3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to meander within a narrow range during the session, reaching into the 5550s, then quickly retreating into the 5520s.

The 4th-wave downward correction that began on June 20th continues.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures trended sideways after trading resumed overnight, zigzagging between the 5510s and the 5540s.

What does it mean? Elliott Wave Analysis sees the decline as a continuation of the 4th-wave correction that began on June 20, a subwave of the uptrending 5th wave that began on June 11.

The bigger picture is unchanged from last week. Within the fractal structue of the chart, the 5th wave from June 11 is embedded in three nested 5th waves, each larger than the one before. The whole structure is embedded in a 3rd wave that began on February 21.

When the smallest of the 5th waves noted above is complete, it will be the end of each of the three nested 5th waves and of the still larger 3rd wave. A 4th wave downward correction will follow. If it is typical, it will end within the range of the 4th wave within the preceding 3rd wave, a range running from the 5250s to the 5160s. A tendency isn’t a rule. It would be unsurprising if the 4th wave ended above or below that range.

What are the alternatives? Also unchanged from last week. There may be a 1st wave on the chart, between wave 5{-6} and 5{-5}. If that’s the proper count, then it would delay the onset or the 4th-wave downward correction, wave 4{-4}. See the June 18 Trader’s Notebook for a more detailed discussion.

[S&P 500 E-mini futures at 3:30 p.m., 1-hour 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 final subwave, uptrending wave 5{-7} and its subwave, downtrending wave 4{-8}, a corrective wave.

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 24, 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.