3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose sharply after the FOMC said it would keep interest rates unchanged and rose again when Fed Chair Powell began his news conference half an hour later.

This morning’s analysis is unchanged: The first subwave, wave A, within the 2nd wave upward correction is nearing its end. Four degrees smaller than wave A is a low-degree 5th and final wave, and that small wave is in its 3rd wave.

I’ve updated the chart.

Trade. I’ve entered a short Iron Condor position on SPY, one day before expiration, 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 traded sideways during most of the night, reaching above 4700 to a new high within the ongoing upward correction after the Producer Price Index report was published. The Federal Open Market Committee will also published its statement today, at 2 p.m. New York time, perhaps providing some clues regarding the FOMC’s next move in setting interest rates. The Federal Reserve chair, Jerome Powell, will hold a news conference at 2:30 p.m.

What does it mean? The correction, wave 2[-2], began on October 13, 2022 and is presently in its final subwave, wave C, which in turn is in a series of increasingly smaller subwaves, which are 5th waves stretching down four degrees in the fractal structure of the chart.

When the smallest of those 5th waves is complete, the event will cascade up the larger waves to end the C wave and, most likely, the correction. That’s if wave 2 takes a simple form, with one corrective pattern. If it takes a complex form, with two or three corrective patterns, then it will expand the correction beyond what we would normally expect.

What are the alternatives? It’s possible that the subwaves within wave C should be lower down in the fractal structure than I’ve labeled them.

[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 4{-1}, began on January 4, 2022 and is underway.
• Within wave 4{-1}, an upward correction, wave 2{-2}, began on October 13, 2022.
• The third wave of the correction, wave C{-3}, is underway.
• Wave C{-3} has reached its 5th and final subwave, wave 5{-4} and a series of smaller 5th waves, down to wave 5{-7}.
• When wave 5{-7} is complete, it will cascade up the fractal structure, also ending wave 5{-4} and its parent, wave C{-3} and possibly the upward corection, wave 2{-2}.

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:
• 2{-2} Minute, 10/13/2022, 3491.58 (up)
• C{-3} Minuette, 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 13, 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.