3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell from the session high, 4835, back to below 4820. Wave C, the final wave of a corrective pattern in wave 2, an upward correction, continues to play out its end game. I’ve updated the chart.

1:45 p.m. New York time

Trades. I exited my short Iron Fly positions on SPY and QQQ, on expiration day, one day after entry. The SPY position produced a 20.3% profit, and the QQQ position, a much less impressive 2.2% profit. I’ve updated the trade analysis with results.

I entered a short Iron Fly position on XSP, one day before expiration, with the intent of existing on expiration day, and have posted a trade analysis.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures moved to a new high overnight, 4834.50, in the rise that began on October 27. The high forces a reassessment how which subwave is in progress within that rise.

What does it mean? The big picture is unchanged. A 2nd wave upward correction that began on October 13 continues and is in the 3rd and final subwave of the corrective pattern, wave C.

Wave C is almost complete, in 5th and final waves across four degrees lower. In the fifth degree lower, I had labeled declining wave 4 as having begun on December 20. The quick reversal to a new high confirms that rising wave 3 is still underway, and I have relabeled the chart accordingly, promoting the wave 3 alternative to principal analysis.

See the December 26 Trader’s Notebook for a chart showing the prior labeling.

What are the alternatives? As is always the case with a new high at this point in the C wave, each new high could be the end of the 3rd subwave and the beginning of 4th subwave.

[S&P 500 E-mini futures at 3:30 p.m., 2-hour 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}.
• Within wave 5{-7}, the middle subwave is underway, wave 3{-8}, an uptrend, began with the December 6 low.

Alternative Analysis

• Within wave 5{-7}, the next-to-the-last subwave is underway, wave 4{-8}, a downward correction, began with the December 27 high.

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 27, 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.