Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. So far during the session, the S&P 500 futures have dropped into the 4020s and risen back in the 4060s. The ups and downs of the last few days have centered on the 61.8% Fibonacci retracement level, meaning that the upward correction has taken back about that much of the downtrend that preceded it. In Elliott wave terminology, wave 2{-9} — the upward correction — has retraced +/- 61.8% of wave 1{-9} — the preceding downtrend.

I’ve drawn a Fibonacci ladder on the chart in read, showing the retracement levels. A 61.8% retracement is a common reversal point for corrections, and the fact that the retracement has reached that level and stalled lends credence to Alternative Analysis #2, that the correction is reaching an end.

I’m not yet ready to buy into that interpretation of the chart. Nonetheless, it’s a strong competitor with my principal analysis, which has the uptrend still underway and in its first leg.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures whipsawed after the 4th quarter GDP was released, ending by rising into the 4060s, to a new high for January.

What does it mean? The inflation metric in the GDP report came in at +3.2% compared to the consensus expectation of +4.3%. The chart analysis remains unchanged: An upward correction that began on December 22, 2022 continues and is in its first segment.

What are the alternatives? Also unchanged.

Alternative #1: The first segment ended at today’s high.

Alternative #2: The third and final segment ended at today’s high, and with it the entire upward correction. 

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? The upward correction is wave 2{-9}. The three scenarios in today’s principal analysis plus the two alternatives differ in their wave labeling within waver 2{-9}.

  • Principal analysis: Upward wave A{-10} is still underway.
  • Alternative #1: Wave A{-10} ended today and downward wave B{-10} has begun.
  • Alternative #2: Rising wave C{-10}, the final wave in the corrective pattern, ended today, also bringing wave 2{-9} to an end. Downtrending wave 3{-9} has begun and will carry the price below 3785.50 — the starting point of wave 2{-9} — and potentially much lower.

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, 12/13/2022, 4110 (down)
  • 1{-8} Subminuscule, 12/13/2022, 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 26, 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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