Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 peaked during the session and then declined to below the starting point of the upward correction that began on September 23. The correction, wave 4{-14}, began from 3660.25 on the futures and peaked today at 3733.

Under the principal analysis, that peak completed wave C{-15} and its parent, wave 4{-14}. The correction having ended, wave 5{-14} is underway.

Under the alternative analysis, the peak completed wave C{-15} and the first corrective pattern within wave 4{-14}, and the subsequent decline is a connector, wave X{-15}, that will be followed by a second corrective pattern as wave 4{-14} continues. The rules governing Elliott wave analysis allow a 4th wave to fall below the wave’s starting point (in contrast to 2nd waves, where such a break below is disallowed).

The more the price drops, the greater the likelihood of the principal analysis. The more the price rises from this point, the greater the likelihood of the alternative analysis.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued to trade sideways overnight, staying within a narrow range centered on the 3700 price level.

What does it mean? The relatively small upward correction that began on September 23 continues and is in its third and possibly final leg. When the correction is complete, the downtrend that began on September 22 will resume.

What is the alternative? If the correction forms a compound structure, then the third leg of the corrective pattern will be followed by a connector wave to the downside, and then by a second corrective pattern.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

What does Elliott wave theory say? Rising wave C{-15} within the upward correction, wave 4{-14} is underway.

Under the principal analysis, wave C{-15} will be followed by downtrending wave 5{-14}, the final wave within wave 5{-13}, which began on September 22.

Under the alternative analysis, wave C{-15} will be followed by downward wave X{-15} and then a second corrective pattern and afterward perhaps by a third. When the compound correction, wave 4{-14}, is complete, then wave 5{-14} will begin its decline,

All of this is happening within downtrending wave 5{-12}, which began on September 20, the final wave within wave 5{-11}, which began on September 15. See the “We Are Here” section, below, for a list of current waves larger than the {-11} degree.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 27, 2022

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
Creative Commons 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued trading in a narrow range. The pattern fits that described in this morning’s principal analysis: The first wave of an upward correction that began on September 23 is underway and has completed its rising first leg and perhaps its declining second leg, all part of a correction with three segments.

In Elliott wave terminology, from small to larger, wave A{-15} within the upward correction, wave 4{-14}, ended at the overnight high with five waves internally. That suggests that the correction is taking the form of a Zigzag. Wave B{-15} will have three internal waves, and the final segment, wave C{-15}, will have five internal waves and will likely end the correction, unless it forms a compound structure. The correction is part of downtrending wave 3{-13}, which began on September 21, the middle wave with downtrending wave 5{-12}, which began on September 20.

No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures remained within a narrow range after trading resumed Sunday evening, between a high of 3718.25 and a low of 3671.50.

What does it mean? A smaller upward correction within a downtrend that began on September 22 is underway, and the decline will resume shortly, one the correction is complete.

What is the alternative? The overnight peak might well have ended the correction’s third and final wave, and if that’s how the chart plays out, then the downtrend has resumed and is in its 5th and final wave.

[S&P 500 E-mini futures at 3:30 p.m., 40-minute bars, with volume]

What does Elliott wave theory say? The downtrend is wave 5{-13}, which began on September 22 from 3833. The internal correction, now underway according to the principal analysis, is wave 4{-14}. According to the alternative analysis, upward wave 4{-14} is complete and downtrending wave 5{-14} within its parent, downtrending wave 5{-13}, has begun.

The correction has clearly completed three waves internally, and the difference between the principal analysis and the alternative is where we place those three waves in the fractal hierarchy of the chart. The principal analysis treats those three waves as waves A{-16}, B{-16} and C{-16} — subwaves of wave A{-15}, the first wave within wave 4{-14}. The alternative analysis treats those three waves as being one degree higher, at degree {-15}. So in the principal analysis, the three waves completed the first wave of the correction. In the alternative, they completed the whole correction.

If the price falls below 3660.25 and continues to fall, it strengthens the case for the alternative analysis. If the price reverses and rises toward 3766.75, it strengthens the case for the principal analysis.

And, in fact, the price has risen from the low, into the 3700 region, buttressing the principal analysis.

This is all happening within a nested series of downtrending waves, ranging from wave 5{-12}, which began on September 20, up to wave 4{-1}, which began on January 4 and is the next-to-the-last wave within wave 5{0}, a Diagonal Triangle that began on December 26, 2018.

