3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued its trending 3rd-wave decline within a larger 1st wave downtrend that began on October 12. No change from this morning’s principal analysis.

I find it easy to get lost in the minutiae of the near-term charts, those small degrees, within the vast fractal pattern, that I use for my trading.

Occasionally, I like to remind myself that the dramatic rises and falls of those lower degrees are contained within much larger behemoths, slow-moving waves that determine the well-being of our households, our economy, our nation and ultimately the world.

The following chart is of S&P 500 index showing the entirely of wave 5{0} — an Intermediate wave in the nomenclature of the inventor of Elliott Wave Theory, R.N. Elliott. Every wave we’ve seen in the index for the past five years has been a subwave of wave 5{0}, which began on December 26, 2018.

[S&P 500 index at 3:25 p.m., 3-day bars]

Wave 5{0} has taken the form of an expanding Diagonal Triangle and is the final subwave within uptrending wave 5{+1}. Internally, wave 5{0} is in turn in its next-to-the-last subwave, declining wave 4{-1}, which began on January 4, 2022, which in turn in its middle subwave, wave 3{-2}.

I’ve drawn in the triangle’s price channel with blue lines. If the chart proceeds as usual, the price in wave 4{-1} will approach the lower boundary, presently in the 1700s and moving lower each day. When the 4th wave is complete, wave 5{-1} will return to the triangle’s upper boundary, now in the 6720s and moving higher each day. And that will be the end of wave 5{0}, which will be followed by a very large downtrend. Which, of course, will have its upwaves and downwaves of various degrees, large and small, that will give futures traders many opportunities to make a fortune or lose it.

When I posted this morning’s analysis I had not yet determined how the reanalysis of the chart impacted the alternatives to the principal analysis. I’ve concluded that Alternative #1 in the October 12 post is no longer valid. The alternative postulated that wave C{-6} within wave 4{-5}, the larger upward correction that began on September 27 is underway.

Alternative #2 in that same post is, however, still a viable alternative, and I’ve inserted it back into the “What are the alternatives” section below.

I’ve updated this morning’s chart, below.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, carrying the price from the 43760s to above 4400.

What does it mean? I had identified the movement as part a low-degree 4th wave upward correction that began on October 12 from 4355.50. But then the chart broke a rule of Elliott Wave Theory: If a 4th wave moves above the 1st wave of the same degree, then it’s not a 4th wave. Something else is going on.

The only possible “something else”, it seems to me at first glance, is that the rise from October 11 is that the decilne on October 12 is a very rapid five-wave downtrend that is a 1st wave — wave 1{-9} on the chart. And the rise that followed and is still underway is a 2nd wave upward correction — wave 2{-9}, both within downtrending wave 1{-8}.

A 2nd wave, under the rules of Elliott Wave Theory, can’t move beyond the start of the preceding 1st wave, which is 4430.50 at this point. There’s still some distance to go.

It is common for 2nd waves to end at the 78.6% Fibonacci retracement level in relation to the preceding 1st wave, which is 4404.24 on this chart. When the 2nd wave is complete, it will be followed by a 3rd wave downtrend, wave 3{-9}.

What are the alternatives? There is one. The final leg of the upward correction — wave C{-6} within wave 4{-5} — ended at the overnight high and the correction takes a compound structure. Declining wave X{-6}, a connector wave, has begun and will be followed by a second corrective pattern.

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

What does Elliott wave theory say?

Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 5{-5}, an downtrend, is underway, having begun on October 12.
• Wave 5{-5} is in its first subwave, wave 1{-6}.

Alternative Analysis:

• An upward correction, wave 4{-5}, is underway and is forming a compound structure. The first corrective pattern ended on October 12, and a declining connector subwave, wave X{-4}, is underway.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 13, 2023

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

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.

S&P 500 ETF Trust (SPY)

Lot 2023-5

Update 10/12/2023: I exited my short bull put vertical spread on October 12, a few hours after entry, eight days before expiration, for a $57 debit per contract/share, a profit before fees of $112 per contract. Shares were trading at $431.32, down $4.98 from the entry level.

The Implied Volatility Rank at exit was 29.2%, up 10.8 points from the entry level.

I exited on the day of entry because the position reached 50% of maximum potential profit, my normal exit point spreads.

