Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures hit a low during the session of 4104 and then rose, although not to a great extent. No change in the analysis. I’ve updated the chart.

3:05 a.m. New York time

SPY options play exit. I’ve exited my short bear call options spread on SPY for a loss. I expected to the price to decline. Instead, it rose. I’ve updated the entry analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures began to fall immediately upon reopening at 4134.25 overnight and continued falling as the opening bell approached, reaching as low so far as 4106.25,

What does it mean? The upward correction that began on October 13, 2022 continues. Internally it is in its last segment, and that segment in turn is in its next-to-the-last segment.

That smallest segment listed above will take days to complete (not weeks). When it is complete, most likely rising above 4208.50 — the end of the middle segment. When complete, that final segment will also mark the end of the correction, which will be followed by a powerful downtrend that will move below, 3502, and perhaps much lower.

What are the alternatives? None at present. As always, alternatives will appear.

Chart note. The waves on a chart form a complex structure, with larger waves containing smaller waves and also being part of still larger waves, with all waves producing the same patterns and following the same rules. The waves together form a fractal pattern. Each wave has a place — a degree — within the fractal hierarchy. On the chart, I use subscripts, within curly brackets, to show the degree. The smaller the number in the subscript, the smaller the degree.

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

What does Elliott wave theory say? These are the waves that are important to the analysis.

  • The upward correction is wave 2{-7}
  • Internally, it is in its final subwave of three: Wave C{-8}, which in turn is in its middle subwave, C{-9}.
  • The C{-9} wave will have five subwaves. The third, wave C{-10}, ended on February 2 at 4208.50, the high point so far in the correction, and downward wave D{-10} is now underway.
  • Wave D{-10} will be followed by upward wave E{-10} which, when correct, will mark the end of waves C{-9}, C{-8} and the correction itself, wave 2{-7}.
  • Downtrending wave 3{-7} will follow. Third waves tend to be powerful. This one will move below 3502, the starting point of the wave 2{-7} correction, and typically significantly below that level.

All of that is happening within wave 3{-6}, which began on August 16, 2022. Wave 3{-6} is one of a series of nested downtrending wave, moving up the fractal structure five degrees, to wave 4{-1}, which began on January 4, 2022 at 4808.25. Wave 4{-1} is the next-to-the-last wave within a large expanding Diagonal Triangle, wave 5{0}, that began on December 26, 2018.

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)
  • S&P 500 Futures and index:
  • 4{-1} Minor, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-2} Minute, 1/4/2022, 4808.25 (down)
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down)
  • 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)

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, February 6, 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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