The end of wave 5{-13} will also be the end of waves 5{-12} and 5{-11}, and of the parent wave, 3{-10}, which began on September 13. Wave 3{-10} will be followed by an upward correction that is larger than the one presently underway.

Big picture: Wave 4{-1} is still in its early stage, in wave 1{-2} one degree lower. When wave 4{-1} is complete, wave 5{-1} will carry the price to the upper boundary of the expanding Diagonal Triangle, which is now in the upper 5000s and will soon enter the 6000s. When wave 5{-1} is complete, it will trigger completion of wave 5{0} and also of a nested series of waves of increasing size, up to uptrending wave 5{+3}, which began on July 8, 1932. A downward correction of astounding size will follow, correcting nearly a century’s worth of market gains. But that’s year’s in the future and not of immediate concern.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 26, 2022

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
Creative Commons 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.

LVS Trade

Las Vegas Sands Corp. (LVS)

Lot 2022-2

I have entered a short bull put vertical spread on LVS, using options that trade for the last time 28 days hence, on September 21. The premium is a $1.11 credit per contract share and the stock at the time of entry was priced at $34.74.

The Implied Volatility Ratio stood at 53.6%.

Premium:$1.11Expire OTM
LVS-bear call spreadStrikeOddsDelta
Calls
Long38.0075.0%30
Break-even36.1165.0%40.5
Short35.0055.0%51

The premium is 74% of the width of the position’s short/long spread. The profit zone covers a 3% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 1.7:1, with maximum risk of $189 and maximum reward of $111 per contract.

How I chose the trade. The trade was placed after the Parabolic SARS indicator gave a bear signal for a third day running. The bear signal was confirmed by a negative reading on the Fisher Transform indicator. The Zacks Investment Research ranking was 4, which is also bearish. The short strike was set to coincide with the expected move in the share price of $0.60 either way, based on options pricing, which gives an upper price expectation of $35.34.

By Tim Bovee, Portland, Oregon, September 23, 2022

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
Creative Commons 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The downtrend that began yesterday from 3833 continued to fall during the session, reaching 3660.25 as the closing bell approached. The downtrend its middle segment, the 3rd wave, which is generally the most powerful of a five-wave trend. In Elliott wave terms, smaller to larger, wave 3{-14} within wave 5{-13} within wave 5{-12} is underway,

No change in the analysis. I’ve updated the chart.

1:05 p.m. New York time

Bearish entry on LVS. I’ve entered a bear call vertical spread on LVS, using options that trade for the last time on October 21 and have posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell in overnight trading, reaching the mid-3710s.

What does it mean? The decline is a resumption of the downtrend that began on September 20. The downtrend is presently in its fifth and final segment.

What are the alternatives? None at present. Ambiguities will develop, I’m sure.

[S&P 500 E-mini futures at 3:30 p.m., 35-minute bars, with volume]

What does Elliott wave theory say? Downtrending wave 5{-13}, which began from yesterday’s peak, 3833, is underway. It is a subwave of wave 5{-12}, which began on September 20 from 3936.25. The starting point of wave 5{-13} was also the end point of an upward correction, wave 4{-13}.

When wave 5{-13} is complete, it will also mark the end of wave 5{-12}, its wave 5{-11} parent and above that, its wave 3{-10} grandparent, which began on September 13 from 4051.25. Wave 3{-10} will be followed by an upward correction, wave 4{-10}.

Fourth waves typically end in the 4th subwave of the preceding 3rd wave of the same degree. Wave 4{-11} within wave 3{-10} began on September 13 from 3938.30 and ended on September 15 at 3977.50. The correction hit a lower of 3929, giving a target range for the futures wave 4{-10} of 3929 to 3977.50. Fourth waves don’t always turn out that way, but they do often enough to take that tendency seriously.

If wave 4{-10} were to begin right now (it won’t), the minimum rise would be 5%.

Above the present wave 3{-10} are a series of nested downtrending waves, each of increasing size, from waves 1{-9} up to wave 4{-1}, which began on January 4 from 4818.62. Enclosing them all is wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018, from 2346.58. In this case, the Triangle constitutes the form of an uptrending wave, and when it is complete, it will be followed by a much larger downtrend than anything we’ve seen since for a long while.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 23, 2022

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
Creative Commons 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has traced out two segments of the small upward correction that began yesterday. The end of the ascending third and likely final segment of the correction will be followed by a resumption of the downtrend that began on September 20.

