3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during most of the session, reaching the 4270s before bouncing back a bit. I see the reversal, tentaytively, as being an upward correction within wave 5{-7}. A rise above 4336.50, the session high, would mean I need to revisit that view.

It’s also possible that wave 5{-7} ended at the session low, also completing waves 5{-6} and 3{-5}. and the initial wave within a larger upward correction, wave 4{-5}, has begun. I’ve updated the chart.

10:10 a.m. New York time

Limits to wave 4{-7}. The small upward correction now underway, wave 4{-7}, has a limit, like all 4th waves. In Elliott Wave Theory, a 4th wave cannot move beyond the end of the preceding 1st wave. If it does, then the chart must be re-analyzed.

In this case, wave 1{-7} ended on September 25 at 4338.25. If wave 4{-7} moves above that level. then I’ll redo the analysis.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight back into the 4330s.

What does it mean? In the following discussion I’ll be using the wave numbers and indicating the degree of a wave — it’s relative position within the fractal hierarchy that is a stock chart — with a subscript in curly brackets. The degree number is relative to the Intermediate degree, or degree {0}, in the nomenclature of Elliott Wave Theory.

The rise is a small 4th-wave upward correction within a series of increasingly larger downtrends. The largest began on January 4, 2022. The one most important for my trading is a 3rd wave, down two levels, that began on September 14, 2023, wave 3{-3} in the labeling system used on the chart.

Wave 3{-3} is presently in its 1st subwave, wave 1{-4}, which in turn is in its 3rd subwave, wave 3{-5}. Down one more degree, and the parent wave in its 5th subwave, wave 5{-6}, which means that wave 3{-5} is nearing its end. And the smallest degree that I’m tracking on the chart is down one more, the small 4th-wave upward correction mentioned above, wave 4{-7}.

Each downtrend will be followed by an upward correction and then another downtrend. Since the whole series of downtrends began nearly 21 months ago, we can expect repeated downtrends and upward corrections of varying degrees to be with us for quite some time.

What are the alternatives? The position of a wave within the vast fractal structure of a chart is ambiguous during the early stages of a trend. Labeling the degrees is a guess at best.

I’ve chosen to treat the downtrend that began on September 14 as being in its 1st subwave, one degree lower. It’s possible that the count one degree lower is in fact be one degree higher, meaning that the downtrend is in its 3rd subwave. Or everything within 1st subwave could in fact be in its own 1st subwave, moving the smaller waves down a level.

[S&P 500 E-mini futures at 3:30 p.m., 20-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 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 3{-5} is underway, having begun on September 1.
• Wave 3{-5} is in its final subwave, wave 5{-6}.
• Wave 5{-6} is in its next-to-the-last subwave, an upward correction, wave 4{-7}.

Alternative Analysis #1

• Within wave 3{-3}, wave 3{-4} began on September 19.

Alternative Analysis #2

• Within wave 3{-3}, wave 1{-4} began on September 19, and its subwave, wave 1{-5}, is underway.

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 27, 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.