3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose into the 5020s during the session, as the final subwave within the uptrend that began on January 31 continues. In Elliott wave terminology, the subwave, wave 5{-6}, is underway, within the uptrend, wave 5{-5}.

Third waves tend to be the longest within a trend, but occasionally 5th waves take that honor. The third subwave within the trend covered a bit more than 100 points. A similar distance on the 5th subwave would take it to the 5050s, about 30 points or so above where it is now. That’s not a forecast, just an exercise “if this, then that”.

This morning’s analysis stands. I’ve updated the chart.

3:05 p.m. New York time

Trades. The rapid rise in the S&P 500 put my 1DTE short Iron Fly position on SPY in a losing position. I sold the in-the-money options for a loss and will allow the out-of-the-money options to expire with zero value. I’ll update the trade analysis when the process is complete.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose sharply overnight, from 4970 to within cents of 5000. The price rose above the February 2 peak, 4997.75, as the opening bell sounded.

What does it mean? The final leg of the uptrend that began on January 31 — the 5th wave — continues. Internally, the 4th-wave downward correction ended during yesterday’s session, on September 6, and the 5th and final subwave began.

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

[S&P 500 E-mini futures at 3:30 p.m., 15-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}, uptrending wave 5{-6} 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 7, 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.