Switching to the terminology of Elliott wave analysis: Wave 4{-13}, the upward correction, is in its third and likely final internal wave, C{-14}. When that wave is complete, wave 5{-13} will begin its downward course within the parent wave 5{-12}, which began on September 20, and which in turn is a subwave of wave 5{-11}, which began on September 15. There is no change in the principal analysis. I’ve updated the chart.

2:30 p.m. New York time

DRI earnings play exit. I’ve exited my short bull put options spread on DRI for 81.8% of maximum potential loss and have updated the trade analysis with details.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a low of 3766.75 after the closing bell, and then reversed, rising to 3833 overnight.

What does it mean? As the chart has played out in the past few days, it has become clear that the low level upward correction that began on September 19 ended on September 20, and that the downtrend that began on September 15 has resumed. The upward reversal overnight is the start of an upward correction within that downtrend.

What are the alternatives? The main ambiguity on the chart is one I referred to after the mid-August downtrend resumed: How large is each movement in connection with the fractal structure of movements ranging from big to small? Subsequent events could require a change in my present labeling of the degrees, using subscripts in curly brackets. For example, the decline from August 16 is wave 3{-6}, but it could just as easily be larger, wave 3{-5}, or even larger still, wave 3{-4}.

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

What does Elliott wave theory say? I revised my analysis after the close to align with the S&P 500’s path on the chart: Wave 5{-12} is underway and internally is in an upward correction, wave 4{-13}. I also moved the end of a prior upward correction, wave 4{-12}, to a point a few days earlier, September 20. And that peak is the starting point of wave 5{-12}.

Under the principal analysis, wave 4{-13} will be followed by downtrending wave 5{-13}, the final wave within the parent wave 5{-12}. The end of wave 5{-13} will also be the end of wave 5{-12}, and will cascade up two nested waves of increasing size, wave 5{-11}, which began on September 15, and wave 3{-10}, which began on September 13 from 4051.25. An upward correction, wave 4{-10}, will ensue, likely carrying the price back up into the mid- and high-3900s.

All of this is happening within a nested series of increasingly larger waves, all declining, ranging from wave 1{-9}, which began on September 13 from 4175, up to wave 4{-1}, which began on January 4 from 4818.62.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 22, 2022

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
Creative Commons 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.

DRI Trade

Darden Restaurants Inc. (DRI)

Lot 2022-2

Update 9/22/2022: I exited my short bull put vertical spread on DRI, 29 days before expiration, for a $2.92 debit per contract/share, a loss before fees of $102 per contract. Shares were trading at $125.38, down $6.68 from the entry level.

The Implied Volatility Rank at exit was 32.8%, down 12.1 points from the entry level.

DRI’s earnings came in as expected, at $1.56 per share, but some same-store sales fell short and the share price fell, turning my bear position unprofitable. I exited on the day after entry for 81.8% of maximum potential loss.

Shares fell by 5.1% over one day for a -1,846% annual rate. The options position produced a 34.9% loss for a -12,750% annual rate.


I have entered a short bull put vertical spread on DRI, using options that trade for the last time 30 days hence, on October 21. The premium is a $1.90 credit per contract share and the stock at the time of entry was priced at $132.06.

The Implied Volatility Ratio stood at 44.9%.

Premium:$1.90Expire OTM
DRI-bull put spreadStrikeOddsDelta
Puts
Long125.0064.0%31
Break-even131.9058.0%36.5
Short130.0052.0%42

The premium is 76% of the width of the position’s short/long spread. The profit zone covers a 5% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 1.6:1, with maximum risk of $190 and maximum reward of $360 per contract.

How I chose the trade. The trade was placed to coincide with DRI’s earnings announcement, before the opening bell on the day after entry. The Zacks Investment Research earnings surprise predictor gave DRI a score of 0.21%, with a rank of 3. The analysts’ consensus is that DRI will announce earnings of $1.56 per share.

By Tim Bovee, Portland, Oregon, September 21, 2022

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
Creative Commons 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 whipsawed over nearly 100 points as the Federal Open Market Committee announced a 75-basis-point rise in the Fed funds rate. On the futures, the price fell from 3905 to 3832.75, and then rose again to 3925.25 before slipping back sharply.

