Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session to 4175.50, remaining below the correction high, 4227.25, set on May 19. The movement is consistent with this morning’s principal analysis but not inconsistent with the alternatives. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight back into the 4160s and then fell sharply at the opening bell.

What does it mean? The reversal from just below the 61.8% Fibonacci retracement level — a common reversal point — increases the likelihood that the final leg of the upward correction that began on October 13, 2022 has, at a lower level, entered its last push to the upside. I’ve marked the chart to show that interpretation.

When the final upward push reaches its end, it will also be the end of the upward correction. A powerful downtrend will follow, carrying the price significantly lower.

However, the subsequent decline at the session open may take that interpretation and toss it in the trash, meaning that the final upward push has not yet begun.

So once again the chart is in chaos, and my interpretation of the chart may well change during the day.

What are the alternatives? There are two.

Alternative #1: The downward movement that began on May 19 from 4227.25 is not yet complete and the price will soon reverse to continue the smaller downward correction within the larger upward correction.

Alternative #2. The correction will forming a compound structure. The end of the present corrective pattern won’t complete the correction. Instead, it will be followed by a declining connecting wave and then a second corrective pattern. Compound corrections can be formed from as many as three corrective patterns.

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

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

Principal analysis:

  • An upward correction, wave 2{-7}, began on October 13, 2022 and is underway.
  • The correction’s first subwave, wave A{-8}, had five subwaves, meaning the correction is taking the form of a Zigzag
  • Wave 2{-7} is in its final subwave wave, C{-8}, which began on March 13, 2023.
  • Wave C{-7} is in its final subwave, wave E{-9}.
  • Internally, wave E{-9} is in its final subwave, E{-10}.
  • The end of wave E{-10} will cascade up the wave degrees, marking the end of waves C{-8} and of the correction, wave 2{-7}.
  • Downtrending wave 3{-7} will follow the end of the correction and will carry the price a significant distance below present levels.

Alternative analysis:

  • The end of wave C{-8} may won’t be the end of the wave 2{-7} correction.
  • Wave 2{-7} will form a compound structure and wave C{-8} ends the first corrective pattern.
  • Wave C{-8} will be followed by a declining connector, wave X{-8}, and then by a second corrective pattern.

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others. The chart shows the Fibonacci retracement levels, in red.

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)
  • 2{-7} Minuscule, 10/13/2022, 3577.75 (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 25, 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.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

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