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.
[S&P 500 E-mini futures at 3:30 p.m., 20-minute bars, with volume]
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.
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.
[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]
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.
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.
[S&P 500 E-mini futures at 3:30 p.m., 90-minute bars, with volume]
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.
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.
[S&P 500 E-mini futures at 3:30 p.m., 85-minute bars, with volume]
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).
Half an hour before the closing bell. The S&P 500 continued trading in a very narrow range. No change in the analysis. Chart updated.
10:35 a.m. New York time
What’s happening now? The S&P 500 E-mini futures completed their sideways correction in overnight trading, reaching higher to 4092.75 as they began the final leg of the rise that began on March 25.
What does it mean? The rise from March 25 is still underway. When complete, a larger, still shallow, correction will begin.
What are the alternatives? The correction that began a few days ago could be underway, perhaps extending into a compound structure with several corrective patterns linked together.
[S&P 500 E-mini futures at 3:30 p.m., 80-minute bars, with volume]
What does Elliott wave theory say? Under the principle analysis, wave 4 of Minuscule degree reached its end early this morning, before the opening bell, and began Minuscule wave 5, the final wave of the rise that began March 25. Completion of Minuscule 5 will also mark the end of the parent, wave 3 of Submicro degree, which will be followed by a 4th wave correction.
As noted in yesterday’s analysis, if Minuscule wave 5 moves above the 4101.75 level (the red line), then Submicro wave 3 will be longer than its preceding 1st wave of the same degree, which covered 258 points beginning to end.
Under the alternative analysis, Minuscule wave 4 is still underway. The early morning high under this scenario coulding a connecting X wave in a compounder correction with two corrective patterns.
The low within Minuscule wave 4 was 4056.50. If the price should dip beneath that level, then I would consider the alternative analysis to be correct.
Half an hour before the closing bell. The S&P 500 continues to trade in a narrow range, working its way through wave 4 of Submicro degree. I’ve updated the chart.
9:50 a.m. New York time
What’s happening now? The S&P 500 E-mini futures began a sideways correction after Tuesday’s high, the second correction within the rise that began on March 25 from 3843.25.
What does it mean? The uptrend from late March is in its final stages. It will be followed by a larger shallow downward correction within the rise that began March 4 from 3720.50.
What are the alternatives? It’s possible that a correction did not begin with Tuesday’s high and that the price will move higher before the correction begins.
[S&P 500 E-mini futures at 3:300 p.m., 80-minute bars, with volume]
What does Elliott wave theory say? The rise from March 25 is wave 3 of Submicro degree, and within it Tuesday’s peak marked the end of wave 3 of Minuscule degree. The present Minuscule wave 4 will be followed by a 5th wave push to the upside that will at the least exceed 4101.75, perhaps by a significant distance.
There is no limit on how far a 5th wave can go, as long as it doesn’t leave the preceding 3rd wave as the shortest of the three movements in the direction the trends, waves 1, 3 and 5.
If that Minuscule 5th wave moves above 4101.75, then its parent wave 3 of Submicro degree will be longer than the preceding Submicro wave 1, removing all limits on how far Submicro 5 can rise, except for the need that it be proportional with other movements of the same degree.
If Minuscule 5 stays below 4101.75, then Minuscule wave 1 will be longer than wave 3, and wave 5 will be limited to the length of wave 1, which is 258 points.
It’s less complex than it might seem: Under Elliott wave analysis, a 1st wave or a 5th wave of a series must be shorter than the 3rd wave. It’s one of the strictly no-compromise, no fudging rules in Elliott.
Update 7/27/2021: I exited my short bear call spread position on XBI 24 days before expiration, for a $0.38 debit per contract/share, a profit before fees of $0.92 per contract. Shares were trading at $122.05, down $2.70 from the entry level.
My decision to exit was based on the price reaching more than 50%.of maximum potential profit, as required by my trading rules. The price remained below my short call strike, $34, throughout the life of the position.The entry and exit dates are shown by vertical red lines on the chart, with a horizontal gray line marking short call strike price.
[XBI at 2:15 p.m., 20-minute bars]
Shares declined by 2.2% over nine days for a -65.8% annual rate. The options position produced a 121.1% return for a 3,682% annual rate.
I have entered a short bear call spread on XBI, using options that trade for the last time 36 days hence, on August 20. The premium is a $0.84 credit per contract share and the stock at the time of entry was priced at $124.75.
The implied volatility rank (IVR) stands at 30%.
Premium:
$0.84
Expire OTM
XBI-bear call spread
Strike
Odds
Delta
Puts
Long
140.00
91.0%
11
Break-even
133.16
86.0%
17
Short
134.00
81.0%
23
The premium is 28% of the width of the position’s wing. The profit zone covers a 6.7% move to the upside.
The risk/reward ratio is 6.1:1, with maximum risk of $516 and maximum reward of $84 per contract.
[XBI, daily bars]
Elliott wave analysis places XBI in a 3rd wave downtrend, and if that analysis holds up, then the price is unlikely to revisit the $134 level, which marks the top of my profit zone.
By Tim Bovee, Portland, Oregon, July 15, 2021
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.
I have entered a short bear call spread on NIO, using options that trade for the last time 45 days hence, on May 21. The premium is a $0.75 credit per contract share and the stock at the time of entry was priced at $40.07.
The implied volatility rank (IVR) stands at 31.9%.
