3:30 p.m. New York time

The S&P 500 has barely budged since peaking this morning after a rise that began overnight with the futures. The rise forced a reworking of my analysis See the new analysis here.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures beginning Sunday rose higher above the upper boundary of the trend channel. The index on Monday opened with a price gap to the upside, reflecting the futures trading. The price moved above the high of September 2 (golden line) — 3588.11 on the index and 3587 on the futures — the beginning of what Elliott wave analysis suggested would be a significant, years-long downtrend.

What does it mean? The rise since October 30 is the first portion of a correction to the upside. It will be followed by a downward movement, and then a push to a higher level.

What is the alternative? The corrective wave’s push above the start of the major downtrend raises a signal in Elliott wave analysis that could mean that the September 2 high was not the end of the rise that began in 1974 and not the beginning of a significant downtrend. See the Elliott wave theory section, below.

What does Elliott wave theory say? The movement of Primary wave 2 above the start of Primary wave 1 violates a rule of Elliott wave theory. If the chart shows it happening, then the count is wrong and must be redone. I don’t yet know what will replace the count shown on the chart above. I’ll post the revision after I’ve done the work and thought it through.

11:25 a.m. New York time. And I’ve completed the reanalysis. See today’s second post, “The Great Bull Market, 1974-????”.

My trading strategy. I’m hanging on to what I have and not entering into anything new.

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3:30 p.m. New York time

I’ve updated the chart to show the S&P 500 half an hour before the closing bell. The price has barely budged as it scrapes along the upper boundary of the trend channel.

6:35 a.m. New York time

What’s happening now? The S&P 500 index continued to dawdle at the upper boundary of the decline that began on September 2.

What does it mean? Nothing significant has changed since yesterday, November 5. I count the rise from October 30 as an initial step in upward correction, to be followed by a downward movement and then a final upward movement, potentially ending the correction and beginning a significant decline in the direction of the main trend.

What does Elliott wave theory say? Wave A of Minute degree is nearing its end. It is the first wave of a three-wave correction, subwaves of wave 4 of Minor degree within downtrending wave 3 of Intermediate degree.

My trading strategy. I’m declining to open options positions at this point, as I wait for the Minor degree downtrend to resume. I continue to hold shares in the inverse exchange-traded fund SDS.

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3:35 p.m. New York time

Half an hour before the closing bell, the S&P 500 has moved beyond the upper boundary of the price channel, a signal that Minute wave A, which began on September 30, is nearing completion. (No afternoon chart update today.)

9:45 a.m. New York time

What’s happening now? The S&P 500 index took another step to the upside, drawing near to the upper boundary of the price channel that began on September 2, when the index peaked at 3588.11

What does it mean? The rise that began on October 30, from 3233.94, is nearing its end.

What are the alternatives? The price could move briefly above the upper boundary — an action called an overthrow — and that would signal an end the rise and a resumption of the decline. An overthrow isn’t mandatory and the price could reverse while still below the boundary.

What does Elliott wave theory say? By my count the index is completing wave A of Minute degree within wave 4 of Minor degree, an upward correction that began on October 30. All of this is happening within wave 3 of Intermediate degree, which in turn is a subwave of wave 1 of Primary degree. Primary 1 began on September 2, ending a rise that began in 1974 and beginning a declining dominant trend that will be with set the direction of the market for years.

Minute wave A will be followed by a decline, Minute B, and then by a final upward movement, Minute C. The end of wave C will either mark the completion of Minor wave 4, ushering in a Minor 5th wave decline down to the 3100s, or wave C will be followed by an X wave, a separator of two corrective patterns that are parts of a combination correction.

My trading strategy. I won’t enter a new options position until Minor wave 5 has begun. I suspect that the December options are off the table, since it will take a bit of time for waves B and C to complete their work. I shall continue to hold my bear-oriented shares of the exchange-traded fund SDS.

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3:20 p.m. New York time

As it turned out, the X-wave alternative proved to be the S&P 500’s pattern. I’ve updated the count, showing today’s rise being an A wave of Minuette degree within a second corrective pattern connected to the first corrective pattern by the overnight decline (X wave of Minuette degree). All of this is happening with a 4th wave of Minute degree.

9:40 a.m. New York time

The futures markets on the major indexes had a dramatic night that commentators excitedly credited to the vast uncertainties in the American presidential election vote count. Elliott wave analysts, on the other hand, calmly marked up their charts, concluding that the drama was nothing more than typical 5th wave triangle pattern, setting up a resumption of the decline that began in February.

What’s happening now? The S&P 500 E-mini futures beginning at 9:30 p.m. underwent a rapid swing that in a couple of hours covered about 100 points each way.

What does it mean? The pattern is typical of the concluding movement in the direction of a larger movement. The swing occurred in an upward movement within an upward correction.

What is the alternative? On the chart I marked last night’s high as the end of the pattern. It’s possible to count the pattern so that an additional high will in fact be the end.

