Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures reached a session low of 4098.25 shortly after the opening bell and then rose back to the 4140s, pulling back in the final minutes. 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 peaked overnight at 4168.50 and then fell sharply to 4101.50 as the opening bell sounded.

What does it mean? The price hasn’t broken beyond the high point of an upward correction that began last October, 4208.50, nor below the starting point of the present rise that began on February 2, from 4060.75. There are no signals to help us choose between the principal analysis and the alternative. Therefore, the principal analysis is that the upward correction is still underway and is nearing completion. A rise above 4208.50 will confirm this analysis.

What is the alternative? The upward correction has ended at the February 2 high, 4208.50, and subsequent price movements have been the early stages of a downtrend that will carry the price below the beginning of the correction, 3502, and almost certainly significantly below that level. A decline below 4060.75 will increase the credence to this scenario, and a decline below 3502 will confirm it.

Chart notes. In Elliott wave analysis, a directional price movement is called a “wave”, and each wave has two characteristics. The first is its designator, a number for trending waves and a letter for corrective waves, that shows the wave’s 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 of large and small waves, 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 that my analysis is based on. It is is unchanged from the past few days.

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 16, 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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