3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures peaked at 5066.50 during the session and then declined sharply.

Elliott Wave Analysis: The sharpness of the decline suggests to me that the peak was the end of wave 3{-2}, the uptrend that began on October 27, 2023, and the beginning of a downward correction, wave 4{-2}. I’ve marked the chart to show that hypotheses and have promoted it to principal analysis.

The alternative analysis is that the price will reverse quickly and move above 5066.50, meaning that wave 3{-2} is still underway. The further the decline, the more likely it is that the principal analysis matches the reality of the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures stayed within a very narrow range after trading resumed overnight, staying almost entirely in the 5040s.

Terminology. In the Elliott Wave Theory discussion that follows, I’ll denote the degree of each wave — where it stands in the fractal structure of the chart — with a subscript in curly brackets that shows how many degrees away from the Intermediate degree it stands. See the “Reading the Chart” section below for further details.

What does it mean? A 5th wave of low degree, wave 5{-7}, began on February 8 from 5008.75 and internally is in a 4th-wave downward correction, it’s next-to-the-last subwave.

The end of wave 5{-7} will cascade up the fractal structure, also marking the end of four 5th wave of increasingly larger degree: 5{-6}, 5{-5}, 5{-4} and 5{-3}.

The parent of wave 5{-3} is wave 3{-2}, which began on October 27, 2023 from 4143.50. The end of wave 5{-3} will also be the end of wave 3{-2}. A downward correction, wave 4{-2}, will follow.

Fourth waves often reach completion within the 4th subwave within the larger 3rd subwave of the still larger 4th-wave downward correction. That would be wave 4{-4} within wave 3{-3} within wave 3{-2}, giving a price target of 4830.75 to 4702.

What are the alternatives? None at present, although I expect ambiguities to develop as wave 3{-2} plays out its end game. {See the afternoon update for new ambiguities.]

[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses. [Updated with this afternoon’s revised principal analysis.]

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 downward correction, wave 4{-2}, that began on February 12, 2024.
• Wave 4{-2} is in its first subwave, wave A{-3}.

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:
• 4{-2} Minute, 2/12/2024, 5066.50 (down)
• A{-3} Minuette, 2/12/2024, 5066.60 (down)

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 12, 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.

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Based on a work at www.timbovee.com.