3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to trade within a narrow range during the session, fluctuating between the 4950s and the 4970s.

A downward correction, wave 4{-6} within an uptrend, wave 5{-5}, continues. This morning’s analysis is unchanged.

I’ve updated the chart.

2:05 p.m. New York time

Trades. I continued my daily 1DTE trade alternation between SPY and XSP. Today, it was XSP’s turn for exit and SPY’s for entry. Wednesday, February 7, will be an opportunity for 9DTE trades on options that expire weekly, and Thursday, February 8, for 1DTE trades on the weeklies.

But today, I exited my short Iron Fly position on XSP for a 21.7% profit and updated the trade analysis with full results.

And I entered a short Iron Fly position on SPY a day before expiration, with the intent of exiting on Wednesday, February 7. I’ve posted a trade analysis.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose to the 4970s and then fell to the 4950s before returning to the higher level.

What does it mean? A small downward 4th-wave correction within a larger uptrend — wave 5{-5} on the chart — that began on January 31 continues. The 5th wave is the smallest of a series of 5th waves of increasing size, all within an uptrending 3rd wave that began last autumn.

When the small 5th wave is complete, it will also be the end of those increasingly 5th waves and of the 3rd-wave uptrend, which will be followed by a 4th-wave downward correction of significant size.

What are the alternatives? As always, there is some uncertainty over the relative size of waves within the fractal structure described above.

The Chart. A close-up view of wave 5{-5} and its subwaves.

[S&P 500 E-mini futures at 3:30 p.m., 10-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 27, 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.
• Within wave 5{-5}, wave 4{-6}, a downward correction, 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, February 6, 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.