3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during most of the session, down to 4148, and then rose sharply, reaching back into the 4170s, so far. This morning’s analysis remains unchanged. The upward correction, wave 2{-8}, that began on March 13 is still underway and is in its final segment, rising wave C{-9}. Drilling down one degree lower, wave rising E{-10} is in progress and internally is in its next to the last wave, declining wave D{-11}.

Alternatively, it’s possible that 4148 marked the end of wave D{-11} and the final wave, E{-11}, is underway. When E{-11} is complete, the correction will be complete, unless it takes a compound form, as discussed this morning.

I’ve updated the chart

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded sideways overnight, with a slight downward lean that carried it from the 4170s into the 4150s.

What does it mean? The upward correction that began on March 13 continues to work through its last leg within the correction’s 3rd and final wave . When complete, it will be followed by an energetic downtrend that will carry the price into the 3800s and likely lower.

What are the alternatives? There are two alternatives.

Alternative #1: The April 15 high, 4189, might be the end of the correction, and the decline that followed, the early steps of the downtrend. Choosing between this alternative and principal analysis depends upon how we analyze that last leg. Under the rules of Elliott wave analysis, it will have five subwaves. I count that peak as being the end of the 3rd wave. By that principal analysis, the present decline will be followed by a final push upward, likely above 4189. However, wave counts are sometimes a bit ambiguous, and I can’t rule out the alternative analysis.

Alternative #2: Under this scenario, Friday’s high marked the end of the corrective pattern but not of the correction, which is forming a compound structure, linking two or three corrective patterns together. If that’s the case, then the decline since Friday’s peak is a downward linking wave, which will be followed by a second corrective pattern.

[S&P 500 E-mini futures at 3:30 p.m., 140-minute bars, with volume]

What does Elliott wave theory say? Here’s how the waves line up, small to large.

Principal analysis:

• The upward correction that began on March 13 is wave 2{-8}.
• Within it, wave C{-9}, the correction’s final wave of that degree, is in its final wave, rising wave E{-10}.
• Under a rule of Elliott wave analysis, wave E{-10} cannot move above the starting point of the preceding wave 1{-8}, 4208.50.
• Wave E{-10} when complete will have five subwaves. It completed the 3rd wave, wave C{-11}, at the April 15 peak and is now in the next-to-the-last wave, D{-11}.
• If wave 2{-8} and its subwaves, 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 #1:

• Wave E{-10}, its child, wave E{-11}, and its parent, wave C{-9}, ended at the April 15 peak, 4189, bringing the upward correction, wave 2{-8} to an end.
• Downtrending wave 3{-8} is underway.

Alternative analysis #2:

• Wave 2{-8}, the upward correction, is forming 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 17, 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

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Based on a work at www.timbovee.com.