9:35 a.m. New York time

Half an hour before the closing bell. The S&P 500 futures have remained within their overnight range during the session. No change in the analysis. I’ve updated the chart.

What’s happening now? The S&P 500 E-mini futures declined from the 4490s overnight, reaching into the 4460s as the opening bell approached.

What does it mean? The decline marks an additional step toward completion of the corrective pattern that began on March 12 within an upward compound correction that began on October 13, 2022.

When the corrective pattern is complete, there are two possibilities for the next step:

• Either the second corrective pattern is the final pattern within the compound correction, and a powerful downtrend follows…
• Or the compound correction produces a third and final corrective pattern, connected to a second pattern by a connector wave.

On the chart, the upward correction is labeled wave 2{-6}, and its second corrective pattern is in its final subwave, wave C{-7}, which is in its still smaller final subwave, wave E{-8}. Within wave E{-8}, the middle subwave, wave C{-9}, ended on June 30. It was followed by a subwave pattern and then today’s overnight decline, which are wave D{-9}, the next to the last subwave of wave E{-8}.

Waves of this {-9} degree set tend to last for only a few days. Wave C{-9}, the longest wave so far within the set, took two days to reach completion. If that pattern holds, then waves E{-8} and C{-7} can be expected to reach completion by next week.

The chart shows only the second corrective pattern, our primary interest at this point in the analysis.

What are the alternatives? There is some ambiguity as to the relative degree of the correction — a not unusual situation. I’ve marked it as {-6} — Minuscule Degree in traditional Elliott wave terminology — but it could be larger.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

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

• An upward correction, a Zigzag, wave 2{-6}, began on October 13, 2022 and is underway.
• 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.
• The end of the present wave C{-7} could also be the end of the wave 2{-6} correction if the compound structure contains two subwaves.
• Or the present corrective pattern could be followed by a declining connector, wave X{-7}, and then a third corrective pattern.
• Wave C{-7} will have five subwaves and is in wave E{-8}, the final subwave.
• Wave E{-8} will also have five subwaves and is in wave D{-9}, the fourth of the set.
• 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.)

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, 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, July 5, 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.