3:30 p.m. New York time

Half an hour before the closing bell. From a low of 4060.75 before the opening bell, the S&P 500 futures launched into a series of swings that appear to be a low degree upward correction within the much larger upward correction, wave 2{-7}, that began on October 13, 2022. The form of the swings, on a five-minute chart, resemble an ascending Triangle structure. No change in this morning’s analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined overnight, coming close to 4060 before bouncing back into the 4080s. The index has fallen nearly 150 points since the February 2 high, 4208.50, a decline of about 3.5%.

What does it mean? The upward correction that began on October 13, 2022 continues and is in its final phase. At a detailed level, the price in the declining next-to-the-last segment of a five-part movement. The final segment will likely rise above 4208.50 and when it ends, will also be the completion of the upward correction. A downtrend will follow, carrying the price below the correction’s starting point, 3502, and most likely significantly lower.

What is the alternative? The upward correction ended at the February 2 high, 4208.50, and the largely declining price movements since have been the first tentative steps a downtrend that will reach 3502 and likely much lower.

Why are there curly brackets on the chart? Each wave has a subscript. In print, subscripts are generally small numbers, which wouldn’t be easily read on a chart. So I’ve placed in curly brackets. A subscript indicates the wave’s place, its degree, within the fractal structure of the price movements. Directional price movements, called “waves’ in Elliott wave analysis, are complex on stock charts. Each wave contains smaller waves and is in turn contained by larger waves. Their sizes stretch from waves lasting a millisecond to those lasting for years and decades.

[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 the basis of the analyses.

Principal analysis:

• The upward correction, wave 2{-7}, continues.
• It is in the third of three parts, upward wave C{-8}…
• … which in turn is in its third and final subwave, rising wave C{-9}.
• Wave C{-9} has five subwaves and is in the fourth, declining wave D{-10}.
• Wave D{10} will be followed by rising wave E{-10}
• A wave in wave E{-10}’s position normally will exceed the endpoint of the prior upward wave, 4208.50, which is wave C{-10}. That peak was attained on February 2.
• The end of the wave E{-10} will also be the end of waves C{-9}, C{-8} and of the upward correction, wave 2{-7}.
• Wave 3{-7} will follow, a powerful downtrend that will carry the price below the starting point of the correction, 3502, and most likely significantly below that level.

Alternativ:

• The upward correction, wave 2{-7}, ended on February 2 at 4208.50 and downtrending wave 3{-7} is now underway.

All analyses:

• This is all happening within wave 3{-6}, which began on August 16, 2022.
• Wave 3{-6} is encompassed by a series of larger waves, the smaller within the larger, stretching up five degrees to wave 4{-1}, which began on January 4, 2022.
• 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 10, 2023

Disclaimer

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.

License

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Based on a work at www.timbovee.com.