3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures migrated between the 5140s and 5150s during the session, dropping below 5120 as the closing bell approached. The rising B wave — the middle subwave of the 4th-wave downward correction that began on April 23, continues.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures stuck to the 5130s and 5140s after trading resumed overnight, reaching into the 5150s as the opening bell rang.

What does it mean? The 4th-wave downward correction continues its middle subwave, wave B, which internally may be in its final subwave, wave C. I’m hedging with the “may be” because the subwave structure within wave B is unusually shallow and therefore lack clarity.

On the chart, the wave numbers are followed by the wave’s distance from the Intermediate degree within the fractal structure created by price movements over time. The waves discussed above, from lower degree to higher, are wave C{-9} within wave B{-8} within the downward correction, wave 4{-7}.

What are the alternatives? In Friday’s Trader’s Notebook, I discussed the main ambiguity on the chart: Is the downward correction taking the form of a Zigzag or a Flat. I’m leaning toward the Flat, and that’s my principal analysis. The Zigzag alternative analysis is still on the table, however.

[S&P 500 E-mini futures at 3:30 p.m., 55-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 wave 5{-5}.
• Uptrending wave 5{-5} is in its initial subwave, rising wave 1{-6}, which is in a declining subwave, wave 4{-7}.
• Wave 4{-7} is in its middle subwave, wave B{-8}

Alternative Analysis:

• Uptrending wave 5{-5} is in its initial subwave, rising wave 1{-6}, which is in an uptrend, wave 5{-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 29, 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.