Shares fell by 1.1% over 2 hours and 15 minutes for a -1,111% annual rate. The options position produced a 98.2% return for a +95,626% annual rate.

---

I have entered a bear call vertical spread on SPY, using options that trade for the last time eight days hence, on October 20, 2023. The premium is a $1.13 credit per contract share and the stock at the time of entry was priced at $436.30.

The Implied Volatility Ratio stood at 18.4%.

Premium:	$1.13	Expire OTM
SPY-bear call spread	Strike	Odds	Delta
Calls
Long	446.00	89.0%	11
Break-even	442.13	80.0%	19.5
Short	441.00	71.0%	28

The premium is 5% of the width of each of the short/long spreads. The profit zone covers a 1.3% move to the upside and a unlimited move to the downside.

The risk/reward ratio is 3.4 :1, with maximum risk of $387 and maximum reward of $113 per contract.

How I chose the trade. I selected the short strike prices based on the expected range of the expiration close, based on the options pricing. In entering the position, I expect SPY to decline, based on my Elliott Wave analysis of the S&P 500 futures, which shows a downtrending 5th wave having begun on the day of the trade.

By Tim Bovee, Portland, Oregon, October 12, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures fell during the session, reaching a low of 4355.50.

The decline is the first three subwaves of a low-degree initial wave within a 5th wave downtrend that began from an overnight high of 4430.50. The small rise that followed the decline is a 4th wave upward correction.

The first steps of a trend also have a bit of uncertainty over where waves are situated in the fractal complexity of market price movement. The 5th wave is unambiguously wave 5{-5}. The downtrend so far is almost certainly taking place within wave 1{-6}. But the subwaves? No way to tell.

Based on a rough similarity in the days taken to complete the present subwaves and subwaves of the preceding downtrend, wave 3{-5}, I’ve chosen to label the three wave’s of today’s decline as being wave 1{-8} through wave 3{-8}, and the small upward correction as wave 4{-8}. All of them are subwaves of wave 1{-7}, which is a subwave of wave 1{-6} and, up a degree, wave 5{-5}.

Wave 4{-8} will be followed by further decline, wave 5{-8}. When complete, wave 5{-8} will be the end of wave 1{-7} and the beginning of an upward correction, wave 2{-7}, which will take back a portion of the decline. The Fibonacci retracement level 61.8% is a common end point for 2nd waves, and we’ll have that price number after wave 1{-7} reaches its end.

I’ve updated the chart.

2:30 p.m. New York time

SPY 8DTE options position exit. My short bear call, entered eight days before expiration, reached 50% of maximum potential profit 2 hours and 15 minutes after entry, and I followed my trading rules for such a position and exited. In Elliott wave terms, I entered as a downtrending 5th wave has just begun and so had a high confidence that it would carry the price much lower, which is profitable for a bear call spread. The rapidity took me by surprise. I had counted on holding the position into next week. My take-away is that used correctly, Elliott Wave Theory and short-term options trading are a powerful combination. Good to know.

12:05 p.m. New York time

SPY 8DTE options position entry. I’ve entered a very short term short bear call spread on SPY, using options that expire eight days from entry, on October 20 (“8DTE” = 8 days to expiration). For me, this is something of an experiment in trading options that will expire quickly. My normal days to expiration preference has been around 45 days. If I can reduce the trade to eight days with similar profits, then I’m money ahead — short trades open the possibility for more trades. I’ve posted an analysis of this trade.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight until the latest inflation numbers were released. At that point the price fell swiftly, from 4430.50 to 4407.75, reversed and retraced about two-thirds of the drop, and then settled in the 4410s.

What does it mean? The rise took the 4th wave upward correction to a new high, and the sharpness of the decline suggests that the high was a significant peak of something. Or perhaps not. As always in the early hours of reversal, if that is what has occurred, all is in flux and ambiguities abound.

To describe the “something”, I’ll need to use subscripts to identify the degree of each wave, its position in the fractal structure of the chart. The subscript, within curly brackets, shows the degree in relation to the the Intermediate degree, which at present is a large 5th movement, wave 5{0}, that began on December 26, 2018 and is still underway.

Prior to the overnight peak, the upward correction, wave 4{-5} — five degrees below the Intermediate degree — was in its 3rd and possibly final subwave, wave C{-6}, which in turn was in its final subwave, wave 5{-7}. That final subwave was also in its final subwave, wave 5{-8}, the smallest wave that I track on the chart.