Rather than selecting a principal analysis for such a move, I shall list the possibilities. Subsequent movements will clarify which is correct.

  1. Wave C{-13}, the final wave within an upward correction, wave 4{-12}, is underway. Wave 4{-12} is taking the form of a Flat. This was the principal analysis this morning and the one that I used to label the updated chart.
  2. Wave C{-13} is taking the form of a Triangle, which implies more whipsawing rather than a directional movement.
  3. Wave 4{-12} is taking a compounds form and the rapid decline was wave X{-13}, a connector wave that is being followed by a second corrective pattern.
  4. The whipsaw high this afternoon was the end of wave 4{-12} and downtrending wave 5{-12} has begun.

Here is very close-up chart showing the whipsaw. I’ve also updated the chart posted this morning.

[S&P 500 E-mini futures at 3:30 p.m., 1-minute bars]

2:20 p.m. New York time

DRI earnings play entry. I’ve entered a short bull put vertical spread on DRI, using options that trade for the last time on October 19, and have posted an analysis of the trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued tor rise overnight, coming within a quarter point of 3900.

What does it mean? The third and final leg of an upward corrective pattern that began on September 19 is underway. When the correction is complete, it will be followed by a resumption of the downtrend that began on September 15.

What are the alternatives? None as regards the context of the rise set forth in the principal analysis. The alternatives have to do with determining when the upward correction is over. Corrections generally have three segments internally, and if that’s the case with the present correction, then the end or the present rise will also be the end of the correction and the resumption of the downtrend. Sometimes corrections take a compound form, stringing two or three corrective patterns together. If that’s the case here, then the end of the present rise will be followed by a decline that will connect the present corrective pattern with another one.

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

What does Elliott wave theory say? The present upward correction is wave 4{-12}, and internally, it is in wave C{-13}, the third wave of a corrective pattern called a Flat.

Under the principal analysis, the end of wave C{-13} will also be the end of its parent, wave 4{-12}, and the beginning of downtrending wave 5{-12}, a resumption of the downtrend, wave 5{-11}, that began on September 15 from 3977.50.

Under the alternative analysis, wave 4{-12} will form a compound correction, a not uncommon event within 4th waves. If that occurs, then wave C{-13} will be followed by a connector wave, X{-13}, and then by a wave A{-13}, the first wave within a second corrective pattern. That second pattern may take a different form than did the first, such as a Zigzag or a triangle of some sort. A compound correction can contain up to three corrective patterns, so might end with the second pattern, or have another connector wave and be followed by a third pattern. In any case, once wave 4{-12} is complete, it will be followed by wave 5{-12}, the final wave in a downtrend, wave 5{-11}.

This is all happening within a nested series of downtrends, each larger than the one before: Waves 3{-10}, 1{-9}, 5{-8}, all the way up to wave 1{-2}, the first wave within wave 4{-1}, which began on January 4 from 4808.25. Wave 4{-1} is the next-to-the-last leg of an expanding Diagonal Triangle, wave 5{0}, that began on December 26, 2018, from 2346.58. Wave 4{-1} will be followed by wave 5{-1}, the rising final wave of the triangle that will carry the price the January 4 high, perhaps significantly higher.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 21, 2022

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
Creative Commons 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the session, so far reaching 3843.25 on the futures. The decline, wave B{-13}, brought the price below the beginning of the upward correction, wave 4{-12}. The first wave of the correction, wave A{-13}, has three waves internally, which means that the correction is taking the form of a Flat, the most common corrective form of 4th waves.

If my principal analysis from this morning still matches the reality on the chart, then wave B{-13} will reverse soon, as wave C{-13} carries the price higher, perhaps above this morning’s peak, 3936.25, which was the beginning of declining wave B{-13}. If instead the wave continues to move lower, then the chances increase that the alternative analysis is correct: Wave 5{-12}, a downtrend, is underway. The the price goes, the greater those chances grow.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reversed sharply in overnight trading and began a decline that has traveled from the peak, 3936.25, down into the 3870s so far.

What does it mean? Under my principal analysis, the peak was the end of the initial wave within an upward correction that began on September 19 and the start of the middle internal wave. This is a change from yesterday’s analysis. I’ll discuss it in detail in the Elliott wave section below.

What is the alternative? The new alternative analysis is yesterday’s principal analysis. The upward correction ended at the overnight high, and the downtrend that began on September 15 is now underway.

