3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell into the 5370s during the session and then rose sharply, back into the 5610s so far.

Elliott Wave Theory: The movement is taking place within a C wave, the final subwave within the late-August 4th-wave downward correction. C waves have five subwaves, and although the details are a bit ambiguous, it looks to me as though the decline is the 3rd subwave within wave C.

A very low degree rising 4th subwave will follow, and then a decline, the 5th and final subwave within wave C.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose from the 5630s to the 5650s overnight, pulling back slightly as the opening bell approached.

What does it mean? The overnight fluctuations, in terms of Elliott Wave Theory, were part of the final subwave — wave C — within the 4th-wave downward correction that began on August 22. In yesterday’s Trader’s Notebook, I ran through the possible permutations wave C and its parent, wave 4, might take, and what comes after wave 4 reaches its end, and I refer the reader to that discussion. So far today, nothing in the analysis has changed.

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

What are the alternatives? None at present, beyond those in yesterday’s discussion of the possibilities. Without a doubt, new ambiguities 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 28, 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.