Under this morning’s new principal analysis, the overnight high of 4430.50 was the end point of waves 5{-8} and 5{-7}, which in turn means it was the end of wave C{-6}, of the corrective pattern that began on September 27 and most likely of wave 4{-5} itself.

Some corrections take a compound structure, stringing together two or three corrective patterns. If that’s the case, then the peak is the end of the first corrective pattern within wave 4{-5}, with one or two more to come. But that’s an alternative.

Under the principal analysis, wave 4{-5} ended at the peak, and wave 5{-5} is underway. As a 5th wave, it can have tremendous power, or it an be a dud. The price will at a minimum is almost certain to return to the 4270s — the starting point of the prior correction, wave 4{-5} — and perhaps a significan distance below that level. If wave 5{-5} is a truncated 5th wave, then it will stop before reaching 4277, the starting point wave wave 4{-5}.

What are the alternatives? There are two.

Alternative #1: The final leg of the upward correction — wave C{6} within wave 4{-5} — is still underway as the price quickly reverses and moves above the present correction high.

Alternative #2: The final leg of the upward correction — wave C{-6} within wave 4{-5} — ended at the overnight high and the correction takes a compound structure. Declining wave X{-6}, a connector wave, has begun and will be followed by a second corrective pattern.

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

What does Elliott wave theory say? Here are the waves that underly the analyses.

Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 5{-5}, an downtrend, is underway, having begun on October 12.
• Wave 5{-5} is in its first subwave, wave 1{-6}.

Alternative analyses #1 and #2:

• Wave C{-6} is underway and will either the final wave of the wave 4{-5} correction or the end of the first corrective pattern within a compound wave 4{-5} correction.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 12, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose slightly during the session and then fell, to 4377.25, climbing back to almost 4400 as the closing bell approached.. I’ve altered the low-degree wave mark-up from this morning to label the session low, 4377.25, as the end of declining wave 4{-8} and the beginning of 5{-8). Otherwise, no change. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose back into the 4410s overnight.

What does it mean? The rise carried the price yet again above the upper boundary of the target range pf the 4th-wave upward correction that began on September 27.

Let’s dig into the fractal structure. Internally, the 4th wave is in its 3rd and likely final subwave, a C wave, which in turn is in its 5th and final subwave. At the lowest level that I’m tracking, that 5th wave within wave C is either in its final subwave — a rising 5th wave — or is still working through its downward 4th-wave correction.

At the highest levels, you’ll notice that I hedged the significance of the C wave, one degree into the 4th wave correction. Most corrections contain a single corrective pattern. Some corrections take a compound form, linking together two or three corrective patterns. If this correction takes a compound form, then the C wave will be the end of the first corrective pattern as the 4th wave correction continues.

In either case, the 4th wave correction will be followed by a 5th wave downtrend that will carry the price below the starting point of the correction, 4277, and most likely signifiantly below that level.

What are the alternatives? I’ve mentioned the one ambiguity above: Is the smallest wave being tracked a rising 5th wave or is the falling 4th wave still underway?

The chart. In Elliott Wave Theory, 4th-wave corrections tend to end within the 4th subwave of the prior 3rd wave of the same degree as the correction. I’ve marked with blue lines the upper and lower boundaries of that 4th wave of 3rd.

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

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave 4{-5} is in its final subwave, rising wave C{-6}.
• Within wave C{-6}, wave 5{-7} is underway and is in its last subwave, wave 5{-8}.

Alternative analysis:

• Wave 5{-7} is in its next-to-the-last subwave, wave 4{-8}.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 11, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, reaching above the upper boundary of the upward correction’s target range, to 4419, and then declined back into the count.

This morning’s analysis is unchanged. The 4th wave upward correction continues and is in the 3rd subwave, wave C. Wave C, in turn is in its final subwave, a 5th wave, which is in its next-to-the-last subwave, a 4th wave.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures reached higher in overnight trading, into the 4380s, as it stayed close to the lower boundary of its target range.

What does it mean? Now underway: The final subwave within the C wave, the final wave within the 4th wave upward correction that began on September 27. When that final subwave, a 5th wave, is complete, it will cascade up and end the correction. One exception: If the correction takes a compound form, containing two or three corrective patterns, then end of that subwave will be the end of the first corrective pattern, with more to come.

