3:30 p.m. New York time

Half an hour before the closing bell. In this morning’s analysis I discussed Elliott Wave Theory’s insights into the near-term possible market responses to the November 5 elections outcomes.

This afternoon, I’m going to broaden it out to a long-term analysis, continuing to use the S&P 500 E-mini futures.

At the smallest level this morning, the market has clarified that at rising 4th wave within the falling C wave ended on November 1, and the final subwave within wave C in now underway, a falling 5th wave. When the small 5th wave ends, so will the parent C wave and the 4th-wave downward correction that began on October 17 and contains them all.

So on election day, the S&P 500 and its derivatives will have a downward tendency, but it won’t last long.

At this point, I’m will be using the wave labels as they appear on the chart: A wave number followed by a subscript in curly bracks given the wave’s degree in the fractal , relative to the Intermediate degree 5th wave — wave 5{0} — that began in December 2018. See the ‘Reading the Chart” section below for more detail.

The small 5th wave discussed at the start of this post is wave 5{-12}, a subwave of wave C{-11}, the final subwave of wave 4{-10}. Wave 5{-10} will begin its rise at that point, and Elliott Wave conditions will change..

Afterward, the Elliott Wave conditions change. Wave 4{-10) now approaching its end is two degrees higher than the small wave 5{-12} close to bringing wave 4{-10} to a close. Uptrending wave 5{-10} will follow. The preceding wave 3{-10} ran from October 7 to October 17, covering around 200 points.

The end of wave 5{-10} will trigger a cascade that will cascade through two degrees, ending waves 5{-9} and 5{-8}, and also wave 3{-7}, which began on August 7 from 5182.

A 4th-wave downward correction taking back a portion of gains that covered 1,000 points or so. That’s a significant downtrending movement.

Elliott Wave Theory is filled with ambiguities. While realizing that weakness, I’ve also found that those waves provide some insight into what lies ahead.

I see short-term rising tendency immediately after the election, but it will be short-lived, followed by a significant downtrend.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures resumed trading by stepping gently into a week that by it’s end had the potential to reveal the nature of the new American future. And also, as a sideshows, the Federal Reserve’s latest on interest rates.

What does it mean? The presidential election, on Tuesday, and the Federal Open Markets Committee’s new rates, on Thursday, both have the potential to be followed by large impact on the markets.

None of us can no for certain how that impact will play out. But with the help of Elliott Wave Theory, we can gain an understanding of the future course of the S&P 500 and its derivatives.

The S&P 500 E-mini futures continue to work through the 4th-wave downward correction that began on October 17. The present subwave is wave C, the final subwave, which in turn is in its next-to-the-subwave, rising wave 4, which is in its descending B wave.

So there’s leeway for a number of immediately directional responses, although the falling 4th-wave correction from mid-October is dominant. That 4th-wave is nearing its end, and a rising 5th-wave will follow, which will carry the price up by a significant amount, by at least around 200 points and most likely higher in the near-term aftermath of the election and Fed events.

But as always, each bullish Elliott Wave is followed by a bear wave, which in turn leads to another bull wave. And each wave has subwaves built by its own bull and bear subwaves.

So what’s future? For the near term it appears to me that an upward response is most likely, but it won’t a simple structure, and we really can’t tell from the chart whether a rise or any movement will be fast or slow, large or small.

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

What are the alternatives? None at present.

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 final; subwave, uptrending wave 5{-8}.
• Wave 5{-8} is in its final subwave, wave 5{-9}, which is in its next-to-the-last subwave, corrective wave 4{-10}, which is in its final subwave, wave C{-11}.
• Wave C{-11} is in its next-to-the-last subwave, wave 4{-12}.

Long-term Waves.

These are the waves currently in progress under my principal analysis. Each line on the list shows the wave number, with the subscript in curly brackets, the traditional degree name, the starting date, the starting price of the S&P 500 E-mini futures, and the direction of the wave.

• S&P 500 Index:
• 5{+3} Supercycle, 7/8/1932, 4.40 (up)
• 5{+2} Cycle, 12/9/1974, 60.96 (up)
• 5{+1} Primary, 3/6/2009, 666.79 (up)
• 5{0} Intermediate, 12/26/2018, 2346.58 (up)
• S&P 500 Futures
• 5{-1} Minor, 10/27/2023, 4127.25 (up)
• 3{-2} Minute, 10/27/23, 4127.75 (up)
• 3{-3} Minuette, 10/27/23, 4127.75 (up)
• 5{-4} Subminuette, 4/18/2024, 4963.50 (up)
• 5{-5} Micro, 8/5/2024, 5120 (up)
• 1{-6} Submicro, 8/5/2024, 5120 (up)
• 3{-7} Minuscule, 8/7/2024, 5182 (up)
• 5{-8} (unnamed), 9/6/2024, 5394 (up)
• 5{-9} (unnamed), 10/2/2024, 5724 (up)
• 4{-10} (unnamed), 10/17/2024, 5927.25 (down)

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, November 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.

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Based on a work at www.timbovee.com.