Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell to the 3940s during the session.

The decline was the first subwave of the middle portion of the upward correction that began on March 13, and the rise was the second subwave. The third subwave is now in progress. That is how I have marked the chart.

Alternatively, all three waves after the March 22 peak are parts of the first subwave.

In Elliott wave terms, the principal analysis is that declining wave C{-10} within wave B{-9} within the upward correction, wave 2{-9}, is underway. The alternative moves the waves within wave B{-9} down one degree. Under that scenario, wave C{-11} within wave A{-10} within wave B{-9} is underway. Future events will clarify the degrees.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a high overnight of 4001.25 and then fell into the 3970s before retracing part of the decline.

What does it mean? The first segment of an upward correction that began on March 13 ended on March 22 at 4073.75. The decline was an early subwave of the second of three segments.

What are the alternatives? It’s possible the overnight decline is a subwave of the correction’s first segment.

Under both the principal analysis and the alternative, the price will decline and then move above the March 22 high, 4073.75. The decline will be shallower under the alternative, deeper under the principal analysis.

Reading the chart. Elliott wave analysis views the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. My labeling system assigns numbers to the subwaves of trending waves, and letters to the subwaves of corrections. Each number or letter is followed by a subscript, in curly brackets, showing the waves position within the complex structure, called its “degree” in Elliott wave parlance. The smaller the number, the lower the degree. On this chart we’re dealing with relatively small waves, so the degree numbers are negative.

Wait a minute. Why are the chart’s wave numbers wildly different from yesterday morning? For those who didn’t see yesterday afternoon’s Trader’s Notebook, the price moved contrary to a rule of Elliott wave theory, and I reanalyzed the chart. The upward correction that began on March 13 is still there, but it is a larger degree compared to the former analysis. See the analysis and my reasoning here.

[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]

What does Elliott wave theory say? Wave A{-9} within the upward correction, wave 2{-8} ended on March 22, and wave B{-9} has begun. Wave A{-9} had five subwaves, meaning that the correction is taking the form of a Zigzag. Wave B{-9} will have three subwaves, and wave C{-9} will have five.

Here is a discussion of waves that are important to the analysis.

Principal analysis:

  • The upward correction that began on March 13, wave 2{-8}, continues.
  • It is in the second of three subwaves, wave B{-9}, which in turn is in its first subwave, wave A{-10}.
  • Wave 2{-8} will be followed by a downtrend, wave 3{-8}, that will carry the price below the correction’s starting point, 3839.25, and most likely significantly below that level.

Alternative analysis:

  • Wave A{-9} is still underway and the overnight decline is a subwave within it.

Bigger structures:

  • This is all happening within wave 3{-7}, which began on February 2.
  • Wave 3{-7} is a subwave of 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
  • When wave 4{-1} is complete, wave 5{-1} will begin and will carry the wave above the January 4 high, 4808.25, and into the 6000s, where the present upper boundary of the triangle lies. The expanding part means that each day that upper boundary moves higher.

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, March 23, 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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