3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, reaching into the 4280s so far. The rise is the first subwave within small 4th-wave upward correction within the 1st-wave downtrend that began on October 12. The wave nomenclature is wave A{-10} within wave 4{-9}, a subwave within wave 1{-8}.

I’ve updated the chart.

11 a.m. New York time

SPY options position exited. I’ve ended my bear call options spread on SPY seven days prior to expiration for half of maximum potential profit and have updated the trade analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures initially stayed in a narrow band, in the 4350s and 4360s, and then fell to 4215.25 as the opening bell approached.

What does it mean? The low-degree downtrend that began on October 17 continues to work through its 3rd wave of five — wave 3{-9}. A small 4th-wave upward correction will follow and then a final 5th-wave push to the downside will complete the downtrend.

Within the fractal structure of the chart, the end of the low-degree downtrend will also end a downtrend one-degree higher, which will move to an upward correction. The beauty of trends is that they are so predictable. Like waves at the beach, their subwaves wash ashore in the direction of the trend, and then retreat, taking back the distance they traveled in a pattern that varies little from trend to trend whatever the degree.

All of this is happening within a 3rd degree downtrend six-degrees larger, wave 3{-3}, which is in its 3rd subwave and will have some distance to travel before moving into a 4th wave correction. Going still higher, everything that has been taking place since January 4, 2022 has been part of wave 4{-1}, the next-to-the-last wave within an expanding Diagonal Triangle, the 5th wave of an uptrend, wave 5{0}, that began on December 26, 2018.

What are the alternatives? Under the alternative, scenario degree labels are lower than the reality on the chart. The degree {-8} waves, for example, ought to be labeled {-7} and the {-9} wave changed to {-8}.

[S&P 500 E-mini futures at 3:30 p.m., 70-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 5{-5}, an downtrend, is underway, having begun on October 12.
• Wave 5{-5} is in its first subwave, wave 1{-6}.
• Within wave 1{-6}, waves 1{-7} and 1{-8} are underway.
• Within 1{-8}, wave 3{-9} is underway and is in a wave 4{-10} upward correction.

Alternative Analysis

• The degrees in the principal analysis are lower than they will eventually turn out to be. The present downtrending wave 3{-9} is wave 3{-8} or perhaps even 3{-7}.

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)
• 3{-3}, Minuette, 9/14/2023, 4566 (down)
• 1{-4}, Subminuette, 9/14/2023, 4566 (down)
• 5{-5}, Micro, 10/12/2023, 4430.50 (down)
• 1{-6}, Submicro, 10/12/2023, 4430.50 (down)
• 1{-7}, Minuscule, 10/12/2023, 4430.50 (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 23, 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.