3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session into the 4380s, remaining below the overnight high, 4390.25.

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 continued to fall overnight, reaching into the 4350s.

What does it mean? Today’s analysis has a bit of complexity, and I’ve had to use the Elliott wave nomenclature to describe it. In short the

The continuing decline has made the expanding Diagonal Triangle analysis increasingly untenable, and I’ve pulled back the chart to a wider view and done a re-analysis.

• I’ve moved the {-5} degree up one to {-4}, as being more consistent with prior waves of that degree.
• I’ve recounted the subwaves of wave 1{-3} to eliminate the expanding Diagonal Triangle..

Under the new principal analysis, the downtrend that began on July 27, wave 3{-2} continues and is in its 1st subwave, wave 1{-3}, which in turn is in its final subwave, wave 5{-4}.

Wave 5{-4} is in its middle subwave, wave 3{-5}, which is in its middle subwave, wave 3{-6}.l

When wave 5{-4} is complete, it will also be the end of wave 1{-3}, which will be followed by an upward correction that will retrace much of the decline since the July 27 peak, 4634.50. Under the rules of Elliott wave analysis, a 2nd wave never moves beyond the starting point of the preceding 1st wave, and so 4634.50 is the upper limit of the correction.

In other words, the chart shows an entirely straightforward downtrend.

What are the alternatives? None at present. I’m quite certain that ambiguities will develop.

[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 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}, wave 5{-4} is underway.
• Within wave 5{-4}, wave 3{-5} is underway, and one degree further down, wave 3{-6} is in progress.

Big picture:

• Both the wave 2{-2} correction and wave 3{-2} downtrend are subwaves of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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 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

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.