3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to rise during the session, reaching into the 5170s and then pulling back slightly. The session high could be the end of the middle subwave, a B wave, within the low-degree downward correction that began on March 4 within a still larger upward correction. Or perhaps not. Absent evidence to the contrary, I’ve stayed with this morning’s analysis.

The low-degree B-wave that pulled back is listed on the chart as wave B{-6}. I’ve updated the chart.

2:05 p.m. New York time

Trade. Today was management day on my 45 DTE short Iron Condor position on IWM, and I exited for a 13.9% return after holding the position for 20 days. My rules for such trades say to exit a 45DTE position either when it reaches 50% of maximum potential profit, or 21 days prior to expiration — management day — whichever happens first. In this case, as it turns out management day won the race. I’ve updated the trade analysis with full results.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, from the 5080s into the 5140s.

What does it mean? Elliott Wave Theory says that the low-degree downward correction that began on March 4 continues to work through its middle rising subwave, which is, at a smaller level, rising in its third and final subwave.

All of this is happening within a series of increasingly larger corrections, all of them subwaves of a 4th-wave downward correction that began on February 12 and that is in its second subwave, a B wave.

The present middle rising B wave within a small downward correction will be followed by a 3rd, and final, declining C wave, which will be the end of the parent degree, a declining A wave, and the beginning of a rising B wave within the larger correction.

On the chart, the waves in play are shown with their wave numbers and a subscript in curly brackets designating the wave’s position within the complex fractal structure of the chart.

The low-degree rising B wave is wave B{-6}, a subwave of falling wave A{-5}, within fallng wave, a subwave of rising wave B{-3}, which is the middle subwave of the large downward correction, wave 4{-2}. See the “Reading the chart” section below for more on degrees, labeling and the fractal structure of the chart.

The 4th wave downward correction has been underway for three weeks and will have more weeks to go before reaching its end. Elliott Wave Theory said that 4th waves have a tendency to end within the range of the 4th subwave of the preceding 3rd wave of the same degree. If that’s how the chart plays out, the 4th wave correction will end between 4830.75, the upper boundary shown in red on the chart, and 4702, the lower boundary.

What are the alternatives? There is some ambiguity about the degree designations, not an unusual state of affairs n Elliott Wave Analysis.

[S&P 500 E-mini futures at 3:30 p.m., 70-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 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 B{-4}, its middle subwave.
• Wave B{-4} is in its initial subwave, wave A{-5}.
• Internally, wave A{-5} is in its second subwave, wave B{-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)
• 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 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

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Based on a work at www.timbovee.com.