What does Elliott wave theory say? The horizontal triangle, marked in red, is the 5th wave of Subminuette degree within the C wave of Minuette degree, both within and marking the end of the 4th wave correction of Minute degree. The ensuing decline will either be the 5th and final wave, of Minute degree, within the declining 3rd wave of Minor degree. Or it could be an X wave of Minute degree, a boundary between two corrective pattern within a compound structure.

My trading strategy. I’m staying away from any new options position until I understand the present decline: Minute 5 is a trade; Minute X is a warning to stay away.

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3:25 p.m. New York time

I’ve updated the chart with half an hour before the closing bell.

9:45 a.m. New York time

What’s happening now? The S&P 500 index is tracing the third step, an upward movement within a low level upward correction.

What does it mean? Two possibilities. 1) The correction will end with the third step and will resume its downward path. 2) The index will trace a downward boundary movement and then will begin another pattern in a compound correction that will be on the shallow side.

What does Elliott wave theory say? The uptrending correction, wave 4 of Minute degree, has completed two internal waves, A and B of Minuete degree, and has begun rising in wave C.

If the C wave completes the correction, then it we followed by wave 1 of Minuette degree within wave 5 of Minute degree, the fifth wave being the final downward push of the 3rd wave correction of Minor degree.

If the correction turns into a compound movement, stringing several corrective together, then the decline following wave C will be an X wave of Minuette degree, a boundary between two patterns.

The difficulty is that the X wave (= correction continuing) and the 1st wave (= correction over) will initially exactly the same. The X wave will have three internal waves, and the 1st wave will have five internal waves. The truth of which we’re seeing will unfold over time.

My trading strategy. I’m looking to enter a new bear call spread position on one of the funds the tracks the S&P 500 closely, using the options that expire December 18. My preferred entry date for that series is today, November 3. It’s not going to happen. I’ll need to see some indication that the Minute 5th wave decline has begun.

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10:25 a.m. New York time

What’s happening now? The S&P 500 index’s low on Friday, October 30, marked the end of the decline from October 23 and the beginning of an upward correction

What does it mean? The decline a bit more than a week, and the position of the correction suggests it will be more of a sideways movement than a quick rush to the higher ground, so probably it the correction will carry into mid-November. The timing is a best guess, so the correction could take a shorter or a longer time to complete. The end wave the correction will be followed by a resumption of the main downward trend that will carry back into the 3200s and below.

What is the alternative? It’s still possible that the decline from October 23 is not yet complete. Based on the look of the chart, it seems unlikely to me.

What does Elliott wave theory say? The October 30 low was the end of wave 3 of Minute degree, and the following wave in its early stage is wave 4 of Minute degree. The Minute 2nd wave was a Zigzag pattern, and Elliott’s rule of alternation says that the 4th wave will be either a Flat or a Triangle. Within Minute 4 the movement is tracing wave A of Minuette degree.

The Minute degree correction is a subwave of wave 3 of Minor degree, which in turn is a subwave of wave 3 of Intermediate degree. All of this is tracing the middle ground of wave 1 of Primary degree, which began on September 2.

My trading strategy. The time taken by the Minute 4th wave correction has implications for my next options play. I exited my short bear all options spread on IWM last Friday, 21 days before its November expiration.

If the chart allows it, the next options position, also a short bear call spreads, will have a December expiration. The optimal entry date will be Tuesday, November 3, with entry possible within a range running from October 27 of last week to November 10, next week.

I don’t trade 4th waves. They have too many variations for confident analysis. They tend to produce surprises. So my target entry is for the end of beginning of Minute wave 5.

I haven’t selected a vehicle yet. Like IWM in my prior trade, the vehicle must have an implied volatility rank of 30 and above. SPY at present meets that requirement, at 35.8%, as does IWM at 40.3% and QQQ at 40.7. All trace similar Elliott wave patterns. Those IV rank can change quickly, so it’s premature to focus on any single symbol at this point.

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10 a.m. New York time

What’s happening now? The S&P 500 E-mini futures hit a low of 3226 in overnight trading and then began to rise within an upward correction that is part of a larger downward trend.

What does it mean? The rise that began last night could carry to 3334 and beyond on the futures chart.

What does Elliott wave theory say? The overnight rise is wave C of Subminuette degree within wave 4 of Minuette degree. A C wave under the Elliott rules can move beyond the end wave A. In this instance wave B moved below the start of wave A. When both B and C envelope A, it is called an expanded Flat. In any case, the pattern suggests that we may have a rise in price to usher us into Halloween night and the weekend.

My trading strategy. This is the day I exit profitable options positions. A glance at the chart at the opening bell told me that my short bear call options spread position on IWM is unlikely to show additional profit today, so I exited immediately, at 39.5% of maximum potential profit. My goal for spreads is 50% of max. So, not the best but not too shabby. I’ll update IWM Analysis with detailed results later today.

