3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session into the 5380s, remaining below the June 7 high of 5385.50. A rise above that level would suggest that the 4th-wave downward correction that began that high has ended, and that a 5th-wave uptrend has begun.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures drifted lower overnight, from the 5370s to the 5350s.

What does it mean? Elliott Wave Theory sees the decline as a small step within a 4th-wave downward correction that is a subwave of a 5th-wave uptrend that began on May 31. The 4th wave, which began on June 7, will have three subwaves and appears to be in the final subwave, declining wave C, although its possible that that the decline is a pullback within the preceding wave B, which is a rising wave.

It is the 5th-wave uptrend mentioned above that is the main driver of the chart. The 4th-wave downtrend, when complete, will be followed by a final wave that will complete the larger 5th-wave uptrend, and its parent wave, a larger 5th-wave uptrend that began on April 18. One degree high, and the end of the 5th waves will also be the end of a 3rd wave that began on February 21 and the beginning of a significant 4th-wave downward correction.

What is the alternatives? 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., 100-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 next-to-the-last subwave, corrective wave 4{-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 11, 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.