3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures slipped slightly into the 4570s when the Federal Open Market raised interest rates and within a minute returned to the 4580s, where it has spent nearly all of the session. This morning’s analysis remains unchanged. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight, back into the 4580s.

What does it mean? The decline strengthens the scenario that within the long-running upward compound correction, the wave signaling the progress of the second corrective pattern is in its fourth wave, only one wave away from completion.

On the chart, the signaling wave is wave E{-4}, a subwave of the third and final wave, C{-3}, within the upward correction, wave 2{-2}, which began on October 13, 2022.

The overnight decline strengthens the case that the chart is in wave D{-5} within wave E{-4}.

The future final wave within the corrective pattern will be rising wave E{-5}, and when it is complete, it will be the end of the second corrective pattern and perhaps of the correction itself. .It is possible that the correction will move on to a third and final corrective pattern.

In any case, the end of wave E{-5} will also be the end of waves E{-4} and C{-3}, and of the correction, wave 2{-2}.

A powerful downtrend, wave 3{-2}, will follow, carrying the price below the start of the correction, from 3502, and likely significantly below that level.

The Fibonacci retracement levels for the correction are shown on the chart in red.

What are the alternatives? The strengthened case described above doesn’t entirely eliminate the alternative: That the wave signaling progress is still in its third wave, two waves away from completion. However, the case for the alternative is weaker than it was a day ago. The third wave in the pattern would be labeled wave C{-5}.

A move above the July 19 high, 4609.256, strengthens the case for the alternative analysis.

[S&P 500 E-mini futures at 3:30 p.m., 260-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underlie 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 fourth of five subwaves, wave D{-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 third of five subwaves, wave C{-5}, a rising wave that will be followed by an downward movement and then a final rise to completion.

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:
• 2{-2} Minute, 10/13/2022, 3502 (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 26, 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.