3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell sharply by more than 100 when the Federal Open Market Committee lowered the Fed Funds rate by 25 basis points,

Elliott Wave Theory: The decline is the final subwave — wave C — within the 2nd-wave downward correction that began on December 16.

The declined resolved this morning’s ambiguities, discussed in the the “What are the alternatives?” section, in favor of the Alternative Analysis.

When wave C is complete, it will be the end of the correction and the beginning rising wave 3, a wave that usually covers the greatest distance of any subwave within an impulse wave.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, traveling from the 6110s to the 6140s. It then began to decline a bit more than an hour before the opening bell.

The Federal Open Market Committee announces its decision on changing interest rates at 2 p.m. New York time, and Fed Chair Jerome Powell will begin a news conference at 2:30 p.m.

What does it mean? Elliott Wave Theory: The rise is the middle subwave, wave B, within the 2nd-wave downward correction that began on December 16.

The first subwave, falling wave A, has completed five subwaves, meaning the corrective pattern is a Zigzag. The following wave B requires three subwaves, and wave C, five subwaves.

I don’t see three subwaves within wave B, and I’m treating the rise overnight as being the first subwave, and the subsequent decline as the second subwave within wave 2. The final subwave, declining wave C, will have five subwaves.

[S&P 500 E-mini futures at 3;30 p.m., 50-minute bars, with volume]

What are the alternatives? An alternative view would see the overnight rise as the entirety wave wave B and the decline as the start of wave C. That scenario would be proportional to other waves in the correction. But without some clarity in the subwave count — three subwaves — I’m sticking with my principal analysis, described above.

What does Elliott wave theory say? Here are the waves that underly the analyses, updated to conform to the price movement during the session,.

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 final subwave, uptrending wave 5{-10}.
• Wave 5{-10} is in its final subwave, wave 5{-11}, which appears to have completed its middle subwave, wave 3{-12}.
• Rising Wave 5{-13} is now underway and is in its second subwave, wave 2{-14}.
• Wave 2{-14} is in its final subwave, declining wave C{-15}.

Former Principal Analysis:

• Rising Wave 5{-13} is now underway and is in its second subwave, wave 2{-14}.
• Wave 2{-14} is in its middle subwave, rising wave B{-15}.

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)
• 5{-10} (unnamed), 11/4/2024, 5824.25 (up)
• 5{-11} (unnamed), 11/19/2024, 5933 (up)
• 5{-12} (unnamed), 11/27/2024, 6000.25 (up)
• 5{-13} (unnamed), 12/13/2024, 6041.25 (up)

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, December 18, 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.