Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures traded in a narrowing range during the session, remaining between the highs and lows set a day earlier. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight, reaching a low of 4116 before bouncing back into the 4130s. The price remained above the starting point of the present rise, 4060.75, and below the peak since that rise began, 4186.50.

What does it mean? The larger upward correction that began last October is still underway. It is in its final segment, which internally is within a final segment that is nearing its end. The upward correction will be followed by a powerful downtrend that, at a minimum, will carry the price below 3502, the correction’s starting point, and almost certainly well below that level.

What are the alternatives? The upward correction may have ended at the February 2 high, 4208.50, and if so, the price movements since have been the first tentative steps the downtrend.

Chart notes. A directional movement in Elliott wave analysis is called a “wave”, and what may appear to be a squiggly line on the chart is, to Elliotticians, a complex fractal structure of smaller waves within larger waves and the larger waves within waves that are still larger.

fA wave has two characteristics that are used to make sense of that structure. The first is its designator, a number for trending waves and a letter for corrective waves, that sows its relative location within the encompassing wave. The second is a subscript, placed within curly brackets on charts I analyze, that shows the wave’s relative position within the fractal structure, called the wave’s “degree”. The smaller the subscript, the further down the wave is in that structure. The larger the subscript, the higher up the fractal hierarchy the wave stands.

[S&P 500 E-mini futures at 3:30 p.m., 5-hour bars, with volume]

What does Elliott wave theory say? Here are the waves behind the principal analysis, the alternative, and the bigger wave strutures encompassing both.

Principal analysis:

  • The upward correction, wave 2{-7}, continues.
  • It is in the third of three parts, upward wave C{-8}.
  • C{-8} 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.

Alternative analysis:

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

Confirmation signals.

The choice between the principal and alternative analyses depends on whether wave D{-10} has ended. The chart has sufficient ambiguity to ensure that there is no obvious answer.

A breakout above 4208.50 — the end of rising wave C{-10} — would confirm that wave E{-10} is underway, A break below 4060.75 — the low point so far of wave D{-10}, 4060.75 andthe end of falling wave C{-11} — would confirm that D{-10} is still underway.

Bigger structures:

  • 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 15, 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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