3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures reversed during the session, falling back to the 4310s.

The first subwave, the rising A wave, of the 4th wave upward correction is complete, and the falling B wave has begun. It will be followed by a rising C wave that will complete the correction, unless the correction takes a compound form.

The form of the correction is a Zigzag, since the A wave has five subwaves.

This morning’s alternative analysis has lost some of its credibility. See the note in the “What are the alternatives?” section bellow.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, into the 4370s.

What does it mean? The first leg of an upward correction that began on September 27 continues.

The correction is a 4th wave, and in Elliott Wave Theory, 4th waves have a tendency to end within the range of the 4th subwave within the preceding 3rd wave of the same degree.

That 4th subwave — labeled wave 4{-6} — rose from 4366.50 to 4399 in late September and can be considered the target of the rise. I’ve marked the upper and lower boundaries of that target in red on the chart.

The overnight rise moved slightly beyond the lower boundary. The tendency is the 4th wave to end at or below 4399, within the target range. However, that target reflects a tendency, not a firm rule, so the price could rise into the 4400s.

In any case, the rise will remain below the end of the preceding 1st wave of the same degree, wave 1{-5}, at 4487.

What are the alternatives? My analysis sees the rise so far as beng the first subwave of the correction, the A wave. It’s possible that the rise is a subwave of that A wave. As the cliche has it, Time will tell, and I’d add, only time can resolve the question.

Afternoon analysis. The reversal of the correction within the target range and the magnitude of the ensuing decline makes this alternative less likely, it seems to me.

[S&P 500 E-mini futures at 3:30 p.m., 25-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 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave 4{-5} is in its middle subwave, declining wave B{-6}.

Alternative Analysis

• Wave A{-5} is in its initial subwave, wave A{-6}, which in turn is in its first subwave.

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 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.

License

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Based on a work at www.timbovee.com.