3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures traded narrowly during the session, as the upward correction, wave 4[-6}, continues. Wave 4{-6} is in its third and final wave, C{-7}, which is in its final subwave, wave E{-8}, which is in its next-to-the-last subwave, downward wave D{-9}.

The beginning of wave D{-9} is new development since this morning’s analysis. All else is unchanged. I’ve updated the chart and the Elliott wave theory section.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight from the 4150s to the 4130s, continuing a sideways movement that has been underway since last week.

What does it mean? The upward correction that began 17 months ago continues and is nearing its end. It will be followed by a downtrend that will carry the price significantly lower.

What are the alternatives? Or at least, probably is nearing its end. If the correction forms a compound structure, then the present corrective pattern will be followed by a declining wave and then a second corrective pattern. Compound corrections can be formed from as many as three patterns.

[S&P 500 E-mini futures at 3:30 p.m., 2-hour bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal analysis:

• An upward correction, wave 4{-6}, began on October 13, 2022 and is underway.
• The correction’s first subwave, wave A{-7}, had five subwaves, meaning the correction is taking the form of a Zigzag
• Wave 4{-6} is in its final subwave wave, C{-7}, which began on March 13, 2023.
• Wave C{-7} is in its final subwave, wave E{-8}.
• Wave E{-8} is in its fourth subwave, falling wave D{-9}.
• Wave E{-8} will have five subwaves altogether once it is complete.
• Wave 4{-6} will be followed by downtrending wave 5{-6}, which, like all 5th waves, might match one of a number of different patterns, all based on the downtrend’s relation with the end of the preceding 3rd wave, at 3502.
• Almost always a 5th wave will move past the preceding 3rd wave’s end point.
• Some 5th waves are truncated, and on this chart that means wave 5{-6} would end before reaching 3502.
• Some 5th waves are extended, that would mean wave 5{-6} would have nine waves internally rather than the usual five, and would cover a greater than expected distance over a greater than expected period of time.

Alternative analysis:

• Wave C{-7} may have ended on May 1 but that is not the end of the wave 4{-6} correction.
• Wave 4{-6} is forming a compound structure and wave C{-7} ends the first corrective pattern.
• Wave C{-7} will be followed by a declining connector, wave X{-7}, and then by a second corrective pattern.

Bigger structures:

• This is all happening within downtrending wave 1{-5}, which began on January 4, 2022 from 4808.25.
• Wave 1{-5} is a subwave of a nested series of larger subwaves, from wave 1{-4} to wave 1{-2}. which also began on January 4, 2022.
• Wave 1{-2} is a subwave of wave 4{-1}, 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.25, and back to the upper boundary of the triangle, which gets higher continually and is in the 6140s.

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)
• 4{-6} Submicro, 10/13/2022, 3502 (up)
• C{-7} Minuscule, 3/13/2023, 3830.25 (up)

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, May 9, 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.