3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose to 4539 during the session and then retreated below 4510. The price remained below the high set on September 11, which I’ve labeled as the end of the upward correction that began on September 7.

No changes to this morning’s analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell into the 4520s overnight, remaining below the September 11 high.

What does it mean? As my principal analysis I’ve chosen to consider that high, 4543.50, to be the end of the 2nd wave upward correction that began on September 7, counting the correction’s three subwaves as shown on the chart. But it’s ambiguous, and there are other ways of analyzing the price movements.

I chose the end-of-the-correction scenario because the price came so close to the start of the preceding 1st wave — a level no 2nd wave can cross — that there’s very little room for a future C wave.

What are the alternatives? There are three.

Alternative #1: The A-wave scenario

For example, one alternative sees the three subwaves of the upward correction marked on the chart as subwaves of the first leg of the correction — the A wave — within a falling B wave and a rising C wave yet to come.

Alternative #2: Just a little bit higher

I’ve marked the overnight peak as the end of the 2nd wave correction’s C wave, but it’s certainly possible for the price to reduce and move just a little bit higher while remaining below the 1st wave’s starting point.

Alternative #3: A compound correction

Corrections typically complete on corrective pattern and their done. Some corrections stretch out with two or three corrective patterns, each separated from its predecessor by a connecting wave. It could here.

[S&P 500 E-mini futures at 3:30 p.m., 40-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.
• Within wave 3{-2}, wave 3{-3}, a powerful downtrend, began on September 1 and is in its third subwave, wave 3{-4}, which is downtrending.

Alternative #1: The A-wave scenario

• Wave 2{-4}, the upward correction, has completed its 1st subwave, rising wave A{-5}, and now is in declining wave B{-5}, the second of three subwaves.

Alternative #2: Just a little bit higher

• The final wave of the upward correction has not yet reached its peak and will rise a few points higher before it is done. Wave C{-5} is still underway.

Alternative #3: A compound correction

• The end of wave C{-5} ends the first corrective pattern within wave 2{-4}. The subsequent decline is a connector, wave X{-5}, which will be followed by second corrective pattern in a compound correction.

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, September 12, 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.