3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fluctuated around the 23.6% Fibonacci retracement level during much of the session, rising into the 42-tens as the closing bell approached.

No change in the analysis. The 2nd wave upward correction that began on October 27 continues. I’ve updated the chart.

2:30 p.m. New York time

IWM short iron fly entry. I’ve entered a short iron fly position on IWM one day left before expiration (1DTE) and have posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, coming within cents of 4200.

What does it mean? I’ve redone the analysis in line with several alternative analyses of the past week.

The revised analysis: The 4th wave upward correction — wave 4{-9} that began on October 23 ended on October 24. The subsequent low-degree 5th wave — wave 5{-9} — ended at the October 27 low and also marked the end of a grandparent wave, 1{-8}. The rise since October 27 is a 2nd wave upward correction, wave 2{-8}.

Two alternatives of the past week play a role in this new analysis. The first alternative was that the wave degrees might be higher than the chart would have it, and indeed that is so; the decline from October 24, rather than being of the {-10} degree, is instead the {-9} degree. The second is that the 4th wave correction that began on October 23 ended on October 24, a rise that my principal analysis had labeled as the A wave within the correction. Instead, it was the whole correction.

Proof again, if any were needed, that Elliott Wave Theory does not predict. Instead, it provides context, forever muttering thoughtfully, “If this analysis matches the chart, then here are some things that might happen and others that can’t happen.”

The 2nd wave upward correction is still in its early stages, having reached the 23.6% Fibonacci retracement level. A 61.8% correction, in the low 4300s, or a 78.6% correction, in the 4360s, are reasonable expectations.

It will be followed by a 3rd wave downtrend that will carry the price below the correction’s starting point, 4122.25, and perhaps significantly lower. All of those waves are contained within larger waves, stretching up to wave 4{-1}, a downtrending wave that began on January 4, 2022. Wave 4{-1} is the next-to-the-last subwave within wave 4{0}, an expanding Diagonal Triangle that began on December 26, 2018.

What are the alternatives? So what could go wrong with the principal analysis? I see two possibilities (and there could be more):

• My prior principal analysis could indeed match the chart, with a scenario that the decline from October 24 is a C wave within a 4th wave upward correction that is still underay. If the price reverses now and moves below 4122.25, the October 27 low, then it will have broken a rule of Elliott Wave Theory: A 2nd wave never moves below the end of the preceding 1st wave. If it does, then the analysis no longer matches the chart. That leaves the 4th wave scenario as a viable principal analysis.
• The degree of the subwaves within the rise so far from October 27 are a bit up in the air. What we see is certainly part of the A wave — Wave A{-9} within wave 2{-8}. But are they of the {-10} degree, or something lower — subwaves within subwaves? It’s not yet clear on the chart.

[S&P 500 E-mini futures at 3:30 p.m., 35-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 waves 1{-6} and 1{-7} are underway.
• Wave 1{-7} is in its 2nd subwave, an upward correction, wave 2{-8}.

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 31, 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.