3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 declined during the day, the futures coming within 5 points of the low set on April 20. The movement doesn’t decide the question posed this morning: Is the bullish alternative count or the bearish alternative count the correct view of the chart? So we’ll head to the closing bell still puzzling over the ambiguity of the Elliott wave analysis. Interestingly, though, the volume picked up on the decline. So perhaps that’s a hint. Chart updated below.

9:40 a.m. New York time

What’s happening now? The S&P 500 E-mini futures leveled off somewhat in overnight trading.

What does it mean? The sudden rise has thrown the chart into a high degree of ambiguity with no clear guidance on which alternative is most likely. One alternative is bullish, treating the decline since April 16 as a correction within an ongoing rise. The other is bearish, treating the decline as the beginning of a new downtrend. At this point I haven’t a clue as to which one will play out in the next weeks.

What does Elliott wave theory say? In the bullish scenario, the decline from April 16 is wave 4 of Bitsy degree, and internally wave A is complete and wave B is either in progress or complete. Bitsy wave 4 will be followed by a push to new highs — Bitsy wave 5.

In the bearish scenario, the decline from April 16 is wave 1 of Bitsy degree, and internally wave 1 is complete and wave 2 is underway and nearing completion. Bitsy wave 2 will be followed by a further, more energetic decline.

If the price moves above the peak of April 16 (4183.50 on the futures, 4191.31 on the index), and if the rise from April 20 has three waves internally, then the bullish scenario is correct.

If the price reverses downward to a significant degree and if the rise from April 20 has three waves internally, then the bearish scenario is correct.

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3:30 p.m. New York time

Half an hour before the opening bell. The S&P 500 has risen sharply at a very small level during the trading day, suggesting to me that the high of April 16 is not the end of the uptrend. In other words, I’m starting to lean toward this morning’s alternate conclusion.

Here’s a rough and ready chart that suggests what the alternate count would look like. I’m not ready to fully commit to it.

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures continued their downward move, reaching the late stage of the first declines of small degree from the high of 4183.50 reached on April 16.

What does it mean? Just as every avalanche begins with the loosening of a few flakes of snow, so a major downtrend begins with small declines and rises in the the five-way pattern of any trending market. This is where the avalanche metaphor breaks down. The first low degree decline is part of a larger degree, and the present decline will be followed soon by an upward correction that will remain below the high of April 16. Think of it as an avalanche in reverse.

What’s the alternative? It’s possible to the count the chart in a way that shows the high of April 16 was not the end of an uptrend. If the price rises above 4183.50 on the futures, 4191.31 on the index, then the uptrend is still underway.

What does Elliott wave theory say? The first loose flakes of snow in the present early days of an avalanche are at Bitsy degree, a degree so small that R.N. Elliott had no name for it. Presently the 1st degree of that small downtrend is in Subbitsy wave 4, which will be followed by Subbitsy wave 5 to the downside, completing the 1st wave of the Bitsy degree.

What follows will be an upward correction, most likely a simple Zig-zag pattern of three waves that will take back much of the decline since April 16 while remaining below the April 16 peak of 4183.50. The upward correction will be followed by wave 3 of Bitsy degree, which is likely to be quite a bit more energetic than was its 1st wave counterpart.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continues its downward course from the peak on April 16 of 4183.50 on the futures, 4191.31 on the index. I’ve updated the near-term chart.

10:10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures completed the first leg down at a small degree in a downtrend that began April 16 from 4183.50, reaching a low of 4131.

What does it mean? The overnight decline marks the start of a major movement to the downside that eventually will reach beyond the low of 2191.86 on the index, set on February 23, 2020, in the first month of the pandemic. The overnight low marks the start of small upward correction that will remain below the April 16 high.

What’s the alternative? It’s still possible my labeling of the April 16 high as the end of the rise will prove wrong, if the price rises above 4183.50. The internal count of the rise ending on that date suggests to me that it was indeed the end, but Elliott wave analysis is filled with ambiguities. Time will tell.

