3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures has so far risen into the 5140s during the session, as a series of rising corrective subwaves continued within a 4th-wave downward correction. Elliott Wave Theory: Wave C{-5} within wave A{-4} within wave B{-3} continue, all subwaves of increasing size within wave 4{-2}, the downward correction that began on February 12.

I’ve updated the upper chart, which shows a close-up view of the 4th wave and its subwaves.

2:30 p.m. New York time

Trades. I’ve exited the two 1DTE short Iron Fly positions I entered on Thursday, on SPY and XLE. SPY returned a 9% profit, and XLE, a 6.7% profit. I’ve updated the trade analyses with full results. XLE still has two out-of-the-money options on the table. If they were to move in the money prior to expiration, they would be exercised and the results would change.

I exited previous 1DTE trades shortly after the opening bell on expiration day. With these trades, I tried jumping in later, about halfway into the session. The result was a series of individual option exits that ended up producing a profit overall. Had I exited at the opening bell, each would have shown a loss.

I entered a short Iron Fly position on XSP today. It expires on Monday and at entry is 3DTE. I’ve posted an analysis of the trade and plan to follow the same exit procedures as I did with SPY and XLE.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell from the 5110s to the 5080s overnight and then retraced a portion of the decline as the opening bell approached.

What does it mean? The downward correction that began on February 12 continues, working through its middle subwave, and one wave lower, the middle subwave’s initial subwave. At the lowest level I’m tracking, that initial subwave is in its final subwave.

The collection of Elliott waves is shown on the chart with a wave number and a subscript, in curly brackets, designating the wave’s position within the fractal structure of the chart, showing the distance from wave 5{0}, the expanding Diagonal Triangle that began on December 26, 2018 that encompasses all that has happened since.

See the “Reading the chart” section below for more on the fractal structure.

Turning now to the nomenclature of Elliott Wave Theory.

The upper chart shows the downward correction, wave 4{-2}, in its entirety. That correction is in its middle subwave, wave B{-3}, which in turn is in its initial subwave, wave A{-4}. At the lowest level that I’m tracking is rising wave C{-5}, the final subwave within wave A{-4}.

The horizontal red line on this chart shows the upper boundary of wave 4{-2}’s target range.

The lower chart shows the expanding Diagonal Triangle, wave 5{0}, in its entirety. At this level everything happening in the upprt chart is a very small, barely visible line. And yet, in keeping with Elliott Wave Theory, both charts together show a single structure, carrying us seamlessly from years down to days.

Wave 5{0} on the upper chart is the final wave of an uptrend. The Diagonal Triangle part means that each wave swings wider than the one that came before it. Wave 5{0} is in its final subwave, rising wave 5{-1}, which in turn in is a downward correction, wave 4{-2}.

What’s next?

On the upper chart, wave 4{-2} will be followed by rising wave 5{-2}, which will complete wave 5{-1} and its parent, wave 5{0}. Wave 4{-2} still has some distance to go before reaching its end, being in its middle subwave, wave B{-3}. The end of the present wave C{-5} will also be the end of wave A{-4}, which will be followed by a declining wave B{-4}.

On the lower chart, Wave 5{0}. when complete, will also be the end of a series of larger 5th waves, up to wave 5{+3}, which began on July 8, 1932. A long-running downtrend will follow, one that will take decades to complete and that, internally, will have the usual downtrends and uptrends within it, along with corrections in either direction.

What are the alternatives? On both charts there is ambiguity about the degree designations.

[S&P 500 E-mini futures at 3:30 p.m., 1-hour bars, with volume]

[S&P 500 index at 9:35 a.m., 3-day bars

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 downward correction, wave 4{-2}, that began on February 12, 2024.
• Wave 4{-2} is in its second subwave, wave B{-3}, which in turn is in wave A{-4}, its initial subwave.
• Wave A{-4} is in its final subwave, wave C{-5}.

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)
• B{-3} Minuette, 2/21/2024, 4959 (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, March 1, 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.