3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose sharply during the session, from the 4440s at the open to slightly above 4500 as the closing bell approached.

The rise confirms that the last subwave, wave C{-4}, within the upward correction that began on August 18, wave 2{-3}, is now in its final subwave, wave E{-5}.

The wave C{-4} rise has taken the correction to the 50% Fibonacci retracement level, just above the end point of the preceding A wave, meeting one criterion for the typical behavior of a C wave in this correction.

There are two possibilities for what happens after the end of wave C{-4}: Either the end of that wave will also be the end of the upward correction and a powerful downtrend, wave 3{-3}, will begin, or the correction will take a compound form, with the end of the first corrective pattern being followed by a declining connector wave and then a second corrective pattern.

Also, given the amount of the retracement, I’m abandoning the alternative analysis from this morning and the past few days.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures declined overnight, from a high in the 4450s down into the 4430s.

What does it mean? The final wave of the corrective pattern that began on August 18 is nearings its end. The 4th of five subwaves within t is now underway, a downward correction two degrees smaller than the upward correction that envelopes it.

The 4th wave downward correction will be followed by a final push upward that will complete the larger corrective pattern, and perhaps the correction itself.

The 4th wave is labeled wave D{-5} on the chart, a subwave of wave C{-4} within an upward correction, wave 2{-3}.

The upward push following wave D{-5} will be wave E{-5}. How high can it go? As the final subwave, it will determine the end point of wave C{-4}. C waves tend to move beyond the starting point of the preceding A wave, 4483.50 in this case.

I’ve superimposed the Fibonacci retracement ladder on the chart in red, and a 50% retracement would be fewer than 10 points above that target.

The C wave in a Zigzag correction like wave 2{-3} often is about the same length as the preceding A wave. Wave A{-4} was 133 points long, wave C{-4} began at 4365.25, and so the endpoint under this theory would be 4498.75, which is 6.75 points above the 50% retracement level.

There is nothing in Elliott wave theory that would forbid wave C{-4} from rising higher, to the 61.8% retracement level just above 4625.75, for example. And it could come up short, ending, for example, at the 38.2% retracement level just below 4458.75.

What are the alternatives? It’s possible that the subwaves seen so far within wave 2{-2} are a degree smaller within the fractal structure of the chart. If that is the case, then the waves labeled A{-4}, B{4} and {C-4} are subwaves of wave A{-3}, the first subwave of the correction. [Note: Abandoned in the afternoon analysis. See above.]

[S&P 500 E-mini futures at 3:30 p.m., 55-minute bars, with volume]

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

Principal analysis:

• A downtrend wave 3{-2}, began on July 27 is underway.
• Internally, wave 3{-2} complete its first subwave, wave 1{-3}, on August 18, and wave 2{-3}, an upward correction, began..
• Within wave 2{-3}, rising wave C{-4} is underway.
• Within rising wave C{-4}, declining wave D{-5} is underway.

Alternative analysis: [Note: Abandoned in the afternoon analysis. See above.]

• Within wave 2{-3}, rising wave A{-4} is underway and is in its 3rd subwave, wave C{-5}.

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 29, 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.

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Based on a work at www.timbovee.com.