3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during the session, reaching into the 5290s as the last subwave, wave C, of the 4th-wave downward correction continued. Wave 4 has been underway since May 16 and the C wave, since May 23.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures kept to a narrow range after trading resumed overnight following a long holiday weekend in the U.S, remaining in the 5320s and 5330s,

What does it mean? The 4th-wave downward correction continues and is in its final subwave — declining wave C. The correction began on May 16 and the C wave, on May 23.

Wave C remains below its starting point, 5368.25 and and its low point is in the neighborhood of the 4th subwave within the preceding 3rd wave — 5338 to 5328 — which is the range in which 4th-wave corrections usually end.

This correction is a small one, but like all 4th waves, it has large implications for the market’s future course.

A counter-trend 4th wave is the next-to-the-last wave within whatever larger trend it’s part of. It is followed by a 5th wave moving in the direction of the trend. When the 5th wave is complete, it’s also the end of the parent wave. And if the grandparent wave is also a 5th wave, it means the completion of that wave and its parent (calll it the great-grandparent).

The 5th wave that will follow the present 4th wave has a 5th wave parent and grandparent. The great-grandparent wave is a 3rd wave and will be followed by a 4th-wave downward correction three degrees higher than the present correction.

What are the alternatives? The principal analysis puts the 4th-wave correction and its subwaves within a still larger 1st wave that began on April 18. Maybe. It’s also possible that there is no still larger 1st wave, and instead, that the four smaller waves on the chart below wave 1 — labeled 4{-10}, 5{-9}, 5{-8} and 3{-7} — are one degree larger, eliminating the next higher degree. In that case, wave 1{-6} ended on April 23. See the Reading the Chart section below for an explanation of wave labeling, including the curly brackets.

[S&P 500 E-mini futures at 3:30 p.m., 115-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 middle subwave, wave 3{-7}, which is in its final subwave, wave 5{-8}.
• Wave 5{-8} is in its final subwave, wave 5{-9}, which is in its next-to-the-last subwave, wave 4{-10}.
• Within wave 4{-10}, the final subwave, wave C{-11}, is underway.

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 28, 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.