3:30 p.m. New York time

Half an hour before the closing bell. After peaking at 4164.25 during the session, the S&P 500 futures declined to the 4130s and then worked its way back up to the 4150s. This morning’s analysis is unchanged. The downtrend, wave 3{-8}, continues and is its initial subwave, wave 1{-9}. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined to 4133.50 after trading resumed overnight, and then rose, reaching back into the 4160s.

What does it mean? The downtrend that began on April 18 continues and is in its early stages. The wave is the 3rd within a larger five-wave trend and is itself in its 1st subwave. The energy will come when the downtrend enters its 3rd wave — a 3rd of 3rd. The downtrend will carry the price below 3839.25 — the start of the preceding upward correction — and likely significantly below that level.

What are the alternatives? There are two, unchanged from Friday.

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]

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.
• The most energetic part of the downtrend, wave 3{-9}, lies ahead.
• 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.

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 24, 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.