3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose slightly during the session and then fell, to 4377.25, climbing back to almost 4400 as the closing bell approached.. I’ve altered the low-degree wave mark-up from this morning to label the session low, 4377.25, as the end of declining wave 4{-8} and the beginning of 5{-8). Otherwise, no change. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose back into the 4410s overnight.

What does it mean? The rise carried the price yet again above the upper boundary of the target range pf the 4th-wave upward correction that began on September 27.

Let’s dig into the fractal structure. Internally, the 4th wave is in its 3rd and likely final subwave, a C wave, which in turn is in its 5th and final subwave. At the lowest level that I’m tracking, that 5th wave within wave C is either in its final subwave — a rising 5th wave — or is still working through its downward 4th-wave correction.

At the highest levels, you’ll notice that I hedged the significance of the C wave, one degree into the 4th wave correction. Most corrections contain a single corrective pattern. Some corrections take a compound form, linking together two or three corrective patterns. If this correction takes a compound form, then the C wave will be the end of the first corrective pattern as the 4th wave correction continues.

In either case, the 4th wave correction will be followed by a 5th wave downtrend that will carry the price below the starting point of the correction, 4277, and most likely signifiantly below that level.

What are the alternatives? I’ve mentioned the one ambiguity above: Is the smallest wave being tracked a rising 5th wave or is the falling 4th wave still underway?

The chart. In Elliott Wave Theory, 4th-wave corrections tend to end within the 4th subwave of the prior 3rd wave of the same degree as the correction. I’ve marked with blue lines the upper and lower boundaries of that 4th wave of 3rd.

[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 final subwave, rising wave C{-6}.
• Within wave C{-6}, wave 5{-7} is underway and is in its last subwave, wave 5{-8}.

Alternative analysis:

• Wave 5{-7} is in its next-to-the-last subwave, wave 4{-8}.

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 11, 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.