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

What does Elliott wave theory say? Under the principal analysis, wave 4{-11} began from the September 19 low (the end of wave B{-12} under the principal analysis. The overnight high is the end of wave A{-12} within the correction, and wave B{-12} is underway. Wave B{-12} will be followed by rising wave C{-13}, the final wave of the corrective pattern, that may well exceed the overnight high, 3936.25.

Under the alternative analysis, the overnight peak is the end of wave C{-12} within the upward correction, wave 4{-11}. Wave 5{-11} has begun, a downtrending wave within a larger downtrend, wave 3{-10}, which began on September 13.

The internal structure of the waves in an extremely close-up view clarified the wave count. The rise that began on September 19 has five waves internally, as it should if the correction takes the form of a Zigzag. The rise that began on September 16 has three wave internally, which would be the case for a 4th wave, wave 4{-13}, within downtrending wave 3{-12}.

Also, the new principal analysis was wave 3{-11} ending at the low point of the decline. The alternative analysis has wave B{-13}, the middle wave of the correction, moving below the end of wave 3[-12}. This is allowed in a Flat corrective pattern, but under that scenario, the rise that followed, wave C{-13}, must have five waves internally, whether the form is a Zigzag or a Flat. It has three waves internally, and therefore must be an A wave for a Flat.

There are problems with the look of some of the waves; they appear too long or two short of their position in the structure. That has been the case with the entire decline, wave 5{-8}, that began on September 13 and is perhaps an effect of heightened uncertainty, heightened emotion, as traders and algorithms make their decisions. It reminds of the look of the early pandemic crash in 2020 — wave 2{-1} — in which every downtrending wave looked like a straight line and every upward correction like a slip of the pen.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 20, 2022

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
Creative Commons 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.

Trader’s Notebook

3:31 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose to 39-teens on the futures and then fell again. The movement means that the upward correction that began on September 16 from 3853 has further to go. In Elliott wave terminology, wave upward wave 4{-12} within wave downtrending wave 5{-11} is underway and is nearing its end. Any fresh high could be the end of the correction, or not. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures resumed their fall after trading resumed overnight, reaching into the 3840s.

What does it mean? The downtrend that began on September 13 from 4051.25 continues and is in its middle leg. It will be followed by an upward correction that can be expected to take back a portion — perhaps a significant amount — of the decline. Or, the decline could be quite shallow, depending upon the form the correction takes. Corrective movements have a lot of variety.

What is the alternative? The main ambiguity is where the price stands within that middle leg of the downtrend. The principal analysis has it as two levels smaller. It could be three. More on this in the Elliott wave theory section below. There are similar ambiguities at larger levels.

The charts. The upper chart gives a close-up view of the S&P 500 futures from September 6 to the present. The lower chart gives a long-term view of the S&P 500 index from February 19, 2020 to the present.

[S&P 500 E-mini futures at 3:31 p.m., 25-minute bars, with volume]

What does Elliott wave theory say? The downtrend that began on September 13, wave 3{-10}, is now its its middle subwave, 3{-11}, under the principal analysis. Under an alternative analysis, that 3rd wave is a degree smaller, wave 3{-12}. Under both scenarios, the 3rd wave that began on September 13 is in its 5th wave internally, wave 5{-12} under the principal analysis and wave 5{-13} under the alternative.

The conundrum illustrates the difficulty in judging the precise degree of subwaves. The only guides are the size of the waves and how much time they take to reach their completion. On this chart, the decline was more powerful than is commonly seen on a routine trading day. Wave 5{-8} began on September 13 from 4175, ended its 3rd subwave three degrees down, wave 3{-11} within its subwave two degrees down, wave 3{-10}, within its first subwave, 1{-9}, all within one day.

That complicates the limited methods the chart offers us to set the degree. Long story short, it’s uncertain how far along the S&P 500 is in wave 5{-8}. It will become clear over time.

The patterns shown on the chart above are of unusual importance for such low degrees, given the vast uncertainties that presently afflict the markets. In good times a trader can track the larger degrees, relaxing throughout the week and checking positions on Mondays. In bad times it pays to keep a closer watch. These aren’t good times.

The big picture, on the other hand, provides a window into the S&P 500’s futures.