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3:30 p.m. New York Time

The S&P 500 and associated products rose by nearly 100 points and then showed the early stages of a reversal, in a correction at the 4th wave of Minuette degree. Tentatively, I count the A wave of Subminuette degree to be complete, with two more waves — B and C — to go.

The upward correction may delay my intended exit from my short bear call spread options positions on IWM, a decision that I’m due to make tomorrow, October 30.

10:10 a.m. New York time

What’s happening now? The S&P 500 index rose in a low-level correction overnight and then continued its fall.

What does it mean? The price stands about 120 points above the lower boundary of the trend channel that began on September 2. It will eventually reach the channel, and the longer it takes, the lower the boundary will sink. A week from today, the lower channel will be at about 3172.

What does Elliott wave theory say? The decline that began September 23 is wave 3 of Minute degree within wave 3 of its parent series, the Minor degree. Both in turn are subwaves of wave 3 of Intemediate degree. So, a 3rd of a 3rd of a 3rd — that is a powerhouse in Elliott wave theory.

The Minute and Minor degrees within Intermediate 3 each have a 4th wave upward correction and a 5th wave grand finale decline ahead of them.

What lies immediately ahead? More down, punctuated by a few upward attempts.

My trading strategy. I’ve put a sell order in on my short bear call options position on IWM, at a price that is 50% of maximum potential profit, about 12 cents below the present price of the position. Tomorrow, October 30, is 21 days before expiration, when I sell the position at any level of profit, unless the chart suggests I should wait.

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12:05 p.m. New York time

Here is a chart analyzing wave 5 of Minute degree, a downward movement that will complete the larger wave 5 of Minor degree and the still larger wave 3 of Intermediate degree. The completion of the present wave 5 of Micro degree will complete its parent, wave 3 of Subminuette degree, which will be followed by an upward Subminuette 4 movement that under the Elliott wave rules is likely to stay bellow 3308 on the futures chart.

9:45 a.m. New York time

What’s happening now? The S&P 500 E-mini futures fell sharply overnight.

What does it mean? The fall is the final movement that began on October 23, from 3462.50, and its parent decline that began on October 12, from 3541. It’s completion will usher in a significant upward correction that will mostly be a Flat pattern that will reach somewhere in the range of 3402 (the October 21 low) to 3460 (the October 23 high on the index, or 3402 to 3462 on the E-mini futures on the same dates.

What is the alternative? The sharpness of the decline leaves no apparent alternative. That’s not to say that ambiguities won’t appear; I just can’t see any at present

What does Elliott wave theory say? The sharp decline that began yesterday, October 28, is wave 5 of Minute degree within wave 5 of Minor degree within wave 3 of Intermediate degree. The completion of the fifth waves will mark the beginning of the Intermediate wave 2 correction to the upside. Fourth waves often end within the span of the 4th wave one degree lower. The 4th wave of Minor degree ran from October 21 to October 23, and that provided the targets I noted above. Minor wave 5 internally is in Minute wave 5, so Minor 5 is nearing its end.

All of this is happening within wave 1 of Primary degree, which began September 2.

My trading strategy. Short bear call spread options on IWM: Exit at 50% of maximum potential profit, or on Friday, the 21st day before expiration, or on any sign that Minor wave 5 has reached its end. SDS shares: Continuing to hold until Primary wave 1 nears completion.

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12:30 p.m. New York time

I’ve updated the chart with about 30 minutes to go before the closing bell. Very little movement today, beyond a slight hook downward that could mark the end of wave 4 of Minute degree, or a continuation of that upward correction — impossible to say which at this point.

9:40 a.m. New York time

What’s happening now? The S&P 500 index is in the late stage of its decline from October 12. It presently stands midway between the boundaries of the trend channel.

What does it mean? Once the decline is over, the index and its associated funds and futures will trace an upward correction, perhaps to the 3450s, and then turn to the final portion of the decline.

What does Elliott wave theory say? October 12 marked the beginning of wave 3 of Intermediate degree, the middle portion of the greater wave 1 of Primary degree, which began September 2.

Considered in greater detail, Intermediate wave 3 has reached its Minor 5 subwave, which in turn is tracing its Minute 4 subwave, the final upward correction within Intermediate 3.

At the opening bell this morning the price declined below yesterday’s low (October 26), which could mark the beginning of Minute wave 5, one level below Minor. Or perhaps not. It could be a continuation of Minute wave 4, which began yesterday.

My trading strategy. I’m holding my short bear call options spreads on IWM until at least Friday, longer if they’re not yet profitable. I’m operating on the presumption that Minute wave 5 of Minor wave 5 will return the position to profitability. I must avoid the start of Intermediate wave 4, an upward correction. I’m continuing to hold my shares in SDS, which profit when the S&P 500 decline, using Primary wave 1 as my guide.

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