3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures reached 5918.25 early in the session and the reversed, rising back into the 5970s.

Elliott Wave Theory can interpret the chart in two ways: Either the 4th-wave correction is a Zigzag and session low point is the end of the third of five subwaves within the correction’s wave A. Or the correction is a Flat and the low is the end of the A wave’s final subwave. In the latter case, the A wave has ended and wave B is underway.

I’ve chosen to use the second scenario — wave A is over and wave B has begun. But I could just as easily gone with the first one — wave A continues. There’s no way to know for sure from this chart. If the price moves below the session low, 5918.85, then wave A continues. If instead it moves higher, then wave B has begun.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures drifted lower after trading resumed overnight, beginning a sharp decline two hours before the opening bell.

What does it mean? Seen through the lens of Elliott Wave Theory, the sharp decline is the next-to-the-last subwave — wave 4 –within the final subwave — wave C — within the 2nd-wave upward correction that began on December 20.

The rising 2nd wave is in turn a subwave of a 1st waves that began on December 16, the smallest of a nested series of five 1st waves within a falling A wave, the initial subwave within a 4th-wave downward correction. It’s part of a significant decline that began with the completion on December 16 of a nested series of 5th waves within a rising 3rd wave that began on August 7 from 5182.

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

What are the alternatives? The decline resolved the ambiguity with which we closed the week. The December 26 peak was the end of wave 3 within wave C.

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 4{-7} is in its initial; subwave, uptrending wave A{-8}.
• Wave 1{-8} is in its initial subwave, wave 1{-9}, which is in its final subwave, uptrending wave 5{-10}.
• Wave 1{-10} is in its initial subwave, as are waves 1{-11}, 1{-12}, and 1{-13}.
• Wave 2{-14} appears to be underway and is in its final subwave, wave C{-15}
• Wave C-15) is in its next-to-the-last subwave, wave 4{-16}.

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)
• 4{-7} Minuscule, 12/16/2024, 6163.75 (down)
• A{-8} (unnamed), 12/16/2024, 6163.75 (down)
• 1{-9} (unnamed), 12/16/2024, 6163.75 (down)
• 1{-10} (unnamed), 12/16/2024, 6163.75 (down)
• 1{-11} (unnamed), 12/16/2024, 6163.75 (down)
• 1{-12} (unnamed), 12/16/2024, 6163.75 (down)
• 1{-13} (unnamed), 12/16/2024, 6163.75 (down)
• 2[-14} (unnamed), 12/20/2024, 5866 (up)
• C{-15} (unnamed), 12/23/2024, 5965 (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 30, 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

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.