3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued continued a sideways course, remaining below the November 15 high of the 4th-wave upward correction that began on October 27. But just barely below that peak, and so the chart continues to leave unresolved the question that dominated the week: Within the correction, did wave A end at that peak and downward wave B begin? Or is wave A still underway? Perhaps the week ahead will bring an answer. Until then, absent a rise above the November 15 high, 4541.25, I’ll continue to mark the chart as though wave B has begun.

I’ve updated the chart.

2 p.m. New York time

Exited short Iron Condor 1DTE positions on SPY, GLD. I closed my short Iron Condor positions on SPY and GLD, with mixed results. SPY had a 3.3% loss, and GLD a 26.2% profit. I’ve updated my analyses of the trades and discussed my take-away from the mixed results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, coming within two points of the correction high so far, 4541.25. The rising price covered less than 20 points and remains slightly above the 78.6% Fibonacci retracement level.

What does it mean? The 4th wave upward correction that began on October 27 continues.

A wise mentor in the art of trading often used the metaphor of war to describe what we’ve seen on the chart over the last few days. He would say that when the chart reaches a reversal level — high in an upward movement, low if the slope is down — and then stalls, it’s a visual representation of a battle between bulls and bears. A market battle, like most battles, will be resolved when one side or the other gains the upper hand, usually through numbers and power (for power in a markets context, think money). On the S&P 500 futures chart, this is the fourth day of fighting, with the 78.6% Fibonacci retracement level being the front line in the battle.

So when I look at this chart, I see a World War I scene, with the bulls charging out of their trenches overnight and making a valiant effort to overcome the bears.

In Elliott Wave Theory terminology, the chart retains yesterday’s principal analysis, which sees the first subwave, wave A, within the ongoing 4th wave upward correction having ended with the November 15 high, and declining wave B, the middle subwave, having begun.. Today, as yesterday, the alternative scenario, which sees wave A as still underway, is of equal likelihood.

And today it remains the case that the chart will decide which scenario is correct. If the price moves above 4541.25, then my switch to the second scenario was premature. If the price remains below that level, then in my mind that’s further evidence that the second scenario is playing out and wave B is underway.

So far wave B — the bears — are winning the battle, but the struggle continues.

After the opening bell, it appears that the bears are winning at this point of the battle, as the price drops from the 4530s to the 4520s.

What are the alternatives? As described above, either wave A has ended and wave B has begun, or wave A hasn’t ended and continues, a choice where both sides have an equal likelihood of being a correct description of 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.

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, an upward correction, wave 4{-3}, began on October 27.
• Wave 4{-3} internally has two possibilities, each of equal likelihood:
  • Scenario 1: Either rising wave A{-4} continues and is nearing it’s end.
  • Scenario 2: Or wave A{-4} ended on November 10 at 4425.75 and wave B{-4} began from that point.
• Under the first scenario, wave A{-4} is its final subwave, wave 5{-5}, which in turn is in its final subwave, wave 5{-6}.
• Under the second scenario, declining wave B{-4} has begun and is in its initial subwave, wave A{-5}.
• The second scenario is presently my principle analysis.

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)
• 4{-3} Minuette, 10/27/2023, 4122.25 (up)
• A{-4} Subminuette, 10/27/2023, 4122.25 (up)

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 17, 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.