3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session into the 5240s and then fell back slightly. This morning’s Elliott Wave Theory analysis stands unchanged. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose after trading resumed overnight, reaching into the 5220s and leaving last weeks peak unchallenged.

What does it mean? Elliott Wave Theory, when applied to the chart, sees the 3rd wave uptrend that began on March 5 as still being underway, a component of a series of increasingly larger 3rd waves covering three degrees, all within a still larger 5th wave uptrend that began on October 27, 2023.

Each of those 3rd waves in the fractal structure must, when complete, still work its way through a 4th-wave downard correction and then a 5th wave uptrend before the encompassing larger uptrending 5th wave is complete, suggesting that the uptrend still has some time to go.

In analyzing a chart like this, the length of the 3rd wave compare to that of the 1st wave is crucial. Under the rules of Elliott Wave Theory, a 3rd wave can’t be sorter than both wave 1 and wave 5 within an impulse wave — a wave in the direction of the trend.

If wave 3 is shorter than wave 1, and the wave that followed wave 4 is longer than both waves 1 and 3, then the 3rd wave that followed must still be underway and in its own 3rd subwave, but one degree smaller.

That’s what has happened with wave 1{-2} and 3{-2} on this chart, producing a proliferation of smaller degrees within the wave 3{-2} uptrend.

What are the alternatives? There is uncertainty over the proper place of the waves within the fractal structure of the chart, their degree, in Elliott Wave terminology. Those ambiguities will be resolved as the present trend works its way forward.

[S&P 500 E-mini futures at 3:30 p.m., 4-hour bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• Rising wave 5{0} is underway.
• It is in its final subwave, wave 5{-1}
• Within wave 5{-1}, rising waves 3{-2}, 3{-3} and 3{-4} are underway, as is the smallest wave labeled on the chart, wave 3{-5}.

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 18, 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.

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Based on a work at www.timbovee.com.