3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, reaching into the 4590s. No change from this morning’s analysis. The second corrective pattern within a rising upward correction that began last October continues. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell back into the 4530s overnight and then rose again into the 4550s as the opening bell approached.

What does it mean? At this point any peak and withdrawal could either be a stopping point on the middle wave of the rise that began on June 26, the final stage of the corrective pattern that began March 12. It is the second corrective pattern within a rising compound correction that began on October 13, 2022.

What is the alternative? Or the high could be the end of the middle wave of the June 26 rise and the beginning of a declining next-to-the-last wave that will be followed by the final wave of the corrective pattern.

Under both scenarios. A compound correction can contain two or three corrective patterns.

If this correction ends with two patterns, then the next step will be an energetic downtrend that will carry the price down to the correction’s starting point, 3502, and below, perhaps significantly lower.

If the correction turns out to contain three patterns, then the next step will be a shallow decline connecting the pattern just ended with the future pattern.

[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 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

Alternative analysis:

• Wave E{-4} is in its fourth of five subwaves, wave D{-5}, a declining wave that will be followed by an upward push to completion

Reading the chart. The chart contains, in red, the Fibonacci ladder for the retradement of wave C{-3}, the last leg of the upward correction.

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:
• 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 18, 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.