3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during the session, reaching into the 4110s as the closing bell approached. The last leg of the upward correction that began on March 13 is nearing its end. Rising wave E{-10} within rising wave C{-9} within the correction, wave 2{-9}, are underway. The end of one will be the end of all and the beginning of an energetic downtrend, wave 3{-8}. No change from 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 rose 39 points in six minutes, to 4177.75, after new inflation numbers showed a 0.1% rise in the consumer price index in March. The price then declined to the 4160s as the opening bell approached. The last time inflation increased so little was in December 2022. Rising prices picked up speed in January, at 0.4%, and February, 0.5%.

What does it mean? The last leg of the upward correction that began on March 13 has entered its final subwave. The end of the subwave will bring the correction to a close and will begin an energetic downtrend that will carry the price below the correction’s starting point, 3839.25, and perhaps significantly below that level.

The final subwave now underway, along with the larger correction, is limited in how far can rise. Under the rules of Elliott wave analysis, the price must not move above the starting point of the preceding downtrend, which began on February 2 from 4208.50. If the price moves above that level, then the analysis no longer matches the reality on the chart and must be redone.

What are the alternatives? The rise that began overnight is the final subwave within the 3rd wave of the upward correction. It’s possible that the 3rd wave will be the end of a corrective pattern but not of the correction itself. Some corrections form a compound structure, linking two or three corrective patterns together. The present correction is the 2nd of five waves within a downtrend. Compound corrections are far more common in 4th waves. Nonetheless, 2nd-wave compound corrections aren’t unheard of.

[S&P 500 E-mini futures at 3:30 p.m., 180-minute bars, with volume]

What does Elliott wave theory say? The rise that began overnight is wave E{-10} within rising wave C{-9}, the last leg of the upward correction, wave 2{-8}, that began on March 13. Wave E{-10} is the final subwave within wave C{-9}.

Here is a discussion of waves important to the analysis.

Principal analysis:

• The upward correction that began on March 13 is wave 2{-8}.
• Down one degree, wave C{-9} is the final wave within that correction.
• If wave 2{-8} and its subwavs, C{-9} and E{-10}, move above the starting point of wave 1{-8}, which was 4208.50, then then analysis will have broken a rule of Elliott wave analysis and a new analysis will be done.
• 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 2{-8}, the upward correction, will form a compound structure, linking together two or three corrective patterns.
• Under that alternative, if it should occur, the present rising wave C{-9} will be followed by a declining connector wave, X{-9}, and then the first wave of a second corrective pattern.
• The correction is a 2nd wave, and compounding is seen less often in 2nds. However, they do happen on occasion.

Bigger structures:

• This is all happening within downtrending wave 3{-7}, which began on February 2.
• Wave 3{-7} is a subwave of downtrending wave 3{-6}, which began on August 16, 2022.
• Wave 3{-6} is encompassed by a series of larger declining 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 back to the upper boundary of the triangle, which gets higher continually and is in the 6090s.

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.

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, April 12, 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.