3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures has continued to rise during the session, reaching into the 4520s. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose in a single minute from the 4480s to above 4500 after the latest inflation statistics were announced, and continued to rise, reaching a high of 4516.25 minutes into the session.

What does it mean? That high for the overnight session is also a new high for the second corrective pattern within the ongoing upward compound correction that began on October 13, 2022, and in, is a new high for the entire correction.

The correction, wave 2{-2}, is in its last leg, wave C{-3}, and one degree lower, wave E{-4}. The new high confirms that one degree lower still, the third of five subwaves, wave C{-5}, is also undersway.

Rising wave C{-5} will be followed by a falling wave, D{-5}, and then a final upward push, E{-5}. When that final upward push is complete, it will also be the end of the second corrective pattern within the compound correction.

At that point, there are two possible futures: Either the compound correction adds a third and corrective pattern, or the present second pattern is the end of the correction.

Under the three-patterns scenario, the present corrective pattern will be followed by a shallow downward connecting wave, and then another corrective pattern. Under the two-patterns scenario, the upward correction ends and a powerful downtrend, wave 3{-2} begins.

I’m not betting on either outcome. It’s simply impossible to know which will occur.

The chart shows the final leg of the second corrective pattern, wave C{-3} and its subwaves, with the Fibonacci retracement ladder overlaid, in red. The price has stayed between the 61.8% retracement and the 78.6% retracement of the preceding first wave, wave 1{-2} since late June.

What are the alternatives? There are none at the present. I’m quite certain that ambiguities will develop over the days and weeks to come.

[S&P 500 E-mini futures at 9:35 a.m., 2-hour bars, with volume]

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

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}.
• 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

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)

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.

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 12, 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.