3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, reaching into the 5280s. Applying Elliott Wave Theory: The rise has so far traced three clear waves from the low of April 2, the beginning of the 4th subwave within the A wave of the downtrending 4th wave correction that began on March 31. The price reversed late in the session, suggesting that the final wave, wave 5{-7}, has begun.

On the chart, with wave numbers and subscripts in curly brackets designating the wave’s distance from the Intermediate degree, the lineup is rising wave 5{-7} within falling wave A{-6} within falling wave 4{-5}.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded sideways overnight, mainly fluctuating in the 5240s and 5250s.

What does it mean? The trading range was centered on the upper boundary of the price target for the 4th-wave downward correction that began on March 31. I’ve marked the price target range boundaries on the chart with dashed red lines.

Elliott Wave Theory counts this sideways movement as the 4th subwave within the larger A wave that is the first leg of a three-way correction. (This labeling is a change from yesterday’s analysis, where I considered the decline to be the final wave of the analysis. It didn’t play out that way.)

Wave A will have five subwaves, wave B will have three and wave C will have five, a Zigzag pattern. Wave 4, the downward correction, will be followed by a 5th-wave uptrend that likely will carry the price beyond the endpoint of the preceding wave 3, which was 5333.50.

When the 4th-wave correction is complete, it will also be the end of its parent, a larger 3rd wave, and the beginning of a another 4th wave correction, this one larger than the one now underway.

What are the alternatives? I’ve numbered the correction as though the A wave is a subwave one degree lower than the parent 4th-wave correction. But is it really? Could it be two degrees lower, making it a subwave of the A wave? Only time will resolve the ambiguity.

[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:

• 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}.
• Downtrending wave 4{-5} is in its 1st subwave, wave A{-6}, which in turn is in its next-to-the-last subwave, wave 4{-7}.

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, April 3, 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.