3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures have continued to rise during the session, coming close to 5630 before reversing slightly. Elliott Wave Theory: The 5th-wave uptrend that began on July 19 continues and is in its 1st subwave.

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, approaching 5620 as the opening bell drew near.

What does it mean? The 5th-wave uptrend that began on July 19 continues and is in its initial subwave, according to Elliott Wave Theory. The trend has progressed sufficiently so that I’m comfortable removing the July 22 alternative analysis, which concluded that the previous 4th is underway. It’s not.

The next milestone ahead for wave 5 is to exceed the price where the prior 3rd wave ended, 5707.75. I’ve marked that level on the chart with a dashed line. Typically, a 5th wave will move beyond the 3rd wave’s endpoint, although not always. A rise above that level suggests that this wave 5 isn’t truncated. Whether it will be extended is still an open question.

The financial press will focus on the moment the price moves above 5721.25, the S&P 500 future’s all-time high. In Elliott Wave Theory, that point is the peak of a subwave of the preceding 4th wave, wave B, and so is of little significance to the journey wave 5. It could end up being a pause, the start of a small correction, perhaps a 4th wave following the trend’s 3rd subwave, but perhaps not.

The present 5th wave is rather small in the general scheme of things, two degrees below the Minuscule degree, the smallest degree in Elliott Wave Theory to have a name. Its end of the 5th wave will trigger the completion of a series of larger waves stretching up five degrees, to Subminuette degree within the fractal structure of the chart and the beginning of a large 4th-wave downward correction, also of Subminuette degree. See the “Looking Ahead” section of yesterday’s Trader’s Notebook for a detailed discussion

[S&P 500 E-mini futures at 3:35 p.m., 2-hour bars, with volume]

What are the alternatives? None at present. Ambiguities will surely develop, as they always do.

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}, uptrendng wave 5{-9}, is in progress.
• Wave 5{-9} is in its initial subwave, wave 1{-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 23, 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.