3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures declined during the session from the overnight high of 4440. That peak was the end of the first subwave, rising wave A{-7}, within an upward correction, wave 4{-6}, that began on August 18. The second subwave, declining wave B{-7}, is now underway.

The correction is taking the form of a Zigzag, with five subwaves in the A wave, three in the B, and five in the C. In a Zigzag, a B wave never moves below the start of the previous A wave, which in this case began from 4350.

I’ve updated the chart, and also the “What does Elliott wave theory say?” section.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, from a low of 4402.25 to a peak of 4440.

What does it mean? The April 18 low, 4350, marked the end of the downtrending 3rd wave within a larger downtrend that began on August 10, and the beginning of a 4th wave upward correction.

Typically a 4th wave will have three subwaves forming a corrective pattern, unless the wave takes a compound form, in which case it can contain two or three corrective patterns.

A 4th wave never moves beyond the end of the preceding 1st wave. In this case, the ending price price, 4459, attained on August 11, is a firm upward boundary that the 4th wave cannot exceed. If the price within the 4th does move above that level, then it’s not a true 4th wave and the analysis will need to be redone.

What are the alternatives? None at present. I’m quite certain that ambiguities will develop, as they always do.

[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}, wave 5{-4} is underway.
• Within wave 5{-4}, wave 3{-5} is underway, and one degree further down, an upward correction, wave 4{-6}, is in progress, having begun on August 18.
• Wave 4{-6} completed its first subwave, rising wave A{-7}, on August 22, and began its second subwave, declining wave B{-7}.

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 22, 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.