3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose back into the 5260s and then declined into the 5230s. Elliott Wave Theory: The peak, 5264, marks the end of the rising 3rd subwave and beginning of the declining 4th subwave within a 5th-wave uptrend that that began on May 8. The 4th subwave will be followed by rising 5th subwave that will complete the parent 5th-wave uptrend.

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 into the 5260s and then fell slightly as the opening bell approached.

What does it mean? In the terminology of Elliott Wave Theory, the small-degree 5th-wave uptrend that began on May 8 continues. It is a subwave of a 1st-wave uptrend that began on May 2, which in turn is the initial subwave of a larger 5th-wave uptrend that began on that date.

At the larger degrees, the May 2 uptrend is a subwave of 1st-wave uptrend that began on April 13, the initial subwave of a 5th-wave uptrend that began on that date. When that 5th-wave uptrend is complete, it will also mark the end of the 3rd-wave uptrend that began on February 21.

At this point we’re looking at waves that can make or break market optimism for months or a year.

The Chart

I’ve pulled the chart back for a broader view, tracking the uptrend that began in late January.

The chart labeling follows the wave number with a subscript in curly brackets denoting the wave’s relationship with the Intermediate degree within the fractal structure of the chart. The current Intermediate degree is wave 5{0}, which began in December 2018.

The waves discussed above, from smaller to larger, are wave 5{-9} within wave 1{-8}, a subwave of wave 5{-7} within wave 1{-6}, which in turn is a subwave of wave 5{-5}, an uptrend that began on April 18, which is a subwave of wave 3{-4}, an uptrend that began on February 21.

What are the alternatives? An ambiguity in the chart has been with us for some time. This section is largely unchanged from the day before. In my principal analysis, I’ve counted the 5th wave that began on May 2 (wave 5{-7} on the chart) as being in its 1st subwave (wave 1{-8} on the chart). It’s possible that the subwave of wave 1{-8} (wave 4{-9} on the chart) is in fact the immediate subwaves of wave 5{-7} (wave 4{-8}), meaning that the 5th-wave uptrend is further along than the principal analysis would have it.

[S&P 500 E-mini futures at 3:30 p.m., 190-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}.
• Wave 1{-8} is in its next-to-the-last subwave, wave 4{-9}.

Alternative Analysis:

• Wave 1{-6} is underway and is in its final subwave, wave 5{-7}, which is in its next-to-the-last subwave, wave 4{-8}.
• Wave 4{-8} is in its 1st subwave, wave A{-9}.

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 10, 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

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.