3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued a largely sideways journey through a small 4th-wave downward correction. This morning’s analysis is unchanged. I’ve updated the chart.

3:10 p.m. New York time

Trade. I’ve exited my short Iron Fly position on XSP, the day after entry and hours before expiration (it was a 1DTE trade). The trade produced a 15.5% loss. I’ve updated the trade analysis with full results.

I entered no new trades today because of uncertainty over how the markets will respond to whatever interest-rate decision the Federal Open Market Committee announces tomorrow.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose sharply after yesterday’s session closed and then traded sideways overnight.

What does it mean? The rise was part of the middle subwave — wave 3 — of a small 5th-wave uptrend that began on January 24. The uptrend is a subwave of a much larger 3rd-wave uptrend that began on October 27, 2023.

At this point in the discussion I’ll refer to the waves not only by the Elliott Wave number but also by their position within the fractal structure of the chart. The fractal number, a subscript contained in curly brackets, tells where the wave stands within that structure in relation to what R.N. Elliott called the Intermediate degree. At present the Intermediate degree is wave 5{0}, which began on December 26, 2018.

The much larger 3rd wave uptrend that began in October is wave 3{-2}. Working down the fractal structure, wave 3{-2} contains a series of 5th waves of increasingly smaller degree, from wave 5{-3} down to wave 5{-6}.

Within wave 5{-6}, wave 3{-7} is rising, and within it, wave 3{-8} ended during yestereay’s session and 4{-8}, a downward correction, is underway.

Wave 4{-8} when complete, perhaps today, will be followed by rising wave 5{-8}, which will complete its parent, wave 3{-7}. A larger downward correction, wave 4{-7}, will follow, and then a push to the upside, wave 5{-7}, will complete the parent, wave 5{-6}.

At this point, things get interesting. Wave 5{-6} is the smallest of the series of 5th waves referred to earlier in this discussion. Its completion will also be the completion of waves 5{-5}, 5{-4}, 5{-3} and wave 3{-2}, the latter being the uptrend that began on October 27, 2023.

Wave 4{-2} will follow, a downward correction far larger than the mini-trends and corrections that have dominated thinking about the S&P 500 chart for the past few weeks.

What are the alternatives? It’s possible that what I’ve labeled wave 4{-8} is a degree larger and should be labeled wave 4{-7}.

[S&P 500 E-mini futures at 3:30 p.m., 45-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 3{-2}, that began on October 25, 2023 and is in wave 5{-3}, the last of five subwaves.
• Wave 5{-3} is in turn in its last subwave, wave 5{-4}, which is also in its final subwave, wave 5{-5}.
• When wave 5{-5} is complete, it will also be the end of waves 5{-4}, 5{-3} and 3{-2}, and a downward correction, wave 4{-2}, will begin.
• At a very small degree — hours rather than days — wave 5{-6} is underway.
• Within wave 5{-6}, wave 3{-7} is continuing its rise and has entered a downward correction, wave 4{-8}.

Alternative Analysis:

• Within wave 5{-6}, a downward correction, wave 4{-7}, 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:
• 5{-1} Minor, 10/13/2022, 3502 (up) (futures), 3491.58 (up) (index)
• S&P 500 Futures:
• 3{-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 30, 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.