3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures returned to the 5640s during the session. Elliott Wave Theory: The final subwave, wave C, of the 4th wave downward correction that began on August 22 continues.

This morning’s analysis is unchanged.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose into the 5640s overnight and then fell rapidly into the 5610s.

What does it mean? The decline, according to Elliott Wave Theory, is a C wave, the final subwave in the 4th-wave downward correction that began on August 22. Wave C will have five subwaves and presently is tracing through its 3rd subwave.

What happens next? There are two possibilities after wave C is complete, and possibilities within each possibility.

• Most of the time, wave C is the end of the correction. In this case, the correction — wave 4 — will be followed by an uptrending 5th waves that, if typical, will move into the 5660s, beyond the beginning of wave 4, and possibly higher.
  • Some 5th waves are truncated and fail to reach the starting point of the preceding 4th wave.
  • Some 5th waves are extended and move much further beyond the beginning of the 4th wave, traveling a greater distance than proportionality suggested by the context of the wave.\
• Some corrective waves, especially 4th waves, form a compound structure, containing two or three A-B-C wave patterns. If that were to occur, then the present declining C wave within wave 4 would be followed by a rising X wave and then by another declining A wave, which will be followed by waves B and C. If the compound structure takes a triple form, there will be a second X wave, followed by a third A-B-C pattern.
  • The 5th-wave uptrend will follow the end of the compound 4th-wave correction.

[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]

What are the alternatives? None at present. Without a doubt, they will develop

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} is in its next-to-the-last subwave, wave 4{-8}, a downward correction.
• Wave 4{-8} is in its final subwave, wave C{-9}

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 27, 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.