3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures has risen above the overnight high during the session, into the 5710s. Elliott Wave Theory: Within the 4th-wave downward correction that began on July 11, I’ve moved the end point of the rising B wave — the middle subwave — to the session high, and consider the falling C wave — the final subwave — to have begun from that point. Otherwise, the morning analysis is unchanged.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight into the 5690s and then pulled back slightly.

What does it mean? The small downward correction that began on July 11 is now in its final subwave, according to Elliott Wave Theory analysis. The correction will be followed by a small 5th-wave uptrend that, if typical, will take a week or so to reach completion.

At that point, things get interesting. When the small 5th-wave uptrend reaches its endpoint, it will also be the end of a series of 5th waves of increasing degree within the fractal structure of the chart, up to a 5th wave four degrees higher. Up one more degree, and a 3rd wave that began in February will also reach its end, and a declining 4th-wave correction, far larger than the one now underway, will begin.

[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]

What are the alternatives? Unchanged for the past few weeks. 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. As the uptrend progresses, this alternative is appearing to be less likely.

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}, which in turn is in its final subwave, uptrending wave 5{-8}.
• Within wave 5{-8}, a downward correction, wave 4{-9}, is in progress.
• Wave 4{-9} is in its final subwave, wave C{-10}

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, July 15, 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

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Based on a work at www.timbovee.com.