Market holiday. U.S. markets will be closed on Friday, March 29, to mark the Christian Good Friday holiday. The next Trader’s Notebook will be posted on Monday, April 1.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, breaking past 5320. Applying Elliott Wave Theory: The move past the end of the preceding 3rd wave suggests the possibility that the low-degree 4th wave ended today, at the overnight low, 5301, and that the uptrending 5th wave has begun. Although it’s not yet a certainty. The rise is small enough so far to count as a subwave within the 4th wave. This is all happening within a larger uptrending 5th wave.

The waves in question, as labeled on the chart, are waves 4{-8} (correction) and 5{-8} (uptrend) within wave 5{-7} (larger uptrend). I’ve updated the chart, retaining this morning’s analysis until there is greater certainty that the uptrend truly has begun.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures shot up to 5312.50 in a minute after the 2nd GDP revision was released, and in the next minute retreated to their overnight price range, just above 5300.

What does it mean? Elliott Wave Theory looks at chart patterns, not economic releases. The rapid rise and fall came in below the peak that had ended the rise during the March 27 session, to 5313.75.

Taken together, the pattern confirms yesterday’s alternative analysis: The 4th wave downward correction that began on March 21 ended on March 27 at 5263. From that point an uptrending 5th wave began and has quickly worked its way through three subwaves and is now in wave 4, the next-to-the-last subwave.

When the 5th subwave is complete, it will also mark the end of its parent, also a 5th wave, and of its grandparent, a larger 3rd wave. A 4th-wave downward correction will follow, two degrees larger than the one that ended on March 27.

What are the alternatives? (The following discussion uses degree designations as subscripts in curly brackets. See the “Reading the chart” section below for an explanation.)

But what degree is the 5th wave that began on March 27, wave 5{-7} on the chart? The waves at degree {-7} have tended to last several sessions. Wave 3{-7} went for three sessions. If the subwaves I’ve labeled as degree {-8} are truly only one degree smaller than their parent wave, then wave 5{-7} will be finished in less than two sessions. It’s possible that the {-8} waves 1 through 4 that I’ve numbered on the chart are one degree lower, the {-9} degree, and are subwaves of wave 1{-8}.

Time will tell which degree-labeling best matches the chart.

[S&P 500 E-mini futures at 3:30 p.m., 30-minute 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}.
• Wave 3{-5} is in its 5th subwave, wave 5{-6}
• Within wave 5{-6}, uptrending wave 5{-7} is underway.

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 28, 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.