3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 traded narrowly during the session, from the 4440s to the 4460s on the futures. This morning’s analysis is unchanged. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded from the 4430s to the 4450s overnight.

What does it mean? The second corrective pattern within an upward compound correction that began last October, wave 2{-2}, continues and is in its last leg, wave C{-3}. Internally, the final leg of the correction is in its last subwave, wave E{-4}, which in turn appears to be in its third of five subwaves, wave C{-5}.

What are the alternatives? Wave E{-4} may still be in its second, downward subwave, wave B{-5}. It’s hard to tell for sure. It depends entire upon whether the rise that began on July 9 is a new rising wave at the {-5} degree, as the principal analysis would have it, or a subwave of the {-6} degree within wave B{-5}, as this alternative analysis assumes.

Reading the chart. I’ve enlarged the chart to show the final subwave, C{-3}, which began on May 4, within the second corrective pattern of the compound correction, 2{-2}. This chart gives a more detailed view of how far along corrective pattern’s end game has progressed. See yesterday’s Trader’s Notebook for a broader view showing all of the second corrective pattern. I’ve overlaid the chart with the Fibonacci retracement ladder, in red, showing retracement of the prior, downtrending wave 1{-2}. The rise that began on July 9 came very close to being a bounce off of the 61.8% Fibonacci retracement level, a common reversal point.

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 3:30 p.m., 2-hour bars, with volume]

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

Principal Analysis:

• An upward correction, a Zigzag, wave 2{-2}, began on October 13, 2022 and is underway.
• The upward correction, wave 2{-2}, 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{-3}, its final wave.
• The end of the present wave C{-3} could also be the end of the wave 2{-2} correction if the compound structure contains two subwaves.
• Or the present corrective pattern could be followed by a declining connector, wave X{-3}, and then a third corrective pattern.
• Wave C{-3} will have five subwaves and is at wave E{-4}, the final subwave.
• Wave E{-4} is in its third of five subwaves, wave C{-5}. Tentatively, See the Alternative analysis, below.
• Wave 2{-2}, when complete, will be followed by a powerful downtrend, wave 3{-2}.
• Under the rules of Elliott wave analysis, wave 2{-2} cannot move beyond the beginning of wave 1{-2}, which was the January 4, 2022 peak at 4953.25.

Alternative analysis:

• Wave E{-4} continues to trace its second of five subwaves, wave B{-5}, which is in its third and final subwave, wave C{-6}.

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:
• 2{-2} Minute, 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 11, 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.