3:30 p.m. New York time

Half an hour before the closing bell. The S&P futures price fell during the session, reaching into the 5190s. The B wave — wave B{-6} on the chart — has five clear subwaves, and that’s not supposed to happen in Elliott Wave Theory.

I’ve labeled the chart as wave B{-6} having ended at the peak and wave C{-6} having begun its decline, although it has become clear that the labeling has probably been overtaken by events on the chart and will require revision.

The rise that began on February 21 looks very much like an uptrending impulse wave, with five subwaves. However, as it has played out, the 3rd subwave is shorter than the 1st and 5th subwaves, and that never happens under the rules of Elliott Wave Theory.

I’ve updated the chart. And will update the revision, perhaps by Friday, perhaps by Monday.

1:50 p.m. New York time

Trade. With the week’s economic reports out out of the way and the implied volatility rank having fallen, I resumed my very short-term trades — in one day before expiration, out on expiration day. I entered a short Iron Fly position on SPY with the intent of exiting the next day — expiration day — win, lose or draw. I’ve posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a new high overnight, 5253.50, and fell sharply after the Producer Price Index for February was released.

What does it mean? Elliott Wave Theory concludes that the higher high, 5253.50, once again extended the reach of the low degree rising wave B that began on March 4. And as is often the case, the higher high may in fact be the end of the wave and the beginning of the next wave down.

The decline after the release of the Producer Price Index carried the price into the 5230s.

The rising B wave is a subwave of a declining A wave one degree higher. Working our way up the fractal chain, the declining A wave is a subwave of a decling B wave, which is a subwave of a rising B wave within a still larger 4th-wave downward correction that began on February 12.

What are the alternatives? As I’ve noted before, the low-degree B-wave — wave B{-6} on the chart — has moved exceptionally high, suggesting that the wave labels may not accurately reflect each wave’s position within the fractal structure of the chart. Working on it.

The chart shows each wave number, followed by a subscript in curly brackets showing the waves distance from an Intermediate wave — in this case wave 5{0}, which began on December 26, 2018. See the “Reading the chart” section below for more on the degrees within the fractal structure of the chart.

[S&P 500 E-mini futures at 3:30 p.m., 80-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 middle 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 14, 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.