After the correction end, a 5th wave downtrend will follow, carrying the pride back below the starting point of the correction, 4277, and most likely significantly lower.

What are the alternatives? There are not at the moment. Ambiguities will surely develop, as they always do.

The chart. I’ve moved the chart closer in that it has been earlier, to better show the upward correction and its internal waves. In Elliott Wave Theory, 4th-wave corrections tend to end within the 4th subwave of the prior 3rd wave of the same degree as the correction. I’ve marked with blue lines the upper and lower boundaries of that 4th wave of 3rd.

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

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave 4{-5} is in its final subwave, rising wave C{-6}.
• Within wave C{-6}, wave 5{-7} is underway and is in its next-to-the-last subwave, wave 5{-8}.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 10, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures exceeded the October 6 high, reaching above 4375, as the final subwave of the C wave entered its target zone. The C wave is likely to be the final wave of the upward 4th-wave correction that began on September 27. If the correction takes a compound form, stringing two or three corrective patterns together, then the C wave will be the end of the first corrective pattern.

The upward movement, by exceeding the September 29 high, eliminates the alternative analysis that was first posted last week and continued in this morning’s post. Under the alternative, the upward correction ended on September 29 at 4371.25 and began the 1st subwave of a 3rd wave downtrend, making today’s rise part of a 2nd wave upward correction that downtrend. Under the rules of Elliott Wave Theory, a 2nd wave cannot move beyond the start of the previous 1st wave. So that alternative is gone, and others will surely takes its place.

Charts. The upper chart, showing a close-up, has not been updated this afternoon. The lower chart, showing the entire decline so far from September 14, has been updated for this post.

9:35 a.m. New York time

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

What does it mean? Within the 4th wave upward correction that began on September 27, the final subwave — wave C — is underway. When it is complete, the upward correction will also be complete, unless the 4th wave becomes a compound correction linking two or three corrective patterns together.

The question of the moment is, where does the decline fit in the fractal structure within the compound correction?

Wave C, now underway, is the 3rd subwave within the correction. The upper chart below is a close-up of the C wave. A C wave in this correction will have five subwaves. The rise on October 6 was the 3rd wave. So the decline that began on October 8 — today — is the 4th wave. It will be followed by a rising subwave that will likely move above the October 6 peak, 4358.50. It will be th 5th wave, and it’s completion will also complete the 3rd wave within the final wave of the upward correction.

A downward 4th wave will ensue, two degrees within the upward correction, and then a rising 5th wave, which will complete the C wave, the corrective pattern, and perhaps the C wave.

What are the alternatives? [Note: The price movement during the day has eliminated this scernario as a viable alternative.]

Unchanged from last week.

The A wave on the chart is the 4th wave in its entirety. The size is disproportionate to prior waves of the same degree, but it’s still possible. If this proves to be the better analysis, then a 5th-wave downtrend began on September 29 and is still underway.

Two charts. The upper chart shows the S&P 500 futures peak of wave 3{-7} on October 6 and the opening gap when trading resumed on October 8 after the weekend. Each bar tracks trading for 4 minutes.

The lower chart shows the entirely of wave 3{-3} so far, the decline that began on September 14 which encompasses the present upward correction, wave 4{-5}. Each bar tracks trading for 40 minutes.

On both charts, the blue lines mark the typical ending range of a 4th wave correction: The boundaries of the 4th wave within the prior 3rd wave of equal degree. The red lines show two common points of reversal or pause — the 78.6%, 50% and 38.2% Fibonacci retracement levels — as well as the lowest and highest rungs of the retracement ladder.

[S&P 500 E-mini futures at 9:32 a.m., 4-minute bars, with volume]

[S&P 500 E-mini futures at 3:30 p.m., 45-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave 4{-5} is in its final subwave, rising wave C{-6}.

Alternative Analysis [Note: The price movement during the day has eliminated this scernario as a viable alternative.]

• Downtrending wave 5{-5} is underway, having begun on September 29 from 4371.25, the date the preceding wave 4{-5} ended. Internally, it is presently in an upward correction, wave 2{-6}.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 9, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures continued to rise during the session.

