3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures traced a sideways course during the session, whipsawing from the 5620s to the 5660s and back into the 5610s as part of a very small subwave correction. The 5th-wave uptrend that began on August 5 continues to work through its early phase.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, from the 5610s to the 5630s.

What does it mean? When Elliott Wave Theory is applied to the chart, it shows the rise to be part of the initial subwave of an uptrending 5th-wave that began on August 5. Internally, the 5th wave is in wave 1, which is in its middle subwave, wave 3. The count within wave 3 is less clear, but it appears to be in its final subwave, wave 5.

What happens next? The uptrending 5th wave that began on August 5 is a pivotal movement within the fractal structure of the chart, as 5th-waves tend to be. When it is complete, it will cascade up the fractal structure, also marking the end of a series of 5th waves of increasing size across five degrees, or levels.

After that, a long-lasting downward correction, built from the usual uptrend and downtrends that are are the building blocks of any Elliott wave of any size.

[S&P 500 E-mini futures at 3:30 p.m., 70-minute bars, with volume]

What are the alternatives? The rising 3rd wave on the chart could still be in its 3rd subwave rather than in its 5th.

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 5{-2}, 5{-3} and 5{-4} are underway, as is wave 5{-5}.
• Wave 5{-5} is in its initial subwave, wave 1{-6}, which in turn is in its middle subwave, wave 3{-7}.
• Wave 3{-7} appears to be in its next-to-the-last subwave, wave 4{-8}, a downward correction.

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 21, 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.