3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures remained between the 4870s and the 4890s during the session. The low-degree 4th-wave downward correction within a series of larger uptrends continues. I’ve updated the chart.

3 p.m. New York time

Trades. I’ve entered two options positions, using different strategies on each for different purposes.

The first, a short Iron Condor on IBM, is in response to the company’s earnings announcement, on January 24 after the closing bell. The second, a short bull put Vertical Spread, is on SPY, based on my Elliott Wave Theory analysis of the S&P 500 chart.

I’ve posted trade analyses of the two positions.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded narrowly in the 4870s for most of the night, rising slightly into the 4890s as the opening bell approached and then declining sharply in the moments before the session began.

What does it mean? The 3rd-wave uptrend that began on January 5 has entered its 4th of five subwaves, a downward correction that will be followed by a final push to the upside that will end the 3rd wave and begin a larger 4th-wave downward correction. The decline overnight may well be the 3rd and final subwave of that 4th-wave downward correction.

This is all happening within a larger 5th-wave uptrend that began on September 27, 2023, which is in its final subwave. When that subwave is complete, it will mark the end of the parent wave, a 3rd-wave uptrend that began on October 25, 2023 and will trigger an even larger 4th-wave downward correction.

What are the alternatives? As always, there is rarely clarity about the degrees in relation to a fixed level. For example, is wave 5{-3} really at degree {-3}, or should it be {-4}? There’s no way to know for sure.

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

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

Principal Analysis:

• Wave 5{0}, an expanding Diagonal Triangle, began on December 26, 2018.
• Within it, an uptrend, wave 5{-1}, began on October 13, 2022 and is underway.
• Wave 5{-1} is the parent wave of a uptrend, wave 1{-2}, that began on October 25, 2023 and is in wave 3{-3}, the middle of five subwaves.
• Wave 3{-3} is in turn in its last subwave, wave 5{-4}. When wave 5{-4} is complete, it will also be the end of wave 3{-3}, and a downward correction, wave 4{-3}, will begin.

Alternative analysis:

• Wave 3{-3} in the principal analysis may be of a lower degree, wave 3{-4}, perhaps, or wave 3{-5}.

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:
• 5{-1} Minor, 10/13/2022, 3502 (up) (futures), 3491.58 (up) (index)
• S&P 500 Futures:
• 1{-2} Minute, 10/27/2023, 4143.50 (up)
• 5{-3} Minuette, 10/27/2023, 4143.50 (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, January 23, 2024

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.