wave within an upward correction that began on October 13 continues. That’s wave C{-8} within wave 2{-7}.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to fall in yesterday’s trading, reaching into the 3970s. Yesterday’s high and low — 4050.75 and 3960 — define the range within which the price has remained since then.

What does it mean? The analysis remains unchanged for another day, as it seeks to answer the question, “Where’s does the correction end?” It’s an important question, since the high will most likely mark the end of an upward correction that began on October 13 from 3502. And the answer to the question is, a shrug. Nobody knows.

If the price reaches above yesterday’s high, then the rise that began on November 3 from 3704.25 is still underway, as is the upward correction. I’ve chosen that as principal analysis, but that’s an arbitrary decision, driven by the absence of clear evidence that a strong decline has begun.

What are the alternatives?

If the price turns and falls below the 3960, the lower level of the range, then that increases the likelihood that yesterday’s high marked the end of the rise from November 3, and the end of the upward correction. The price since the high has traced three waves — down, up, down — in a pattern that is consistent with the early steps in a downtrend.

[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 that began on October 13 is wave 2{-7}. Internally, it is in its final wave, C{-8}, which began on November 3.

Under the principal analysis, wave C{-8} is in its third subwave, C{-9}. It will be followed by a downward wave D{-9} and then a push to a new high, wave E{-9}, which will complete wave C{-8} and most likely wave 2{-7} as well. It is possible, although not likely, that wave 2{-7} will form a compound correction pattern, stringing together two or three corrective patterns before reaching its end.

Under the alternative analysis, wave C{-8} yesterday completed its 5th internal wave, E{-9}. If wave 2{-7} is forming a simple structure, with a single corrective pattern, then the 2nd wave is over and a strong downtrend, wave 3{-7}, has begun. It will almost certainly carry the price below 3500, perhaps significantly below. If the structure is that of a compound correction, then wave C{-8} will be followed by a declining connector wave, X{-8}, and then a second corrective pattern.

This is all happening within downtrending wave 3{-6}, which began on August 16, from 4127.50. And wave 3{-6} is itself a subwave in a fractal pattern of nested downward waves of increasing size, stretching back to the Great Depression in the 1930s. There will be large ups and downs within the fractal pattern, and as a trader, I plan to keep in mind that the downs will be trends and therefore have more power than will the ups, which will be corrections, running contrary to the trend.

As my mentors in trading often said, “The trend is your friend”, and those will be words to trade by in the coming years.

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 6, 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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