3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures began the session low, from 4469, rising as the day progressed to 4503.25, two points above the overnight peak.

The analysis remains unchanged from this morning. Rising wave 4{-7} continues. It is the next-to-the-last wave within wave 5{-6}, an expanding Diagonal Triangle.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures bounced between the 4460s and around 4500 overnight, continuing the sideways pattern that closed last week’s chart.

What does it mean? Under the principal analysis, the price has been bouncing off of the lower boundary of an Expanding Diagonal Triangle that began on August 9. The triangle, whose boundaries are marked n red on the chart, is the final leg of a downtrend that began on August 4, which itself is part of a larger downtrend that began on July 27 and of a still larger downtrend, that began on January 4, 2022.

The sideways movement that has dominated the last few days is atypical of an expanding Diagonal Triangle. The price should bounce off the lower boundary and head back to the still rising upper boundary, and then bounce and fall again. The present hugging of the lower boundary breaks no rules of Elliott wave analysis, but it’s a bit unusual.

To accomodate the sideways pattern, I’ve moved the endpoint of wave 3{-7} to Friday’s low, 4459.

What are the alternatives? There are two:

Alternative #1:

• 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{-2}, will follow.

Alternative #2:

• I have listed the Triangle as being the from of wave 5{-6}. It’s still early days in the decline from July 27, and that wave’s degree could be higher — wave 5{-5} or wave 5{-4}.

[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 analyses.

Principal analysis:

• A 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}.
• The final subwave within wave 5{-5} began overnight. Declining wave 5{-6} is now underway.
• Wave 5{-6} is its 2nd of five subwaves, an upward correction designated wave 2{-7}.

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{-2}, 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 14, 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.