3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures reached a session peak of 4791.75 and fell to a session low of 4746.25.

The decline so far is in its 4th wave and is a classic trend structure, with the 3rd wave being the longest wave so far. For the moment I’m staying with this morning’s announcement, that the parent of the session decline, a rising 3rd wave, is not yet complete. I’d like to see more of how that 4th wave shapes up before changing the principal analysis.

I’ve updated the chart.

1:35 p.m. New York time

Trades. I’ve exited a short Iron Fly position on SPY, on expiration day for a 24.1% loss and have updated the trade analysis with details.

I’ve entered a short Iron Fly position on XSP — a lower-priced version of SPX, the S&P 500 Index — with the intent of exiting the next day, when it expires. I’ve posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures remained within a narrow range during much of overnight trading, pushing higher as the opening bell approached.

What does it mean? The 2nd-wave upward correction that began on October 13, 2022 continues to work through its final subwave, wave C.

At the smallest degree in the chart’s Elliott Wave structure, five levels small than the C wave, a wave 3 uptrend is in progress. It will be followed by a 4th wave downward correction and a 5th wave push to the upside that will complete the small-degree rise, the series of increasingly larger 5th waves up to the C wave, the C wave itself, and the 2nd wave upward correction, if it takes a simple form containing a single corrective pattern. If it takes a comple form, with two or three correvtive patterns, then it will be awhile longer before the correction reaches its end.

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. If that proves to be the case, then wave C is further from completion than the principal analysis would have it.

[S&P 500 E-mini futures at 3:30 p.m., 105-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}.
• Wave 5{-7} is in its middle subwave, rising wave 3{-8}.

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 14, 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.