3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures moved higher during the session, to 5665.25, and then fell sharply, so far reaching back into the 5580s.

Elliott Wave Theory analysis: I’ve interpreted the rise early in the session as the final subwave within the middle subwave, wave 3, within the larger 3rd wave of the 1st-wave uptrend that began on August 5. The session peak ended the smaller 3rd wave and began a subwave downward correction of low degree.

On the chart, the waves are labeled as follows, smaller to larger: Wave 3{-8} within wave 3{-7} within wave 1{-6}. Wave 3{-8} ended at the session peak, and wave 4{-8} has begun.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, from the 5630s to the 5660s so far.

What does it mean? The rise, viewed through the lens of Elliott Wave Theory, is a sign that yesterday’s very small 4th-wave downward correction has ended and the uptrend has resumed: Wave 3, the middle subwave with the larger wave 1, the initial subwave within a still larger 5th-wave uptrend that began on August 1.

The wave numbers on the chart are followed by a subscript in curly brackets denoting how many degrees the wave is from Intermediate degree. The present Intermediate wave is wave 5{0}, which began in December 2018.

The chart numbers for the waves discussed above, from smaller to larger: Wave 5{-8} within wave 3{-7} within wave 5{-6}.

[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, wave 3{-7}, could still be in its 3rd subwave, wave 3{-8}, rather than in its 5th, wave 5{-8}. The chart lacks clarity at the smallest degree under discussion.

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 final subwave, wave 5{-8}, an uptend.

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 22, 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.