3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures attained an overnight peak 5803.25 as the opening bell approached, and then fell during the session into the 5740s, fluctuating narrowly thereafter.

The session-opening Elliott Wave Theory analysis remains unchanged. A 2nd-wave upward correction continues within a larger 5th-wave downtrend that began on September 26.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose sharply into the 5790s upon the release of the Employment Situation Report for September.

What does it mean? Elliott Wave Theory sees the movement as a 2nd-wave upward correction within the initial subwave of a 5th-wave downtrend that began on September 26.

Under the Elliott Wave rules, the rising 2nd wave must remain below the start of the preceding 3rd wave — 5830. If it were to move above that level, then something else is going on and the analysis will be redone.

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

What are the alternatives? There are two.

Alternative #1:

Occasionally a subwave will take a compound form, containing two or three corrective patterns, each composed of three subwaves — waves A, B and C — and connected to the prior pattern by a wave called an X wave. This would mean that the 4th-wave upward correction is still underway and would delay the start of the following 5th wave downtrend.

Alternative #2:

The 4th-wave upward correction that began on September 6 is still underway and will soon reverse, reaching above the September 26 high, 5830. The lower it goes, the less likely this scenario becomes.

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}, which is within wave 5{-10}.
• Wave 5{-10} is in its initial subwave, declining wave 5{-11}, which in its 1st subwave, declining wave 1{-12}, which in turn is in a 2nd-wave upward correction, wave 2{-13}.

Alternative #1:

• Wave 4{-11} a rising correction, is taking a compound form,
• The three subwaves — waves A{-12}, B{-12} and C{-12} — have completed the first corrective pattern. A declining connector wave — wave X{-12} is underway.

Alternative #2:

• Wave 4{-11} continues to decline as a subwave of wave C{-12}.
• When the subwave is complete wave C{-12} within wave 4{-11} will continue to rise.

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, October 4, 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.