What does Elliott wave theory say? In the short-term, wave 1 of Bitsy degree ended overnight at 4131 and wave 2 of Bitsy degree has begun its 2nd wave, an upward correction, which is now in its A wave of Subbitsy degree. This is all happening within wave 1 of Subminuscule degree and its parent, wave 1 of Minuscule degree.

In the long term, the April 16 peak of 4183.50 marks the beginning of wave 3 of Minor degree, the next large downward movement of a diagonal triangle that began on December 26, 2018. The boundaries of the triangle are moving away from each other — an expanding triangle — and at this point the current price is near the upper boundary and the lower boundary is around 2054.

It will take time, with many ups and downs on the journey, but the price’s destination is that lower boundary.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 fell during the day to the lower boundary of the price channel of Subminuscule degree. A break below the boundary will be evidence that Subminuscule wave 5 ended on April 16. A break below the April 14 low, 4129.50 on the futures, will provide stronger evidence. I’ve updated the chart below.

10:15 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell from Friday’s peak of 4183.50, to a low in overnight trading of 4154.75.

What does it mean? The peak marks the end of the rise that began on April 7 and the beginning of downward correction.

What are the alternatives? Another possible analysis is suggests that the rise from April 7 is still underway in its late phase, and that the decline overnight is a correction within that rise. I consider this to be a less likely possibility based on the proportionality the decline so far.

What does Elliott wave theory say? The high of April 16 (futures: 4183.50, index: 4191.31) marks the end of wave 5 of Minuscule degree and internally, down to Bitsy degree. Above Minuscule, it is also the end of wave 3 of Micro degree and its child wave 3 of Submicro degree. This is all happening within the rising wave 5 of Subminuette degree, which began March 4.

At the higher degrees — MIcro and Submicro — the S&P 500 has entered 4th wave corrections. Fourth waves are followed by 5th waves, to the upside in this case, that finish the trend.

Fourth waves, as is normal within all Elliott wave constructs, are composed internally of uptrends and downtrends. In this case, I’ve labeled the A wave — the first wave of the correction — at the Submicro degree, within wave 4 of Micro degree. An A wave internally can have 5 waves, labeled 1 through 5, if it is a Zigzag, or three waves, labeled A through C, if it is a Flat. I’ve used the numerical labelling within Submicro wave A, but that could change.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 rose to new heights today, the futures to 4180.50 and the index to 4188.21, as wave 5 of Minuscule degree and below continued its course. I’ve updated the chart below.

10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures pushed above the upper boundary of the price channel in overnight trading, reaching a high of 4178.50 in the final leg of its rise that began April 14.

What does it mean? Today’s high could be the end of that rise, and indeed of the rise that began April 7. It will be followed by a higher degree correction, most likely of the shallow variety.

What are the alternatives? Although, it needn’t be the end of the rise. There could still be more upside potential into next week.

What does Elliott wave theory say? The overnight rise is wave 5 of Subbitsy degree within a series of 5th waves of increasing size, Bitsy degree within Subminuscule degree within Minuscule degree. And all of that is within wave 3 of Submicro degree, the degree of coming 4th wave correction. Submicro 3 began on March 25.

The question is at what point does Subbitsy wave 5 come to an end. There is no set length for 5th waves, as long as the preceding 3rd wave isn’t the shorter than both waves 1 and 5, and so each new high is potentially the end of wave 5, or potentially just another milestone on the continuing rise.

My trades. Having exited NIO for a profit yesterday, I looked at the possibility of entering another position using the options that expire May 16. By my rules, the entry window closed on April 13, but for a good enough trade, I could fudge the rules by a day or two. Two sufficiently liquid stocks — SNAP and TWTR — have implied volatility ranks (IVR) of 30% or higher. However, SNAP publishes earnings on April 22 and TWTR, on April 29. I don’t hold options positions through earnings announcements — too many unknowns — and so I’m passing the opportunity.

