3:30 p.m. New York Time

Half an hour before the closing bell. Another sideways session for the S&P 500 futures, meandering like a drunken river between the 4550s and the 4580s. This morning’s analysis stands unchanged. I’ve updated the chart.

2:45 p.m. New York time

Trades. I exited two 1DTE options Iron Fly positions, QQQ for a 2.6% profit and SPY for a 22.2% profit, and have updated the trade analyses with results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight from the 4570s to the 4550s and then rose slightly.

What does it mean? The 4th-wave upward correction that began on October 27 continues. The question is whether it’s initial internal subwave, the A wave, is still underway, or if the middle subwave, the B wave, began on December 1.

I’m tracking the chart at a fairly low level, four levels below the A subwave. That low level wave is now a 5th wave, the final wave of the trend. When it is complete, it will cascade up the four levels — all 5th waves — and also be the end of the A wave.

At this point I consider the two analyses to be of equal likelihood. I’ve stuck with the A-wave scenario for the chart because I tend not to change an analysis until I have a reason to. If the price moves below the low point of the low-level 4th wave, 4544.75, then I’ll make the switch to the B-wave scenario.

Meanwhile, the A-wave scenario is the principal analysis…

What are the alternatives? … and the B-wave scenario is the alternative.

If the B-wave is indeed underway, how low is it likely to go? We know that wave A had five subwaves, which means the correction is taking the form of a Zigzag. The B wave of a Zigzag tends to retrace 38% to 79% of the preceding A wave.

The A wave began at 4122.25. If the A wave ended on December 1 at 4607.75, then it covered 485.50 points.

A 38% retracement would carry the B wave down to 4423.60. A 79% retracement would carry the B wave down to 4224.21.

So if this 4th-wave correction is typical, the low-level 4th wave low on November 30, 4544.75, is still a bit more than 130 points shy of reaching the minimum typical correction, 4423.60.

I’ve shown the high and low typical retracement levels on the chart in blue.

[S&P 500 E-mini futures at 3:30 p.m., 80-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}, an upward correction, wave 4{-3}, began on October 27.
• The initial wave of the correction, wave A{-4}, continues.
• Wave A{-4} has reached its 5th and final subwave, wave 5{-5} and a series of smaller 5th waves, down to wave 5{-8}.
• Within wave 5{-8}, declining wave 4{-9} is underway. It will be followed by rising wave 5{-9}.
• When wave 5{-9} is complete, it will cascade up the fractal structure, also ending wave 5{-5} and its parent, wave A{-4}.

Alternative Analysis:

• Wave A{-4} ended on December 1 and wave B{-4} is underway.

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, December 5, 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.