Trader’s Notebook

New Year’s holiday trading. New Year’s Eve falls on a Sunday this year and the markets will be closed on Monday in observance of the holiday. The S&P 500 futures will resume trading Monday evening, January 2, 2023.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures has fallen during the session, reaching a low of 3821.50 as the closing bell approached. No change in the analysis. The downtrend that began on December 13, wave 3{-7}, continues. I’ve updated the short-term, upper chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures withdrew from yesterday’s high, 3882.75, into the 3830s, as the final trading session of 2022 opened.

What does it mean? The first leg of a downtrend that began on December 13 continues. Internally, it is in its third of five segments, and within that third segment, is in the midst of a low-level upward correction.

What are the alternatives? For the past few weeks I’ve listed alternate analyses that saw the upward correction that began on October 13 as still being underway. I’m dropping those alternatives. The internal structure makes it clear that this downtrend is the real deal.

So I have no alternatives today. I’m quite certain they will develop as the chart progresses. Alternatives always do.

Chart notes. The upper chart, of the S&P 500 E-mini futures, shows the present downtrend and the upward correction that preceded it, running from mid-October to the present. The lower chart, of the Dow Jones Industrial Average, shows the Crash of 1929 and the subsequent uptrend that began in 1932 and is with us today.

[S&P 500 E-mini futures at 3:30 pm., 3-hour bars, with volume]

[Dow Jones Industrial Average at 9:30 a.m., quarterly bars]

What does Elliott wave theory say? Looking first at the near-term, upper chart of the S&P 500 futures…

These are the waves that are driving the action:

  • The downtrend that began on December 13 is wave 3{-7}.
  • It is in its initial subwave, downtrending wave 1{-8}.
  • The initial subwave is in its 3rd and middle segment, wave 3{-9}.
  • Wave 3{-9} is in an upward correction of low degree, wave 2{-10}

Wave 3{-9} will be followed by an upward correction, wave 4{-9}, and then a final decline, wave 5{-9}, that will complete the parent wave, 1{-8}.

Turning next to the very long term, lower chart of the Dow Jones Industrial Average…

  • The Crash of 1929, wave 4{-3}, ended in 1932.
  • The uptrend that followed, wave 5{-3}, is still underway, having traveled from 40.6 on the index top the January 5, 2022 peak, 36952.65.
  • The 2022 peak ended wave 3{-1}, the middle wave of wave 5{0}, the final wave of wave 5{+1}.
  • The completion of wave 5{+1} will also be the end of wave 5{+2}, which began in 1974, and wave 5{+3}, the rise that began in 1932.

The analysis shows that we are in a significant market correction, one that I expect to continue through 2023 and perhaps into 2024. It will be followed by an uptrend of massive proportions that will carry the price above the January 2022 high and almost certainly quite a distance above that level.

So Happy New Year, everyone. My motto as a trader for 2023 will be the words of the English Theologian Thomas Fuller, who began a sentence, “Thus, as it is always darkest just before the day dawneth…”. The quote comes from his 1650 work, A Pisgah-Sight of Palestine and the confines thereof; with the history of the Old and New Testaments acted thereon.

And so it is with the markets: It is always darkest before the dawn.

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 30, 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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