3:30 p.m New York time

Half an hour before the closing bell. The S&P 500 futures has swung between the 5510s and the 5530s during the session as what Elliott Wave Theory sees as a 4th-wave downward correction continues.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to trade in a narrow range overnight, between the low 2010s and the high 2020s.

What does it mean? Unchanged from yesterday, and so I’ll be brief. Elliott Wave Theory sees the sideways movement as part of a 4th-wave downward correction, within a larger 5th-wave uptrend. The waves are labeled on the chart as wave 4{-8} and wave 5{-7}.

Internally, the 4th wave is in its third and final subwave, wave C, which is labelled wave C{-9} on the chart.

The labels show the wave numbered followed by a subscript, in curly brackets, showing the label’s position in the fractal structure of the chart relative to the Intermediate degree. The Intermediate wave now in progress is wave 5{0}. Under this labeling system, wave 4{-8} is eight degrees below Intermediate and wave 5{-7} is seven degrees below Intermediate.

What are the alternatives? Also unchanged. 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 9:35 a.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.
• Wave 4{-8} is in its final subwave, wave C{-9}.

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 25, 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.