3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during the session to a low of 4482 and then rose, returning to the 4510s.

The upward reversal is a subwave, wave 4{-6}, within the final leg, wave {5-5}, within the decline that began on July 27, wave 1{-4}, a downtrend within two progressively larger downtrends, wave 1{-3} and wave 3{-2}.

Wave 4{-6} will be followed by a further push downward, as wave 5{-6}, which, when complete, will also be the end of wave 5{-5} and its parent, wave 1{-4}.

The subscripts in curly brackets, showing the placement of the waves within the fractal structure of the chart — their degrees — are solid at the higher levels, and less certain at the smaller. For example, wave 5{-5} may in fact be one degree higher, {-4}, or it could be one degree lower, {-6}, pushing the subwaves down a degree to {-7}. The degrees will become clearer wave 3{-2} downtrend develops.

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 fell overnight, from 4541 into the 4490s.

What does it mean? The rise from the August 7 low, 4493.75, was an upward correction within last leg of the larger downtrend that began on July 27. That last leg is itself a subwave of downtrends. each larger than the one within it, that all began on that date, which will appear on future charts as a major reversal point.

What are the alternatives? The downtrends, under the principal analysis, follow an upward correction that lasted nearly 10 months. The correction took a compound form and completed two corrective patterns.

Under the alternative analysis, it’s possible that the decline from July 27 is an X-wave, a connector linking the second corrective pattern with a third pattern that, when complete, will also be the end of the correction.

The further the price falls, the less likely this scenario becomes.

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

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

Principal analysis:

• An downward correction, wave 3{-2}, began on July and is underway.
• Internally, the correction is in its first subwave, wave 1{-3}.
• Within wave 1{-3}, things become a bit more ambiguous, since the precise degree of the subwaves won’t become clear until the downtrend has progressed further.
• I’ve chosen, as a guess, to label the subwave of wave 1{-3} as being in its first wave, 1{-4}, which in turn is in its final subwave, wave 5{-5}.

Alternative analysis:

• Wave 2{-2}, and upward compound correction that began on October 13, 2022 completed a second corrective pattern on July 27.
• The subsequent decline is wave X{-3}, a downward connector between the second corrective pattern and the future third corrective pattern.
• Once the third corrective pattern within wave 2{-2} has ended, a powerful downtrend, wave 3{-3}, will follow

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:
• 3{-2} Minute, 7/27/2023, 3502 (down)

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, August 8, 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.