3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell further during the session, into the 4290s. The 2nd subwave, the B wave, of the 4th wave upward correction that began on September 27 continues and is in its final subwave. 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 the 4350s to just below 4310.

What does it mean? The decline is part of the 3rd and final subwave of the B wave, the middle wave of the 4th wave upward correction that began on September 27. The rising C wave that will follow most likely will be the end of the correction, unless it takes a compound form, stringing together two or three corrective patterns.

The correction will be followed by a 5th wave downtrend which, when complete, will also be the end of the parent wave, a downtrending 1st wave that began on September 14. That 1st wave will be followed by a 2nd wave upward correction that will carry the price quite a distance upward, while remaining below the starting point of the preceding 1st wave, 4566.

This is all happening within a downtrending 3rd wave that began on September 14.

4th wave corrections tend to end within the range of the 4th subwave of the preceding 3rd wave. In this case that would be between 4366.50 and 4399. I’ve marked those price levels with red lines on the chart.

What are the alternatives? As always, there’s ambiguity in where the wave patterns are within the complex fractal structure of the chart. For the principal analysis I’ve labelled the upward correction as being two degrees below the 3rd wave. It’s possible that moving it up a degree, to one degree below the 3rd, will prove to be more accurate, or moving it down one degree, to three degrees below the 3rd, better describes what’s happening on the chart.

[S&P 500 E-mini futures at 3:30 p.m., 30-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

Two possibilities. Either…

• Wave 4{-4} within downtrend 3{-3} is underway.

… or …

• Wave 4{-6} within wave wave 1{-5} within wave 1{-4} 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, October 2, 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.