3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell to the 4240s during the session and then retraced much of the decline. The middle wave, B{-10}, of the 4th-wave upward correction that began on October 23 is underway. 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, reaching the 4270s shortly after the session opening.

What does it mean? The rise is the first leg of a 4th-wave upward correction that began on October 23. The preceding 3rd wave began at 4423.25 on October 17 and ended at 4213.25.

Under the rules of Elliott Wave Theory, 4th wave cannot move above the end of the preceding 1st wave. That wave began on October 13 from 4340.75, and that’s an absolute ceiling on how high the correction can rise. If it goes higher, then the analysis no longer matches the reality of the chart and will be revised.

A 4th wave typically ends within the range of the 4th subwave within the preceding 3rd wave. That 4th wave — wave 4{-10} in Elliott wave nomenclature — began at 4320.75, the end of wave 3{-10} — and ended at 4366.50, both points attained on October 19. And that is the target range for the present upward correction, wave 4{-9}.

The lower boundary of the target range is close to the 50% retracement level on the Fibonacci ladder, shown on the chart in red, and the upper boundary is above the 61.8% retracement and approaching the 78.6% retracement.

The overnight rise carried the price past the 23.6% Fibonacci retracement level.

The 4th wave upward correction will be followed by a downtrending 5th wave that will complete the parent, wave 1{-8}.

What are the alternatives? The alternative analysis that has been with us for the past few days remains a possibility. Under the alternative scenario, the 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., 20-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}, a downward correction ,wave 4{-9}, is underway and is in wave G{-10}, it’s second of three subwaves.

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)

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 24, 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.