My next entry window, for trades using options expiring June 21, has an entry window open from April 27 to May 11, with May 4 being the midpoint that I usually prefer.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P touched the upper boundary of the price channel, with highs of 4162.50 on the futures and 4169.58 on the index. As the closing approached the price hovered slightly below high point. Based on the form on the chart, it appears to me that the rise has another push higher at a very low degree before the correction begins. I’ve updated the chart below.

2:15 p.m. New York time

My trade. I’ve updated the entry analysis of my short bear call options position on NIO with full results and a discussion of my exit decision. The options used to build the position expire on May 16. The window for trading May 16 options expired two days ago. Nonetheless, I’ll take a look to see if there’s anything interesting enough to allow me to fudge my rules. Another NIO trade is out, as the implied volatility rank has fallen sharply, to 11% at exit. My rules require 30% or better.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reversed overnight, climbing from a low of 4129.50 climbing to 4148 shortly after the opening bell. The high so far on the index is 4156.56. The reversal followed a sharp one-day decline on Wednesday.

What does it mean? The reversal is in light with yesterday’s closing analysis: “The decline will be followed by a rise back toward the upper boundary of the channel, now in the low 4150s, and perhaps overshoot the boundary in the final rise” of small degree. Once the rise is complete, the price will begin a shallow correction at a higher degree.

What are the alternatives? It’s possible that the final upward push will be truncated, and the high so far this morning could in fact be the end of the rise.

What does Elliott wave theory say? Wave 5 of Bitsy degree began with the overnight reversal and continues its upward course toward the upper boundary of the Subminuscule degree price channel, marked in red on the chart. Bitsy 5 is within wave 5 of Subminuscule degree, and, in increasing size, within wave 5 of Minuscule degree, wave 3 of Submicro degree and wave 3 of Micro degree. The simultaneous completion of wave 5 of Bitsy, Subminuscule and Minuscule degree will be followed by a 4th wave correction one degree higher, at the Submicro degree.

My trading. I exited my short bear call options spread on NIO for $0.38 per contract/share, or 49.3% of maximum potential profit. My goal is 50%, so I count it as a win. I’ll update the entry analysis with results later today.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 pushed slightly higher, to 4144 on the futures and 4151.69 on the index, in the first hours of trading and then fell rapidly to the lower boundary of the trend channel marking the rise from April 7, to a low so far of 4129.50.

By my count that decline marks the somewhat overdramatic end of the wave 4 of Bitsy degree correction. It will be followed by a rise back toward the upper boundary of the channel, now in the low 4150s, and perhaps overshoot the boundary in the final, 5th wave rise of Subminuscule degree. That completion will also be the end of the parent, waves 5 of Minuscule degree, and the grandparent, wave 3 of Submicro degree.

I’ve updated the chart below, showing the trend channel in red, with a vertical grey line marking the opening bell.

10:20 a.m. New York time

What’s happening now? The S&P 500 E-mini futures ended a brief sideways move and rose to a new high of 4142.50 after the opening bell.

What does it mean? The rise that began on April 7 continues in its final phase. It will be followed by a shallow downside correction.

What are the alternatives? The new high could be the end of the rise from early April, but I think that’s the less likely alternative. Based on the form I’m seeing on the chart, there’s still more upside left.

What does Elliott wave theory say? I’m focusing this today on the internal structures within wave 5 of Minuscule degree, which began on April 7 from 4056.50. My count shows that wave 5 of Bitsy degree — two degrees smaller than Minuscule — began this morning with an unrelenting upward movement that I see as wave 1 of Subbitsy degree. This is happening within wave 5 of Subminuscule degree, which in turn in a child wave of wave 5 of Minuscule degree, which began on April 7.

If today’s rise indeed proves to be wave 1 of Subbitsy degree, then we have several days of upside remaining, as Subbitsy 1 climbs the staircase through a 2nd wave downward correction, a 3rd wave up, a 4th down and a final 5th wave push to the upside.

The end of Subbitsy 5 will trigger a series of endings up the degree ladder, resulting in a new downtrend up to the Minuscule degree and a 4th wave correction up to MIcro degree, whose 3rd wave began on March 4 from 3720.50.

