3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, coming within half a point of 5200. Elliott Wave Theory: Uptrending wave 5 continues its 3rd subwave. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, from the 5150s to the 5170s.

What does it mean? Applying Elliott Wave Analysis: The 5th-wave uptrend that began on May 2 continues and is in its 1st subwave of five. The first wave will have five subwaves total and is presently in its 3rd subwave.

The 1st subwave within the 5th wave uptrend will be followed by a 2nd wave downward correction that will remain above the starting point of 1st subwave, 5036.25. A rising 3rd subwave will follow, usually the largest and most energetic subwave of a trend, called a “motive wave” in Elliott Wave Analysis.

What are the alternatives? The degree of the subwaves of a price movement are always uncertain in the early stages of the move. The principal analysis described above, lists three subwaves within a larger 1st subwave. It could well be that the three smaller subwaves are in fact larger relative to the uptrend.

It’s all a matter of degrees, the position of a wave within the fractal structure of the price movements. On the chart each wave number is followed by a subscript in curly brackets showing the wave’s degree as number of degrees distant from the Intermediate degree, which at present is wave 5{0}, a very large wave that began in December 2019.

Under the principal analysis, the waves now underway and their degrees are wave 3{-9} within wave 1{-8} within the uptrend, wave 5{-7}. Under the alternative analysis, the current waves and degrees are wave 3{-8} within wave 5{-7}.

[S&P 500 E-mini futures at 3:30 p.m., 70-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}.
• Wave 1{-6} is underway and is in its final subwave, wave 5{-7}, which is in its initial subwave, wave 1{-8}.

Alternative Analysis:

• Wave 1{-6} is underway and is in its final subwave, wave 5{-7}, which is in its middle subwave, wave 3{-8}.

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, May 6, 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.