3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, from the 5150s back into the 5190s. If the price moves above 5196 — the overnight high — then the principal analysis will switch the ongoing wave back to rising wave B, with the caveat that each new high could in fact be the end of wave B and the start of declining wave C.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures opened higher when trading resumed, at 5196, and immediately fell, into the 5160s so far.

What does it mean? Elliott Wave Theory analyzes the chart as follows: The downward correction that began on February 12 continues and is in its 3rd subwave, an A wave. On Friday I had labeled, on that chart, that day’s high as the end of a rising B wave four degrees lower in the correction, and the start of next wave, a declining C wave. The new high requires an adjustment, and the overnight high is now considered to be the end of wave B and the start of wave C.

That low-degree C wave is labeled wave C{-6}, with a subscript in curly brackets designating the degree’s relative position in the fractal structure of the chart. The {-6} means that it is six degrees lower in the structure than is the current Intermediate degree, to use the terminology of R.N. Elliott, who developed Elliott Wave Theory in the 1930s. The current Intermediate degree is wave 5{0}, which began on December 26, 2018.

See the “Reading the chart” section below for more on the fractal structure in Elliott’s theory, and the “What does Elliott Wave Theory say?” section and the “We Are Here” section for lists of waves, each with its starting price and date, and direction.

What are the alternatives? The biggest ambiguity is the degree placement: Should everything be moved up a degree? Or the smaller waves moved down a degree?

One glaringly obvious alternative that I looked at over the weekend is that the downward correction, wave 4{-2}, ended on February 21 at 4929 (that position is labeled as the end of a subwave, wave C{-4}, on the chart.) If that’s the end of wave 4{-2}, then uptrending wave 5{-2} began from that point and is presently underway.

I’ve marked the alternative wave numbers on the chart in blue, preceded by “Alt:”.

I concluded that the alternative doesn’t work. It would require that wave [Alt: 1{-3}] end on February 23 (the present label is wave A{-5}. [Alt: 2{-3}] would follow, with three subwaves, ending on March 5 (the present label is wave A{-6}.

And that’s where the problem lies. In a 2nd wave, the B subwave never moves beyond the 2nd wave’s starting point. Yet in the alternative count, wave [Alt: B{-4}] moves above the starting point of [Alt: A{-4}] and its parent, [Alt: 2{-3}].

In Elliott Wave Theory, that’s an error. And from it I conclude that wave 4{-2} is still underway and wave 5{-2} has not yet begun.

[S&P 500 E-mini futures at 3:30 p.m., 75-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 final subwave, wave C{-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 11, 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.