Trader’s Notebook

Holiday trading. The Christmas holiday falls on a weekend this year, on this coming Sunday, and, like many others around the world, will be closed on Monday in observance. The U.S. futures markets will open at 6 p.m. New York time on Monday.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has risen during the session, from a low of 3821.25 on the futures shortly after the opening bell to a high so far of 3872.50 as the closing bell approached. The analysis remains unchanged. A downtrend, wave 3{-7}, is underway and is in its first leg, wave 1{-8}, which internally is in a smaller downtrend, wave 3{-9}, that began on December 21. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in overnight trading, remaining below the most recent downward reversal point, 3919.75.

What does it mean? The downtrend that began on December 21 continues. It is part of a larger downtrend that began on December 13.

What are the alternatives? There are several points of ambiguity that will be resolved over the next days and weeks.

  • Alternative #1: It’s possible that the smaller /upward correction that began on December 19 is still underway and is taking the form of a Triangle.
  • Alternative #2: The larger upward correction that began on October 13 is is still underway and is in its final segment.
  • Alternative #3: The upward correction that began on October 13 is still underway and is taking the from of a compound correction, containing two or three corrective patterns. The first corrective pattern ended on December 13, and the decline that followed will link the first corrective pattern to the second one.

Alternatives #2 and #3 are increasingly unlikely. Nonetheless, they can’t be ruled out entirely.

[S&P 500 E-mini futures at 3:30 p.m., 150-minute bars, with volume]

What does Elliott wave theory say? Here’s a description of the wave structure that is currently in play.

Under the principal analysis,

  • A downward correction, wave 3{-7}, began on December 13 and is still underway.
  • Wave 3{-7} is in its first subwave, wave 3{-8}.
  • Wave 3{-8}, in turn, has completed an small upward correction, wave 2{-9} and now is downtrending again in wave 3{-9}.

Under the alternative analyses,

  • Alternative #1: Wave 2{-9} is still underway and is taking the form of a Triangle, which will have five waves internally.
  • Alternative #2: Wave 2{-7} is still underway and is its final subwave, wave C{-8}.
  • Alternative #3: Wave 2{-7}, a compound correction, has completed wave C{-8}, the final wave of its first corrective pattern. The decline from December 13 is wave X{-8}, connecting the completed wave C{-8} to the first wave, A{-8}, of its second corrective pattern.

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)
  • 3{-7} Minuscule, 12/1/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/1/2022, 4110 (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, December 23, 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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