3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell to 5329 during the session and then rose to 5385.50, exceeding the overnight high. The higher triggered Alternative #1: The rising 3rd subwave within the larger 5th-wave uptrend that began on May 31 is underway, replacing this morning’s principal analysis that saw the 3rd subwave having ended and the 4th subwave having begun.

I’ve updated the lower chart, showing the larger 5th-wave uptrend it in its entirety, so far.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures quickly rose to 5380 when the latest employment/unemployment data was published, and hour before the opening bell, and swiftly fell back into the 5330s.

[S&P 500 E-mini futures at 8:35 a.m., 133-tick bars]

What does it mean? The rise came first and then the fall, and that made a difference in application of Elliott Wave Theory to the chart. Under the principal analysis, the peak, 5380, is the end of the 3rd subwave within the 5th-wave uptrend that began on May 31. The subsequent decline is the beginning of the 4th subwave within the larger wave 5.

If the wave reverses quickly and moves above 5380, then Alternative #1 comes into play.

What are the alternatives?

Alternative #1: It’s possible to see the rise as part of the 4th subwave. In that case the peak at 5380 would be the end of the B subwave within the larger 4th wave correction, and the still larger 3rd wave is still underway. On the chart under this scenario, wave 3{-7} is changed to wave B{-9} within wave 4{-8} within ongoing wave 3{-7}.

Alternative #2: Also, its possible that the larger 5th subwave is actually a degree smaller, as are all of its subwaves, and that they are part of a 1st wave with a still larger 5th wave. On the chart, the larger 5th wave changes from 5{-6} to 5[-7}, wave 1{-6} is inserted into the line-up, They’re all subwaves if wave 5{-5}.

[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 5{-6} is underway and is in its middle subwave, rising wave 3{-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, June 7, 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.