3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to rise during the session, coming close to 4300. The upward correction is only a short distance from completion, restricted by an absolute rule of Elliott wave theory.

My analysis goes like this: The downtrending 1st wave that preceded the present 2nd wave correction began from 4327.50. Under the rules of Elliott wave theory, a 2nd wave cannot move beyond the start of the preceding 1st wave. So under the present analysis, the present rise, wave 2{-7} has less than 30 points to go before reaching the starting point of wave 1{-7}.

If the price does move above 4327.50, then the analysis no longer matches the chart and will be redone.

I’ve updated the chart, marking the 4327.50 level with a red line.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, moving above the previous high within the upward correction that began last October. A whipsaw coinciding with the release of new jobs data carried the price still higher, eventually reaching to the 4260s at the opening bell.

What does it mean? The new high confirms prior analyses that a series of final waves within the upward correction are nearing their end. The upward correction has met all of the requirements of Elliott wave theory and could plausibly end with each new high. The implication is that the correction might have ended already, at the overnight high, or it may have a bit further to go.

The upward correction will be followed by a powerful downtrend that will carry the price significantly lower.

What are the alternatives? There are two.

Alternative #1, correction has ended: The correction may have ended at the present high point.

Alternative #2, compound correction: The correction may form 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. If this alternative happens, it will delay the start of the downtrend.

[S&P 500 E-mini futures at 3:30 p.m., 20-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}, which is also in its final subwave, E{-11}.
• The end of wave E{-11} will cascade up the wave degrees, marking the end of waves E{-10}, E{-9}, 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 #1, correction has ended:

• Wave E{-11} is the smallest wave labelled on the chart.
• It may have ended at the present high point in the correction, and if it did, then the correction, wave 2{-7}, has also ended.
• If so, then wave 3{-7}, a powerful downtrend, is taking its first steps.

Alternative analysis #2, compound correction:

• 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.

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, June 2, 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.

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Based on a work at www.timbovee.com.