3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during the session, beginning the day in the 4050s and as the closing bell approaches, has so far reached 4002. The movement gives credence to this morning’s principal analysis, that the downtrend that began on February 2, wave 3{-7}, continues and will fall a significant distance before reaching its end. I’ve updated the chart.

1 p.m. New York time

COIN earnings play entry. I’ve entered a bear call vertical spread on COIN, using options that expire in 24 days, and have posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight, reaching a low of 4044.25 as the opening bell sounded.

What does it mean? A downtrend that began on February 2 continues and is in its early stages. Eventually it will carry the price below 3502, the starting point of the preceding upward correction, and almost certainly significantly below that level.

The present decline, a relatively small subwave, began on February 14 and when complete, will be followed by a small upward correction and then a resukption of the downtrend.

The further the price declines, the more likely it is that this principal analysis is the most accurate map of the S&P 500.

What is the alternative? The upward correction that began on October 13, 2022 is still underway and is in its late stages. The decline since February 2 is a subwave within the correction, and it will be followed by a resumption of the rise that will carry the price above 4208.50, the high so far within the correction.

If the price reverses and moves above 4208.50, then that would confirm that this alternative analysis is the most accurate map of the S&P 500.

Chart note. I’ve focused the chart to take a closer look at the details of the downtrend that began on February 2.

The chart mark-up, showing the Elliott wave analysis, works like this: Each wave has a designation — a number or letter — that shows its position within the larger structure that contains it. And each wave designation is followed by a subscript, in curly brackets, to indicate the wave’s place, its degree, within the complete fractal structure of the price movements. 

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

What does Elliott wave theory say?

Here are the waves that my analyses are based on.

Principal analysis:

• The downward correction that began on February 2, wave 3{-7}, continues.
• It is in the first of five subwaves, wave 1{-8}.
• Within wave 1{-8}, wave 1{-9} is underway and is in the final subwave within a five-wave structure, downtrending wave 5{-10}.
• When wave 5{-10} is complete, it will also mark the end of wave 1{-9} and the beginning of a low-degree upward correction, wave 2{-9}.
• Wave 3{-7} is still taking its tentative first steps and will develop into a powerful downtrend that will carry the price below 3502, the starting point of the preceding upward correction, wave 2{-7}, and most likely significantly below that level.

Alternative analysis:

• The upward correction that began on October 13, 2022, wave 2{-7}, is still underway.
• 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.

Confirmation signals.

The principal analysis will be confirmed if the present decline, wave 3{-7} and its subwaves move below 3502.

The alternative analysis will be confirmed if the present decline, wave D{-10}, moves above 4208.50.

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)
• 3{-7} Minuscule, 2/2/2023, 4208.50 (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, February 21, 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

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.