3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to rise during the session, reaching 6000 as the closing bell approached.

Elliott Wave Theory: The 4th-wave upward correction that began on January 13 continues and is in its 3rd subwave.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded close to a straight sideways line overnight until an hour before the opening bell. At that point, the latest Consumer Price Index, a measure of inflation, was released. The price rose from the 5901.25 to 25 cents below 5980 in the span of a minute, and stayed in the upper part of the range thereafter.

What does it mean? Elliott Wave Theory analysis places the price in the 4th-wave upward correction that began on January 13, a subwave of the downtrendng 5th wave that began on January 6. Within the correction. The rise from mid-January shows three clear subwaves, waves A, B and C or possibly waves 1, 2 and 3.

The uncertainty lies in understandng what follows wave C. There are alternatives.

What are the alternatives? Which alternative is correct depends upon the form being taken by the parent wave 4.

If it’s a Zigzag, wave 4 will have five subwaves, and the present wave 3 will be followed before two more waves before the correction is complete.

If it’s a Flat, wave 4 will have three subwaves, and the present wave C will be the final subwave within the correction.

Wave 4 corrections tend to be Flats, but not always. So the question is up in the air and as the 3rd subwave ends will create a bit of confusion.

Whichever the form, a rule of Elliott Wave Theory says that a 4th wave cannot move beyond the end of wave 1. In this case, that level is 6004. If it does cross that line, then its not really a 4th wave and the analysis will be redone.

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

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, which is uptrending wave A{-8}, if wave 4{-7} is a Flat structure, with three subwaves, or wave 1{-8} if it is a Zigzag structure, with five subwaves. (I’ll assume Flat as the list continues, since that’s more common within 4th waves)
• Wave A{-8} is in its intial subwave, wave 1{-9}, as are waves 1{-10}, 1{-11}, 1{-12}, 1{-13} and 1{-14}.
• Wave 5{-15} is presently underway and is declining. Within it, wave 4{-16} is rising and is in its 3rd subwave.

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)
• 1{-14} (unnamed), 12/16/2024, 6163.75 (down)
• 5{-15} (unnamed), 1/6/2025, 6068.25 (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, January 15, 2025

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.