What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
S&P 500 index, daily bars
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
S&P 500 index, hourly bars
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
S&P 500 index, 30-minute bars
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
S&P 500 index, 4-hour bars
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
Learning and other resources.Elliott Wave International has long been the leading analytical house based on Elliott wave theory. They make available a number of free educational materials and other resources, in addition to their for-pay subscriptions.
I recommend two books, both by people associated with EWI.
First, Elliott Wave Principleby Robert Prechter and A.J. Frost is the book that, along with Prechter’s analyses, that created the revival of Elliott wave theory. I first read it in 1984, and it has had a profound influenced on my thinking about markets ever since.
Second, I’ve found Visual Guide to Elliott Wave Trading by Wayne Gorman and Jeffrey Kennedy, both of EWI, to be a useful book that relates Elliott wave theory to practical trading. The authors are hands-on Elliotticians, and for an active trader, that’s exactly what’s needed — less theory and more how-to. The first chapter of the book gives a very nice thumbnail run down of what Elliott wave theory is all about.
Terminology. Here are some links to information about some of the technical jargon I use.
Charts. On my charts, waves have a subscript showing the degree above or below the Intermediate degree. Here are the subscripts and the degree each represents:
{+3} Supercycle
{+2} Cycle
{+1} Primary
No subscript: Intermediate
{-1} Minor
{-2} Minute
{-3} Minuette
{-4} Subminuette
{-5} Micro
By Tim Bovee, Portland, Oregon, December 31, 2020
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.
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.
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
S&P 500 index, daily bars
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
S&P 500 index, 4-hour bars
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
S&P 500 index, 30-minute bars
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index moved slightly lower at mid-day Thursday, to 3,328.82, tentatively marking the end of the decline that began the day before.
What does it mean? The index has begun an upward correction within the downward move that began on Thursday. The correction will remain below 3,428.92, the starting point of the decline.
What is the alternative? It is still possible for the price to reverse and extend the correction that began September 11 from 3,310.47. I find it to be unlikely but can’t rule it out entirely.
S&P 500 index, 30-minute bars
What does Elliott wave theory say? Thursday’s low begins the uptrending wave 2 of Subminuette degree within downtrending wave 3 of Minuette degree. At the Subminuette 2 will end below 3,428.92, the starting point of Minuette 3 and within it, Subminuette 1. A firm rule of Elliott wave analysis posits that a 2nd wave cannot move beyond the start of the preceding 1st wave. Subminuette 2 will be followed by Subminuette 3, which will take the price down to new lows in the decline since September 16
My trading strategy. My short iron condor options position on SPY, the exchange-traded fund based on the S&P 500, is 28 days from expiration and seven days until management day, when I take profits. It is trading at 12% of maximum potential profit, and I shall exit at 50% of max.
Also, I’m holding inverse exchange-traded fund shares on the S&P 500 (SDS is the symbol).
What’s happening now? The S&P 500 index rose to within 4% of the upper of the trend channel.
What does it mean? The index is nearing the end of its uptrend and most likely will reverse before reaching the upper boundary of the trend channel.
What does Elliott wave theory say? The S&P E-mini futures on Sunday rose above their February 19 high, returning all of the major S&P 500 vehicles to alignment on the fifth day after they diverged. I’ll continue to focus my analysis on the S&P 500 index, turning to the E-mini futures to fill in the blanks where the index isn’t trading. (See “The Wave 2 Rule Collides With Reality“ for a description of the discrepancy.)
The index last Thursday began its 5th wave of Micro degree, the smallest degree I’ve counted as the 5th wave of Intermediate degree — five levels higher — nears completion in a Diagonal Triangle pattern.
Diagonal Triangles tend to reverse before reaching the trend channel boundary, so the end of the rise may be nearer than the boundary line might suggest.
Elliott wave theory says that the end of Intermediate 5 will mark the beginning of a downward correction that will march the price down to beyond the lower boundary of the triangle, perhaps around the 2000 level as a start, depending upon how quickly the decline progresses, and afterword, significantly below that level.
What is the alternative? There’s no limit, in the Elliott analysis rule set, on how far a 5th wave can travel, and there’s nothing that prohibits the price from breaking above the trend channel, by a little or a lot. I can guess that we’re within months of the end of Intermediate 5 and the start of the decline, but not necessarily. As always with the markets, the timing of things is a mystery.
What about my trades? I’ll continue to hold my bear shares (the inverse S&P 500 exchanged fund SDS) in the expectation that they will return to profitability during the fall after Intermediate wave 5 reaches its end. Regarding options: I’m reluctant to trade this close to the end of wave 5 while there’s also a possibility of an extended rise. So I shall bide my time.
What’s happening now? The S&P 500 index continues to work its way toward the upper boundary of its trend channel, trading at the open about 200 points plus change below the boundary.
What does it mean? The closer the price is to the boundary, the higher the likelihood of a significant reversal to the downside.
What does Elliott wave theory say? The present wave is Minuette wave C, the final wave up within Minor wave 5 within Intermediate wave 5 within Primary wave 5. Once C is complete, then the whole house of cards collapses into a long-lasting downtrend. Minor wave 5 has taken the form of a Diagonal Triangle, and therefore is likely to reverse before reaching the trend boundary.
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