3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures dipped a bit more during the session, from the 4970s into the 4950s. I’ve added an additional, smaller wave degree to the analysis, showing the subwaves of wave E{-5}, the lowest-level wave in this morning’s discussion. Wave E{-5}, which began on February 19, is in its final subwave, wave E{-6}, which began the next day, on February 20. When wave E{-6} reaches its end, the event will cascade up the fractal hierarchy, ending the parent, wave E{-5}, and waves higher up as described in this morning’s analysis, below.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures worked its way slightly lower overnight, from the 4990s to the 4970s.

What does it mean? The end game continues within the first subwave, wave A, of a 4th-wave downward correction that began on February 12 from 5066.50.

I’ve expanded the waves I’m tracking to encompass four Elliott Wave degrees, that is, four relative levels in the fractal hierarchy of the chart. The wave degrees are designated on the chart and in this discussion by subscripts within curly brackets showing each degrees distance from the Intermediate degree, which is presently wave 5{0}, an expanding Diagonal Triangle that began in December 2018 and that encompasses all that has happened since.

Wit that in mind, the largest wave, the downward correction, is wave 4{-2}. It is in its first subwave, wave A{-3}, which in turn is in its final subwave, wave C{-4}.

Wave C{-4} is in its endgame. The C wave has five subwaves, and this C wave is in its fifth, wave E{-5}, the smallest degree covered by this analysis.

What happens next? The end of wave E{-5} will cascade up the fractal hierarchy, also marking the end of waves C{-4} and A{-3}, and the beginning of rising wave B{-3}, the second of three subwaves within the correction, wave 4{-2}.

In corrections that take the form of a Flat, B waves are powerhouses, always retracing 90% of the preceding A wave and usually retracing 100% to 138%. This B wave, B{-3}, is part of a 4th wave correction, and 4th waves tend to be Flats. The A wave in a Flat has three subwaves. It is on wave C{-4}, so it is within this rule.

But sometimes 4th waves take the form of a Zigzag, with five subwaves within the A-wave. What if wave C{-4} isn’t the end of wave A{-3}? That leads to an alternative…

What is the alternative? If wave 4{-2} is in fact taking the form of a Zigzag, then the end of wave E{-5} will the the end of wave C{-4}, but not the end of wave A{-3}. Instead, wave rising wave D{-4} will follow, and when it is complete, then declining wave E{-4} will carry its parent, wave A{-3}, to its end. Only then, under this alternative scenario, does rising wave B{-3} begin.

B waves within Zigzags are less energetic than the Flat variety. They typically retrace 38% to 79% of wave A.

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

What does Elliott wave theory say? There are two

Principal Analysis: Flat correction scenario

• 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}, which in turn is in wave C{-4}, its third and final subwave.
• Within Wave C{-4}, the middle wave of five subwaves, declining wave E{-5}, is underway and is in its final subwave, wave E{-6}..

Alternative Analysis: Zigzag correction scenario

• Wave 4{-2} is in its first subwave, wave A{-3}, which in turn is in wave C{-4}, its middle of five subwaves.
• Within Wave C{-4}, the middle wave of five subwaves, declining wave E{-5}, is underway and is in its final subwave, wave E{-6}.

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 21, 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.