3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures have fallen during the session to slightly above 4200. The decline carries the B wave of the 4th wave upward correction below the starting point, 4213.25, of the preceding A wave. The correction is taking the form of a Flat, which is common for 4th waves, and so such a drop is within the rule of Elliott Wave Theory.

Coming next, an impressive C-wave rise.

I’ve updated the chart.

3:10 p.m. New York time

SPY 9DTE options position entered. I’ve opened a bull put vertical options spread on SPY with nine days until expiration (9DTE) and have posted an analysis of the trade.

2 p.m. New York time

QQQ options position exited. I’ve exited by bear call vertical spread on QQQ for 50% of maximum potential profit and have updated the trade analysis with an analysis of the results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded sideways overnight, ranging from the 4240s to the 4270s and staying close to the 23.6% Fibonacci retracement level. (The Fibonacci levels are shown on the chart in red.)

What does it mean? The 4th-wave upward correction that began on October 23 continues and is in its B wave, the second of three internal waves. If the correction turns out to be typial of 4th waves, it will end somewhere between the 4320s and the 4360s, in the range of the 4th subwave within the preceding 3rd wave of the same degree as the correction. That target range is in the neighborhood of a 50% retracement and the 61.8% Fibonacci level, also typical endpoints of corrections.

The declining B wave will be followed by a rising C wave that will complete the correction, unless it takes a compound form containing two or three corrective patterns. Whichever form it takes, once the correction is complete, it will be followed by a 5th-wave downtrend that likely will carry the price below the end of the preceding 3rd wave, at 4213.25, and perhaps significantly below that level.

The present upward correction is a subwave of a series of downtrending 1st waves of increasing size (or “degree”), all of which are contained within a downtrending 5th wave four degrees larger than the correction. The 5th wave began on October 12 and so is also of a fairly low degree.

Big picture: Everything I’ve described above is happening within a downtrending 3rd wave seven degrees larger than the correction, which began on July 27, and that 3rd wave is a subwave of the downtrending 4th wave one degree higher that began on January 4, 2022.

So with a nod to Robert Frost and his 1923 poem “Stopping by Woods on a Snowy Evening“, this major bear market can truly say it has “miles to go before I sleep.”

What are the alternatives? Getting the degrees right is a difficult and often an impossible chore. Under the alternative scenario, the degree labels are lower than the reality on the chart. For example, the degree {-8} waves on the chart ought to be labeled {-7} and the {-9} wave changed to {-8}.

[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 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 B{-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 25, 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.