3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell sharply after the Federal Open Market Committee said it would keep the Fed Funds Rate unchanged for now. The price continued to work its way lower, reaching into the 4460s as the closing bell approached,.

The decline confirms this configuration of waves in progress: The 3rd subwave, wave C{-5}, within the larger middle subwave, wave B{-4}, within the upward correction, wave 2{-3}, that began on August 18.

The configuration is unchanged from 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 to the 4480s overnight and then rose back above 4500.

What does it mean? The price has largely fluctuated around the 50% Fibonacci retracement level since September 15 as the middle leg of an upward correction that began on August 18 continues.

The correction is a 2nd wave and internally it is in the B subwave, which in turn is in its smaller C subwave.

Within the B wave, the C subwave is the last of the three subwaves. When it is complete, the larger B subwave will also be complete. The final leg of the corrective pattern will follow, a rising C wave.

The end of the corrective pattern may also be the end of the 2nd wave correction. It could also be the first of two or three corrective patterns if the correction takes a compound form.

When the 2nd wave correction is complete, it will be followed by a powerful downtrending 3rd wave.

What are the alternatives? It’s possible that the entire corrective pattern ended at the September 14 high. If so, then either the 3rd wave downtrend has begun or the connector wave in a compound correction is underway.

[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 downtrend wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, wave 2{-3}, an upward correction, began on August 18 and is in its middle subwave, declining wave B{-4}.
• The corrective pattern is taking the form of a Zigzag, with five subwaves within wave A{-4}.

Alternative Analysis.

• Wave 2(-3} ended on September 14.
• The decline that followed is either downtrending wave wave 3{-3} or a connector wave X{-4} within a compound correction.

Big picture:

• The wave 3{-2} downtrend is a subwave 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 20, 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

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Based on a work at www.timbovee.com.