3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell into the 4930s during the session and then returned to the 4960s, within the range it had traded overnight.

The decline is a small subwave within the uptrending 5th wave that began on January 31.

This morning’s analysis is unchanged. I’ve updated the chart.

1:40 p.m. New York time

Trades. Two short-duration trades today on ETFs based on the S&P 500.

I exited my 3DTE over-the-weekend position on SPY for an 19.5% profit and updated the trade analysis with full results.

I entered a 1DTE position on XSP and will exit it on expiration day, February 6. I’ve posted a trade analysis.

Both positions were structured as a short Iron Fly — the same as a short Iron Condor except the two short options have the same strike price. It’s a low-risk, relatively low-reward strategy that does best with low volatility underlying symbols.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures remained mainly in the 4960s and 4970s after trading resumed overnight. The price remained below the February 2 high, before the weekend, of 4997.75.

What does it mean? The uptrend that began on January 31 continues, a 5th-wave within a series of increasingly larger 5th waves stretching up two levels within the fractal structure of the chart, to a larger 3rd-wave uptrend within another, larger 5th wave uptrend.

The end of the January 31 5th-wave uptrend will also be the end of three of its parent waves. In incresing size, they are two 5th waves and a 3rd wave that began on October 31. The 3rd wave, when complete, will be followed by a significant 4th-wave downward correction.

On the chart the smallest movement I’m tracking is wave 5{-5} — the January 31 uptrend — up through wave 3{-2} to the largest, wave 5{-1}, which began on October 13, 2023. See the “Reading the Chart” section below for an explanation of the degree indicators in curly brackets. The future downward correction will show on the chart as wave 4{-2}.

What are the alternatives? I made an adjustment last week the relative placement of waves within the fractal structure of the price movements, It is possible that further degree adjustments will be needed. In Friday’s analysis I said that I would work over the weekend on the question of when wave 4{-1} ended and wave 5{-1} began. Still working on it.

[S&P 500 E-mini futures at 3:30 p.m., 210-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.

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, February 5, 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.