Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures moved narrowly during the session, between the 4160s and the 4130s. No change in this morning’s analysis. I’ve updated the upper chart, which shows the futures.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell to 4040 overnight, remaining above the prior day’s low, 4137, and then rose back into the 4150s.

What does it mean? A downtrend that began on April 18 from 4198.25 is now in its early stages. It will carry the price below 3839.25, the start of the upward correction that preceded it, and likely significantly below that level.

What are the alternatives? There are two.

Alternative #1: The upward correction is still underway. The downward movement from the April 18 peak is still in its early stages, and it remains possible that the decline is part of the final waves of the correction.

Alternative #2: The correction is forming a compound pattern, linking several corrective patterns together. Under this scenario, the correction is nearing the end of its first corrective pattern but not of the correction itself. The first corrective pattern will be followed by a declining connector wave, and then a second corrective pattern.

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

The Big Picture. Since December 26, 2018 the S&P 500 index and its derivatives have been in the final segment of an uptrend that began on March 6, 2009. The final segment is taking the form of an expanding Diagonal Triangle composed of five subwaves.

The early pandemic crash that ended on February 23, 2020 is the 2nd subwave within the triangle. The long rise that followed and ended on January 4, 2022 is the 3rd wave, and a declining 4th wave is presently underway.

When the 4th wave is complete — it has years to go — the 5th and final wave will carry the price above 4818,62 the peak attained on January 4, 2022, and most likely a considerable distance above the level.

In short, a few years of gloomy decline and then a years-long massive rise. After the storm comes the sun, and a rainbow.

[S&P 500 index at 9:35 a.m., 4-day bars, with volume]

What does Elliott wave theory say? Here’s a description of the waves that underly the analysis.

Principal analysis:

  • The downtrend that began on April 18 is wave 3{-8}.
  • Within it, wave 1{-9}, the first of five waves, is underway.
  • Wave 3{-8} will carry the price below the starting point, 3830.25, of wave 2{-8}, the upward correction that began on March 13 and ended on April 18. Most likely the price will decline significantly below that level.

Alternative Analysis #1:

  • Wave 2{-8}, an upward correction that began on March 13, is underway.
  • 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} is in its final subwave, E{-11}.
  • If wave 2{-8} and its subwaves, C{-9} and E{-10}, move above 4208.50, the starting point of wave 1{-8}, then then analysis will have broken a rule of Elliott wave analysis and a new analysis will be done.

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.

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 21, 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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One thought on “Trader’s Notebook

  1. […] For a broader view, showing the upward correction that preceded the present downtrend, and also a chart showing the entire expanding Diagonal Triangle that began in 2018 and that encompasses everything that has happened sense, I refer the reader to the Trader’s Notebook for April 21. […]


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