[S&P 500 index at 9:35 a.m., 2-day bars]

The lower chart shows the S&P 500 index from the start of the early pandemic crash in February 2020 and the long rise that followed, ending with the decline that began on January 4 of the present year.

As the chart shows, the S&P 500 is in a major 4th wave correction, wave 4{-1}, the next-to-the-last leg of an expanding Diagonal Triangle that is the from taken by its parent, uptrending wave, 5{0}, which began in December 2018 from 2346.58. The triangle’s price channel for the triangle appears on the chart as two red lines. The more time passes, the more space there is within that channel for a corrective wave to fall.

Like any downtrend, wave 4{-1} will have its up waves and down that can be traded profitably. For example, the present larger downtrend, wave 3{-6}, began on August 16. It is still underway — bear trade — and will be followed by a 4th wave upward correction, wave 4{-6} — bull trade.

Given the fractal nature of the markets — waves within waves of smaller and larger degree — even major downward corrections provide opportunities for the bullish trader.

And wave 4{-1} will be followed by wave 5{-1}, the final wave of the expanding Diagonal Triangle, which will carry the price back to the constantly rising upper boundary of the triangle’s price channel.

We Are Here.

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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 19, 2022

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
Creative Commons 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.

Trader’s Notebook

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 has continued falling during the session, reaching a low so far today of 3853 on the futures. Wave 5{-11} is underway. It is the final wave within a downtrend that began on September 13, wave 3{-10}. No change in the analysis. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached a high of 3977.50 on September 15 and overnight declined below the narrow range within which it had fluctuated since September 13.

What does it mean? The upward correction, which took the form of a Horizontal Triangle having five segments internally, ended at the September 15 high. The downtrend that began on September 13 then resumed.

What are the alternatives? None at this point, beyond determining the size of the early waves within the resumed downtrend. Ambiguities always develop, of course. Such is the way of Elliott wave analysis.

[S&P 500 E-mini futures at 3:30 p.m., 25-minute bars, with volume]

What does Elliott wave theory say? Wave 4{-11}, an upward correction, ended on September 15 at 3977.50, and from that point downtrending wave 5{-11} began. Fifth waves vary in their behavior. Sometimes they can extend into nine waves internally and move far beyond the end of the preceding 3rd wave (in this case, 3938.50 on September 13). Or they can be cut short — “truncated” is the term in Elliott wave theory — and fail to reach the end of the preceding 3rd wave. Or they can behave normally, tracing out five internal waves and then moving on.

In this case, wave 5{-11} is already below the end of wave 3{-11}, so there is no truncation. The degrees of the early portion of a trend can be an estimate at best; the time taken by a wave and the distance traveled are the guideposts. On this chart it looks to me like wave 5{-11} internally is in wave 1{-12}, which in turn is within wave 3{-13}.

Wave 5{-11} when complete will also be the end of its parent wave, 3{-10}, and will be followed by wave 4{-10}, a larger upward correction by one degree than the one just completed.

Wave 3{-10} is one of a series of nested ever larger downtrending waves, stretching up nine degrees to wave 4{-1}, which began January 4 from 4818.62. Wave 4{-1} is the next-to-the-last wave in an expanding Diagonal Triangle, wave 5{0}, that began on December 26, 2018.

We Are Here.

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. (The smallest waves — Bitsy, Subbitsy and Deci — aren’t named as part of the Elliott scheme.)

  • 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)
  • 4{-1} Minor, 1/4/2022 4818.62 (down)
  • 1{-2} Minute, 1/4/2022 4818.62 (down)
  • S&P 500 Futures and index:
  • 1{-3} Minuette, 1/4/2022, 4808.25 (down) (futures), 4818.62 (down) (index)
  • S&P 500 Futures:
  • 1{-4} Subminuette, 1/4/2022, 4808.25 (down)
  • 1{-5} Micro, 1/4/2022, 4808.25 (down)
  • 3{-6} Submicro, 8/16/2022, 4325.28 (down)
  • 1{-7} Minuscule, 8/16/2022, 4325.28 (down)
  • 5{-8} Subminuscule, 9/13/2022, 4175 (down)
  • 1{-9} (no name), 9/13/2022, 4175 (down)
  • 3{-10} (no name), 9/13/2022, 4051.25 (down)
  • 5{-11} (no name), 9/15/2022, 3977.50 (down)

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, September 16, 2022

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
Creative Commons 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.