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3:30 p.m. New York time

Half an hour before the opening bell. The S&P 500 rose to new highs during the day, so far reaching 4139.75 on the futures and 4148 on the index as wave 5 of Minuscule degree continues its upward course. Chart updated.

10:20 a.m. New York time

What’s happening now? Same song, different verse. The S&P 500 E-mini futures continued their rise, reaching a high of 4127 before the opening bell.

What does it mean? The the rise that began April 7 is continuing, with no hard target to the upside. It will be followed by a shallow correction of the larger rise that began March 25, and then a final push upward.

What are the alternatives? Today’s high could be the end of the rise from April 7, although I think that is the less likely possibility.

What does Elliott wave theory say? April 7 marked the beginning of wave 5 of Minuscule degree within wave 3 of Subminuettte degree. The correction that will follow completion of Subminuette 3 will be wave 4 of Subminuette degree, and like most 4th waves, it will have a sideways quality to its; most likely it will be composed of a Flat structure rather than a Zigzag. Although, it could combines both in a compound correction. This is all happening within the parent, wave 3 of Micro degree, which began on March 4.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 continued its 5th wave rise at the Minuscule degree, the final stage of the parent wave 3 of Submicro degree. The movement confirms the principle analysis, below. I’ve updated the chart.

10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures remained below Friday’s high in overnight trading as the rise that began on March 25 continues.

What does it mean? The final wave of the low level uptrend that began late last month is in its final phase and internally, it is in the middle of that phase. It has a bit more upside to go over the next week or two. When complete, the rise will be followed by a shallow correction, and then another upward push.

What are the alternatives? It’s possible that Friday’s high, 4121.50, marks the end of the rise from March 25. I don’t think the internal wave count bears out that interpretation, but I can’t rule it out entirely.

What does Elliott wave theory say? The rise from March 25 is wave 3 of Submicro degree, and within it, wave 5 of Minuscule degree, all happening within a series of nested 3rd waves within a still larger 1st wave. The child wave, Minuscule 5, looks to be in its 3rd (middle) wave, which means a shallow correction lies ahead and then a Subminuscule 5th wave push upward. That 5th wave completion of Submicro 3 will trigger a larger, also shallow correction, and then a Submicro 5th wave push to the upside.

The preceding 3rd wave of Minuscule degree took about a week to run its course, and the current Minuscule 5th wave is in its 3rd trading day, so under the Elliott wave rule of proportionality, I would expect Minuscule 5 to be over within a week, perhaps two if it extends.

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3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 moved higher today, so far to 4111.25 on the E-mini futures and 4119.03 on the index. No change in the analysis. I’ve updated the chart below.

10:05 a.m. New York time

What’s happening now? In overnight trading, the S&P 500 E-mini futures reached a new high, 4102.50, briefly moving past a milestone that removes a hard limit on how high the future final push to the upside of the rise from March 4 can go. The price quickly retreated from that high, trading sideways at the opening bell.

What does it mean? The new high confirms that the uptrend that began March 25 is still underway. When complete, it will be followed by a shallow correction.

What are the alternatives? It’s possible that the new high completes the rise from March 25 and the correction has already begun.

What does Elliott wave theory say? The milestone past overnight relates to a hard rule in Elliott wave analysis: No 3rd wave can be shorter than both waves 1 and 5 in a trend. Wave 1 of Submicro degree began on March 4 from 3720.50 and was 258 points long. Wave 3 of Submicro degree began on March 25 from 3843.25 and as of the new overnight high is 259.25 points long — so far.

If wave 3 had been shorter than wave 1, then the future wave 5 would have to be shorter than wave 3 in order to prevent wave 3 from being the shortest wave.

The new high, 4102.50, confirms that wave 3 of Submicro degree is still underway. Internally, wave 5 of Minuscule degree may still be under way (the principle analysis) or may have ended at the new high high (the alternative, less likely analysis).

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