Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures has stuck narrow range during the session, from the 3890s to the 3830s. The upward correction that began on December 19, 2022 continues, taking the form of a Horizontal Triangle. I’ve updated the chart.

9:35 a.m. New York time

Happy birthday! The massive downtrend that is betraying bullish hopes and expectations began a year ago today, on January 4, 2022 on the S&P 500 futures. Other index derivatives and stocks began their declines at various times around that date. So raise a cup to toast the great slow-motion crash of 2022. The bear market is one year old.

What’s happening now? The S&P 500 E-mini futures rose along a shallow path in overnight trading, reaching into the 3870s in an upward movement that began on January 3 from 3814.50.

What does it mean? The rise is part of what appears to be the fourth wave within a Horizontal Triangle, an upward correction that began on December 19, 2022. Altogether, the Triangle will have five waves. The end of the Triangle, and of the upward correction, will be followed by an energetic downtrend that will carry the price lower.

What are the alternatives? The wave count is a bit ambiguous, with some uncertainty over whether a wave is a subwave or one of the waves defining the Triangle. So my assertion that the Triangle is in its fourth wave is somewhat tentative.

Chart note. The price channel boundaries of the Horizontal Triangle are shown on the chart in red.

[S&P 500 E-mini futures at 3:30 p.m., 210-minute bars, with volume]

What does Elliott wave theory say? These are the wave involved in the analysis. Each wave number or letter is followed by a subscript in curly brackets showing the wave degree, where it fits in the complex fractal structure of waves, subwaves (or child waves), and parent waves.

  • The Horizontal Triangle is wave 2{-9}, an upward correction.
  • Internally, the Triangle is in its fourth wave, D{-10}, which will be followed by a rising final movement, wave E{-10}. That final wave will complete the Triangle and wave 2{-9}.
  • It’s possible that the overnight rise is the beginning of wave E{-10}, but it seems to me that it is more likely a subwave of D{-10}
  • Wave 2{-9} will be followed by a downtrending wave, 3{-9}. Like most third waves, it is likely to show greater power than any other movement since the present decline began in mid-December.
  • Wave 2{-9} is part of a downtrending wave, 1{-8}.
  • Wave 1{-8} is a subwave of wave 3{-7}, a larger downtrend that began on December 13, 20223.
  • All of this is happening within wave 3{-6}, a powerful downtrend that began on August 16.
  • The parent of them all is wave 1{-5}, a downtrend that began a year ago, on January 4, 2022, from 4808.25.

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, January 4, 2023


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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