9:35 a.m. New York time

U.S. markets closed. Today is the Juneteenth holiday in the United States, celebrating the emancipation from slavery of Black Americans. U.S. markets will remain closed today. The S&P 500 futures were traded overnight, and the London and Tokyo stock exchanges conducted their regular sessions. Trading will resume on U.S. exchanges at 9:30 a.m. Tuesday New York time

What’s happening now? The S&P 500 E-mini futures gently declined from the 4460s to the 4440s, remaining below the June 16 peak in the ongoing upward correction, 4493.75, and also below the 78.6% Fibonacci retracement level, the next common reversal point in the rise.

What does it mean? The lack of movement in the price leaves unresolved the ambiguities I described in Friday’s Trader’s Notebook, and I refer the reader to that post for the details, both of the principal analysis and the alternatives.

The upward correction began on October 13, 2022 from 3502 and has dominated the U.S. markets ever since. The financial media has declared a new bull market to be underway, using a rather simplistic method that calls any rise of 20% or greater over two months or longer to be a bull market. In Elliott wave analysis, such is not the case. The upward correction, wave 2{-6} in Elliott wave terminology, is still underway.

The question is, how far along is the correction?

Briefly, there are two was of analyzing the Elliott waves that make up the chart, and I consider them to be of equal likelihood until additional evidence tips the analysis one way or the other. On the chart, the wave numbers are in black for one way of counting and in blue for the other way of counting. The black wave count scenario has the first subwave, wave A{-7}, within the correction nearing its end. The blue wave count presents a scenario in which the upward correction is nearing its end and is in its final subwave, wave C{-7}.

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.

[S&P 500 E-mini futures at 9:35 a.m., 8-hour bars, with volume]

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

Principal analysis, simple correction (black labeling on the chart):

• An upward correction, a Zigzag, wave 2{-6}, began on October 13, 2022 and is underway.
• The correction’s first subwave, wave A{-7}, is underway and will have five subwaves.
• Wave A{-7} at present is in its 3rd subwave, wave C{-8}.
• Wave C{-8} is in its 3rd subwave, wave C{-9}.
• Wave 2{-6}, when complete, will be followed by a powerful downtrend, wave 3{-6}.
• Under the rules of Elliott wave analysis, wave 2{-6} cannot move beyond the beginning of wave 1{-6}, which was the January 4, 2022 peak at 4953.25. (I’ve adjusted the January 4 peak.)

Principal analysis, compound correction (blue labeling on the chart):

• The upward correction, wave 2{-6}, is taking a compound form, which can contain up to three corrective patterns.
• The correction is in its second corrective pattern, which is in wave C{-7}, its final wave.

Alternatives, a 3rd corrective pattern or the end of the correction?

• Wave C{-7}, when complete, will be followed by either (#1) a separator wave, X{-7}, and then a third corrective pattern, or (#2) will be the end of the wave 2{-6} correction and will be followed by a powerful downtrend, wave 3{-6}.
• Compound corrections can contain no more than three corrective patterns.

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, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 1{-2} Minute, 1/4/2022, 4953.25 (down)
• 1{-3} Minuette, 1/4/2022, 4953.25 (down)
• 1{-4} Subminuette, 1/4/2022, 4953.25 (down)
• 1{-5} Micro, 1/4/2022, 4953.25 (down)
• 2{-6} 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 19, 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

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Based on a work at www.timbovee.com.