3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to fall during the session, reaching into the 5090s. Applying Elliott Wave Theory, the velocity of the decline suggests that the final subwave, wave C, within the 4th-wave downward correction has begun. An alternative analysis is that the session’s decline is a wave one degree smaller, a subwave within wave 3, which in turn is a subwave of the larger 5th-wave decline.

Here are the waves as labeled on the chart, with wave numbers followed by subscripts in curly brackets showing each wave’s distance from the Intermediate wave that began in December 2018 and contains everything that has happened since.

Now underway, smaller to larger:

• Principal Analysis
  • Wave 5{-7} within wave C{-6} within the down correction, wave 4{-5}.
• Alternative Analysis
  • Wave 3{-8} within wave 3{-7} within wave C{-6} within 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 rose after trading resumed overnight, from the 5160s to the 5210s.

What does it mean? Elliott Wave Theory considers the rise to be the next-to-the last subwave — wave 4 — within a larger declining final subwave — wave C — within a 4th-wave downward correction that began on March 31. When that final subwave is complete, it will also be the end of the wave 4 correction and a 5th-wave uptrend will begin.

On the chart, the waves under discussion, from small to large, are labeled rising wave 4{-7} within falling wave C{-6} within the downward correction, wave 4{-5}. The waves are designated by their number and with a subscript, in curly brackets, showing the distance of the wave from the Intermediate degree. For example, within the fractal structure of the chart, wave 4{-5} is five degrees smaller than the current wave of Intermediate degree, wave 5{0}, which began in December 2018.

Fourth wave corrections tend to end within the range of the 4th subwave within the preceding 3rd wave of the same degree. Wave 4{-5] has so far moved in line with that tendency, with its low point so far only slightly below the lower boundary of that trend. The trend boundaries are shown on the chart as dashed lines in red.

What are the alternatives? It’s possible that what I’ve labeled as wave 4{-7} is actually a subwave of an ongoing wave 3{-7}, although given wave 3{-7}’s internal structure, it seems unlikely to me.

[S&P 500 E-mini futures at 3:30 p.m., 90-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 a wave of Intermediate Degree that began in December 2018.
• 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 final subwave, falling wave C{-6}, which is in its next-to-the-last subwave, rising 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 15, 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.