3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures went nowhere during the session. The low-degree downward correction that began on February 7 continues. This morning’s application of Elliott Wave Theory to the chart remains valid, and I’ve updated the chart.

2:10 p.m. New York time

Trades. Three trades today: One out, two in.

I exited my short Iron Fly 1DTE trade on SPY for a 27.8% loss. Shortly after I entered the S&P 500 rose sharply, turning the position unprofitable. I exited the in the money calls in the position and allowed the out-of-the-money puts to expire without value. I’ve updated the trade analysis with full results.

I entered two 1DTE short Iron Fly positions today.

MSFT has weekly expirations and published earnings on January 30. The price has settled since then, and the volatility measure (IVR) has reached an extreme low of 2.9%, perfect for a 1DTE short Iron Fly.

XSP expires daily and so is extremely flexible. The S&P 500 settled somewhat today, with a lower IVR than the prior day, and so I decided to enter the 1DTE short Iron Fly position.

I’ve posted trade analyses for MSFT and XSP.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded sideways overnight, remaining below the prior day’s session high, 5020.

What does it mean? Elliott Wave Analysis: The 5th-wave uptrend that began on January 31 is in its final subwave, a smaller 5th wave, and that subwave began its next-to-the-last subwave, a 4th-wave downward correction, from that session high.

On the chart that smallest subwave is labeled wave 4{-7}, where the {-7} subscript shows the 4th-wave’s relative position within the fractal hierarchy of the chart. When wave 4{-7} is complete, a final subwave, wave 5{-7}, will complete a series of subwaves from the parent wave 5{-6} up to wave 5{-3}, and one degree larger, wave 3{-2}, which began on October 27, 2023 and which will be followed by a 4th-wave downward correction of significant size.

What are the alternatives? None at present. They will develop, as they always do.

[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, and one degree further down, wave 4{-7}, a downward correction, began on February 7.

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 8, 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.