3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose into the 5480s during the session and then drew back into the 5460s. This morning’s Elliott Wave Theory analysis is unchanged: The final subwave within the 4th-wave upward correction that began on August 5 continues. The session rise brought the 4th-wave close to the 78.6% Fibonacci retracement level.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded sideways in a narrow range overnight until the latest Consumer Price Index data was released an hour before the opening bell. At that point the price whipsawed between the 5470s and the 5440s before coming to a rest in the 5460s, about where it had been before the release.

What does it mean? Elliott Wave Theory, when applied to the chart, sees the brief overnight drama as being a subwave buried in the final subwave of the 4th-wave upward correction that began on August 5.

The correction is of fairly low degree. When it is complete, a 5th wave downtrend will follow, bringing to an end the final subwave of a larger 4th-wave downward correction that began on July 11.

The end of that larger correction will be followed by a 5th-wave uptrend that will carry the price back into the 5700s or higher.

And the end of that 5th wave will trigger the end of a series of four other 5th waves of increasing size, which will also be the end of the wave that encompasses all that’s happening on the chart, a 3rd-wave uptrend that began on February 21 from 4959. A sizable 4th-wave downward correction will follow.

All in all, it should be quite a roller-coaster ride.

The whipsaw left the price midway between between the 61.8% and a 71.6% Fibonacci retracement levels of the 3rd-wave that preceded wave 4. The Fibonacci ladder is shown on the chart in read.

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

What are the alternatives? Unchanged from yesterday. We’re at a point where the present low-degree C wave — wave C{-12} — is routinely reaching new highs, and in high carries the possibility that it is the end of wave C and of its parent 4th wave. Only the price movements that follow each high can tell us whether wave C has in fact ended.

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}, wave 4{-9}, a downward correction, is in progress.
• Wave 4{-9} is in its final subwave, wave C{-10}.
• Wave C{-10} is in its next-to-the-last subwave, wave 4{-11}, which in turn is in its final subwave, wave C{-12}.

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, August 14, 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.