3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures climbed during the session, pushing past the 61.8% Fibonacci retracement level into the 4330s.

In order to pry apart the complex fractal structure of the chart, I’ll need to use my full Elliott wave notation: A wave number and a degree number in curly brackets. The degree is the relative placement of a wave compared to other waves, larger and smaller. A degree of {-8} is larger than degree {-9}, and degree{-10} is smaller than both. All of the negative degree numbers are smaller than degree {0}, which is the degree of the major downtrend, wave 4{0}, that began on January 4, 2022.

The rise from October 27, wave 2{-8}, an upward correction, is in wave A{-9}, the first subwave of the correction.

Internally, wave A{-9} is nearing the end of its middle subwave, wave 3{-10}, which in turn is in its final subwave, wave 5{-11}. Wave 3{-10} will be followed by a downward correction, wave 4{-10}, and then an uptrending wave 5{-10}, which will complete wave A{-9}. The middle wave of the correction, declining wave B{-9} will follow, and then rising wave C{-9} will complete the pattern.

The A wave has five subwaves, which means the correction is taking the form of a Zigzag. This will have implications for the limits of the future B and C waves. For the 2nd wave correction as a whole, the rule is that the price cannot move above the start of the preceding 1st wave, 4430.50.

11:10 a.m. New York time

SPY bull put spread exited. I’ve exited my bull put options spread on SPY on the day after entry, for a profit of 184.4%. I’ve 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 rose overnight, reaching above 4300.

What does it mean? The 2nd wave upward correction that began on October 27 continues and is in its first subwave, an A wave.

The price is now approaching the 61.8% retracement level in the 4310s, a common reversal point.

Reversal in this context means the end of wave A and the beginning of declining wave B, the second subwave in the correction. The B wave will be followed by a rising C wave that will complete the corrective pattern and most likely the correction itself. An exception to the common pattern would be for the correction to take a compound form, linking two or three corrective patterns together before reaching its end.

In any case, the end of the 2nd wave will be the start of a downtrending 3rd wave that will carry the price below the start of the upward correction, 4122.25, and most likely significantly below that level.

What are the alternatives? There is one, although it is in the nature of stock charts that new ambiguities will develop.

The present alternative: 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., 40-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}.
• Internally, wave 2{-8} is in its first subwave, rising wave A{-9}.

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, November 2, 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.