Premium:
$0.75
Expire OTM
NIO-bear call spread
Strike
Odds
Delta
Calls
Long
47.00
78.0%
30
Break-even
43.25
74.0%
35
Short
44.00
70.0%
39
The premium is 50% of the width of the position’s wing. The profit zone covers a 9.8% move to the upside, with no downside limit.
The risk/reward ratio is 3:1, with maximum risk of $225 and maximum reward of $75 per contract.
Elliott wave analysis. NIO is in a 4th wave that began March 5 and internally has begun its C wave to the upside. As a 4th wave it will most likely take the form of a Flat, meaning it will be shallow. Wave 4 has already retraced about 62% of the preceding wave 3.
The next move after wave 4 will be either a 5th wave to the downside — the position is bearish and will profit all the way down — or a continuation of wave 4, in which case the price will likely stay within the same range as we’re seeing now, which is profitable.
The short call strike price, at $44, is slightly below the start of wave 3, at $53.58. That’s a risk I took to make the premium worthwhile, and with a 45-day lifespan there should be ample opportunity for any move above that to level to reverse back into the profit zone, given that my analysis shows the most likely tendency is to the downside.
[NIO at entry, 2-hour bars, with Fibonacci retracement]
By Tim Bovee, Portland, Oregon, April 6, 2021
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.
Half an hour before the closing bell. The S&P 500 inched up to a new high today, 4076 on the futures and 4086.23 on the index. The present wave 3 of Submicro degree is still shorter than the preceding wave 1. Although it’s not a requirement, wave 3 is normally the longest. The 1st wave was 258 points long, and the price, marked on the chart, where the 3rd wave equals the 1st is 4101.75. Failure to rise above that level would a reanalysis of the wave count. I’ve updated the chart.
2:20 p.m. New York time
Trade entered. I’ve entered a bear call options spread on NIO and have posted the analysis.
1:45 p.m. New York time
Trade selected. I’ve decided to go with NIO out of my three potential options trades. BIDU is a bit less liquid than the other two, and SNAP has some ambiguities on the chart that make it hard for me to analyze its prospects. Plus, NIO was also my last trade, so I have a well-analyzed chart to work from. I’ve submitted the order for a bear call spread and will post the analysis once I get a fill.
9:45 a.m. New York time
What’s happening now? The S&P 500 E-mini futures traded within a very narrow range overnight, staying slightly below yesterday’s high, 4074.50.
What does it mean? The pause in the rise that has driven the market since late March may be the start another correction within the upward movement. When the correction is complete, the next move will be a push to the upside, completing the rise from 3843.25 that began on March 25.
What are the alternatives? The overnight pause may be a lower level movement, and if that’s the case, then the rise that began on March 25 will quickly resume.
[S&P 500 E-mini futures at 3:30 p.m., 75-minute bars, with volume]
What does Elliott wave theory say? The rise that began on March 25 is wave 3 of Submicro degree, and the correction that follows, either now under the principle analysis or later under the alternative, will be Submicro 4. I expect it to be a shallow correction, and it will be followed by Submicro 5, which will complete the parent, wave 3 of Micro degree.
Micro 3 will be followed by another, larger 4th wave correction and then another, larger push to the upside that will complete the yet higher wave (grandparent?), wave 1 of Subminuette degree.
Trading. Today is the optimal day for me to enter a trade in options that expire 45 days out, on May 21. The U.S. tech company SNAP and two Chinese companies, the automaker NIO (the Tesla of China) and the internet services giant BIDU, are the only prospective trades with implied volatility ranks of 30% or greater. I’ll be analyzing all three today to pick which short options spread position I’ll enter.
Half an hour before the closing bell. The S&P 500 continued its upward push today, continuing to show the energy typical of a 3rd wave. The high so far today is 4073.75 on the futures, 230.5 points above the start of rise, wave 3 of Submicro degree. The index high so far is 4083.42. I’ve updated the chart below.
9:50 a.m. New York time
What’s happening now? The S&P 500 E-mini futures continued their rise in overnight trading, reaching 4048.25 after the opening bell.
What does it mean? The continuing rise is the middle wave within an uptrend that began March 4. When complete, the middle wave will be followed by a shallow correction, and then a push to higher highs.
[S&P 500 E-mini futures at 3:30 p.m., 75-minute bars, with volume]
What does Elliott wave theory say? The rise since March 25 is wave 3 of Submicro degree within wave 3 of Micro degree, which began on March 4. A 3rd wave within a 3rd wave has a great deal of power. Submicro 3 will be followed by Submicro 4, and 4th wave corrections tend to be a shallow, sideways correction, a Flat form in Elliott wave terminology. The preceding 2nd wave correction was directional, called a Zigzag form in Elliott wave analysis, and under the rules of Elliott waves 2 and 4 must have different forms.
What’s happening now? Although the U.S. stock markets are closed for a holiday, the S&P 500 E-mini futures continued to trade overnight, rising 25.5 points from the close of Thursday’s session, to 4038. This will be the final update today.
What does it mean? The uptrend that began March 25 from 3843.25 is still underway.
[S&P 500 E-mini futures at 9:50 a.m., 70-minute bars, with volume]
What does Elliott wave theory say? The near-term uptrend is wave 3 of Submicro degree within a rising series of parent waves stretching up to wave 3 of Supercycle degree, which began in 1932. Submicro 3 will be followed by a shallow 4th wave correction and then a final 5th wave push higher that, when complete, will signal the start of a downtrend, all the up to the Supercycle degree.
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