3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose into the 5580s during the session and then fell, reaching into the 5520s as the closing bell approached.

Elliott Wave Theory: The session high, 5585, marked the end of the middle subwave of a 4th-wave downward correction that began on June 20 and the beginning of the final subwave, declining wave C.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose from the 5540s to the 5570s overnight, peaking with the releasseof the Personal Consumption Expenditures (PCE) index, a measure of inflation, an hour before the opening bell. The price then swiftly reversed to the 5550s.

What does it mean? The rise bought a degree of clarity to the Elliott Wave Theory view of the chart, and I’ve adjusted the analysis accordingly. The 4th-wave downward correction that began on June 20 is in its 2nd of three subwaves, rising wave B. The B wave will bne followed by a declining C wave that will complete the correction. An uptrending 5th wave will follow.

All of this is happening within a larger uptrending 5th wave that began on June 11.

What are the alternatives? 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., 180-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 final subwave, uptrending wave 5{-7} and its subwave, downtrending wave 4{-8}, a corrective wave.
• Wave 4{-8} is in its middle subwave, wave B{-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 28, 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.