3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures delivered a whipsaw today, quickly rising to 4173.25 before the opening bell and declining during the session to 4112.25. It then started to rise again.

The whipsaw poses some problems for this morning’s analysis, since it carried the price above the May 5 high and then below yesterday’s low. It doesn’t break any strict rules of Elliott wave analysis, but it runs contrary to the subjective concept within the Elliott wave methodology, that a wave ought to have the right look and feel consistent with its position in the sequential progress of and the hierarchy of waves.

Whipsaws often produce terrible looks and feels. So here’s how I’ve dealt with it in my revised analysis of the low-degree waves.

Wave C{-9}, rather than ending on May 5, ended at today’s session high, 4173.25. The subsequent decline is wave D{-9}, which is still underway.

Contrary to this morning’s analysis, wave E{-9} has not yet begun.

If the price quickly rises above 4173.25, then I’ll change the analysis to show wave C{-9} as being underway.

Everything else remains as it was in this morning’s analysis: The upward correction, wave 4{-6}, is still underway and is in the final waves for two degrees down, waves C{-7} and E{-8}.

I’ve kept this morning’s chart with the old analysis for comparison. Here’s the new chart, with the revised analysis.

[New analysis: S&P 500 E-mini futures at 3:30 p.m., 120-minute bars, with volume]

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell to a low overnight of 4120.50 but rose immediately 4152.75 when fresh inflation stats confirmed analysts’ forecasts. The price continued to work its way higher, reaching into the 4170s

What does it mean? The upward correction continues and is in the last subwave of the last leg of its journey. This morning’s peak exceeded the May 5 high, 4163.75, which I analyzed yesterday as being the end of the middle segment of that last subwave. The higher high has several possible interpretations. My principal analysis has the decline to the overnight low as being the 4th segment within the last subwave, and the last segment as being underway.

The end of that last segment, wave E{-9} on the chart, will also be the end of the last segment, E{-8}, within the last leg, C{-7}, of the upward correction, wave 4{-6}. When the correction is complete, a downtrend will follow, carrying the price below the correction’s starting point, 3502, and possibly well below that level.

What are the alternatives? If the correction forms a compound structure, then the present corrective pattern won’t complete the correction. Instead, it will be followed by a declining wave and then a second corrective pattern. Compound corrections can be formed from as many as three patterns.

[Now outdated: S&P 500 E-mini futures at 9:35 a.m., 120-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underly this afternoon’s revised analyses (see upper chart).

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 next-to-the-last subwave, falling wave D{-9}.
• 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:

• The end of wave C{-7} may won’t be the end of the wave 4{-6} correction.
• Wave 4{-6} will form 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 10, 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.