3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures reached session high of 4598.50 at the opening bell and then fell back to the 4550s as the day progressed. This morning’s analysis, with all of its uncertainties, stands unchanged. I’ve updated the chart.

2:40 p.m. New York time

Trades. I’ve entered two short Iron Fly options positions, on QQQ and SPY, one day before expiration and have posted analyses of the trades.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose slightly in the first two hours of overnight trading and then settled into a sideways pattern, remaining there until the release, an hour before the opening bell, of the ADP National Employment Report, a private sector metric that provides a sneak preview of the government’s jobs numbers, which will be out on Friday.

The price rise was small — only about 10 points — but sharp, taking only three minutes to set an overnight peak, 4595, before dropping back slightly and then reversing, moving a few points higher.

What does it mean? Often an economic report can be the starting pistol for a market price to begin an Elliott Wave Theory push higher or lower. This morning’s report proved to not be a starting pistol but more a momentary leap of joy before the price continued slogging along its ambiguous path.

The S&P 500 is in the initial subwave of a 4th wave upward correction that began on October 27, a rising A wave. Or, that wave ended on December 1 at 4607.73 and the middle subwave, a falling B wave, is underway.

Traders’ response to the ADP employment statistics did nothing to suggest a consensus among traders as to the proper direction for the market.

What are the alternatives? The two possible interpretations are of equal likelihood. I chose the A-wave hypothesis for the chart because is was the status quo going into the present period of ambiguity, and nothing has occurred to change that assessment.

If the price moves below the low point of the small-degree rise that began on November 30 from 4544.75, I’ll consider switching to the wave B scenario.

If it rises above the December 1 high of 4607.75, then I’ll consider wave A to still be unambiguously underway.

If it rises past the beginning of the 1st wave that opened the larger downtrend of which the correction is a part, then I shall toss out both scenarios and rework the analysis entirely. The level that will trigger a reanalysis is 4634.50, reached on July 27.

[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 6, 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.