3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures traded sideways during the session, remaining within a narrow range. This morning’s principal analysis, using Elliott Wave Theory, is unchanged: The 4th wave downward correction that began on May 16 continues to work through its end game.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell overnight, back into the 5260s.

What does it mean? In Elliott Wave Theory terminology, the decline is a small part of the final subwave of the downward correction that began on May 16. The final subwave is wave C, and it in turn is in its 4th subwave of five, a declining B wave that began on June 3. Itis a subwave within an upward correction that began on May 31.

What happens next? The small declining B wave within the upward correction will be followed by a rising C wave that will complete the 4th-wave upward correction, which will be followed by a downtrending 5th wave that will complete the final wave of the larger 4th-wave downward correction and the correction itself.

A 5th-wave uptrend will follow, and when complete, will be the end of two 5th waves of each larger than the other, and also a still larger wave 3, which began on May 2. The future 5th wave will be labeled wave 5{-9} on the chart — the wave number followed by a subscript, in curly brackets, showing how many degrees the wave is from Intermediate degree within the fractal structure of the chart. The Intermediate degree,, wave 5{0}, began in December 2019. Wave 5{-9} is nine degrees lower than the Intermediate degree.

5th-wave brats: Fifth waves are the unpredictable brats within a trend. They tend to move above the end the preceding 3rd wave — 5349 in this case — but sometimes they fall short, an event called “truncation”. And sometimes they continue for an ubexpectedly greater distance before reaching the end, a condition called “extension.”

And there is no way to tell ahead of time whether a 5th wave will be truncated, extended, or a normie.

Small-wave ambiguity. Back to the small waves within the 4th-wave upward correction. It’s possible to label the subwaves in several different ways. I’ve chosen the labelling that seems most likely, but others aren’t out of the question. The only response available to an analyst, at this point, is to quietly mutter, “Time will tell.”

[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 wave 5{-5}.
• Wave 3{-6} is underway and is in its middle subwave, wave 5{-7}, which is in its final subwave, wave 5{-8}.
• Wave 5{-8} is in its next-to-the-last subwave, wave 4{-9}, a downward correction.
• Within wave 4{-9}, the final subwave, wave C{-10}, is underway and is in its next-to-the-last subwave, wave 4{-11}.
• Wave B{-12} is underway within wave 4{-11}.

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, June 4, 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

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Based on a work at www.timbovee.com.