3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures exceeded the October 6 high, reaching above 4375, as the final subwave of the C wave entered its target zone. The C wave is likely to be the final wave of the upward 4th-wave correction that began on September 27. If the correction takes a compound form, stringing two or three corrective patterns together, then the C wave will be the end of the first corrective pattern.

The upward movement, by exceeding the September 29 high, eliminates the alternative analysis that was first posted last week and continued in this morning’s post. Under the alternative, the upward correction ended on September 29 at 4371.25 and began the 1st subwave of a 3rd wave downtrend, making today’s rise part of a 2nd wave upward correction that downtrend. Under the rules of Elliott Wave Theory, a 2nd wave cannot move beyond the start of the previous 1st wave. So that alternative is gone, and others will surely takes its place.

Charts. The upper chart, showing a close-up, has not been updated this afternoon. The lower chart, showing the entire decline so far from September 14, has been updated for this post.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell sharply when trading resumed overnight.

What does it mean? Within the 4th wave upward correction that began on September 27, the final subwave — wave C — is underway. When it is complete, the upward correction will also be complete, unless the 4th wave becomes a compound correction linking two or three corrective patterns together.

The question of the moment is, where does the decline fit in the fractal structure within the compound correction?

Wave C, now underway, is the 3rd subwave within the correction. The upper chart below is a close-up of the C wave. A C wave in this correction will have five subwaves. The rise on October 6 was the 3rd wave. So the decline that began on October 8 — today — is the 4th wave. It will be followed by a rising subwave that will likely move above the October 6 peak, 4358.50. It will be th 5th wave, and it’s completion will also complete the 3rd wave within the final wave of the upward correction.

A downward 4th wave will ensue, two degrees within the upward correction, and then a rising 5th wave, which will complete the C wave, the corrective pattern, and perhaps the C wave.

What are the alternatives? [Note: The price movement during the day has eliminated this scernario as a viable alternative.]

Unchanged from last week.

The A wave on the chart is the 4th wave in its entirety. The size is disproportionate to prior waves of the same degree, but it’s still possible. If this proves to be the better analysis, then a 5th-wave downtrend began on September 29 and is still underway.

Two charts. The upper chart shows the S&P 500 futures peak of wave 3{-7} on October 6 and the opening gap when trading resumed on October 8 after the weekend. Each bar tracks trading for 4 minutes.

The lower chart shows the entirely of wave 3{-3} so far, the decline that began on September 14 which encompasses the present upward correction, wave 4{-5}. Each bar tracks trading for 40 minutes.

On both charts, the blue lines mark the typical ending range of a 4th wave correction: The boundaries of the 4th wave within the prior 3rd wave of equal degree. The red lines show two common points of reversal or pause — the 78.6%, 50% and 38.2% Fibonacci retracement levels — as well as the lowest and highest rungs of the retracement ladder.

[S&P 500 E-mini futures at 9:32 a.m., 4-minute bars, with volume]

[S&P 500 E-mini futures at 3:30 p.m., 45-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 final subwave, rising wave C{-6}.

Alternative Analysis [Note: The price movement during the day has eliminated this scernario as a viable alternative.]

• Downtrending wave 5{-5} is underway, having begun on September 29 from 4371.25, the date the preceding wave 4{-5} ended. Internally, it is presently in an upward correction, wave 2{-6}.

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 9, 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.