Within the 4th wave upward correction that began in late September, the C wave breezed past the 78.6% Fibonacci retracement of the preceding A wave and approached the 100% retracement level, the A wave’s starting point.

A 4th wave, typically, will end within the 4th subwave of the preceding 3rd wave of the same degree. In this case, that subwave began at 4366.50 and ended at 4399, providing a target range for the correction I’ve marked the boundary of that range with blue dashed lines.

Bottom line, in my opinion: The rising 3rd subwave within wave C is underway. It will be followed by a falling 4th subwave, and then a final rising 5th subwave that will end the correction, unless it takes a compound form, stringing together two or three corrective patterns.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures traded narrowly overnight until the U.S. Employment Situation Report was released an hour before the opening bell, and then dropped 50 points within the span of a minute. In subsequent trading it dropped another 10 points and then recovered about a third of the decline.

What does it mean? Under the Principal Analysis, marked on the chart, the rapid fall counts as the 4th of five waves within the final subwave of a 4th-wave upward correction that began on September 27. Under the alternative analysis, the fall is part of a rising 2nd-wave correction within a 5th wave downtrend that began on September 29

What are the alternatives? The A wave on the chart is the 4th wave in its entirety. The size is disproportionate to prior waves of the same degree, but it’s still possible. If this proves to be the better analysis, then a 5th-wave downtrend began on September 29 and is still underway.

[S&P 500 E-mini futures at 9:35 a.m., 40-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave 4{-5} is in its final subwave, rising wave C{-6}.

Alternative Analysis

• Downtrending wave 5{-5} is underway, having begun on September 29 from 4371.25, the date the preceding wave 4{-5} ended. Internally, it is presently in an upward correction, wave 2{-6}.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 6, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures rose during the session, again exceeding 4300. This morning’s analysis stands unchanged. The 3rd and final wave within an upward corrective pattern that began on September 27 continues. I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose from the 4270s to slightly above 4300 overnight, and then fell sharply back to the 4270s as the opening bell approached.

What does it mean? The decline was a low-degree downward correction within the third and perhaps final wave of a larger upward 4th-wave correction that began on September 27.

The third wave is a C wave. If it behaves typically, it will exceed the end of the preceding A wave, 4371.25. The C wave high so far is 4304, so there’s some upside left.

What are the alternatives? The alternatives described in the October 3 Trader’s Notebook continue to be viable possibilities, due to the profound ambiguity of the wave count within the rise from September 27 and the decline that followed, beginning on September 29.

I refer to you to the October 3 discussion for detail. Long story short: There are two possible interpretations of almost equal likelihood. The Principal Analysis, desribed above and shown on the chart, has a slight edge.

The other possibility that the A wave on the chart is the 4th wave in its entirety. The size is disproprotionate to prior waves of the same degree, but it’s still possible. If this proves to be the better analysis, then a 5th-wave downtrend began on September 29 and is still underway.

[S&P 500 E-mini futures at 12:30 p.m., 40-minute bars, with volume]

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.
• With wave 1{-4}, subwave 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave 4{-5} is in its final subwave, rising wave C{-6}.

Alternative Analysis

• Downtrending wave 5{-5} is underway, having begun on September 29 from 4371.25, the date the preceding wave 4{-5} ended.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 5, 2023

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

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.

3:30 p.m. New York time

Half an hour before the closing bell. The S&P 500 futures traded narrowly during the session, between the 4250s and the 4290s, adding a bit more distance to the rise that began on October 3. The movement is consistent with wave C within the 4th wave upward correction, requiring no change to this morning’s analysis.

I’ve updated the chart.

9:35 a.m. New York time

What’s happening now? The S&P 500 E-mini futures rose overnight, from 4235.50 into the 4280s.

What does it mean? The 4th-wave upward correction that began on September 27 has begun the final subwave of the corrective pattern, the C wave. Maybe. There are ambiguities.

In yesterday afternoon’s post I described two equally likely scenarios based on a chart that lacked clarity in the wave count.

If the overnight rise continues, it lends credibility to the B-wave scenario: The decline from September 29 was the middle subwave of a 4th wave upward correction that began on September 27. The overnight rise is wave C.

Had the price continued to decline, it would have increased the credibility of the 5th wave scenario: The upward correction ended on September 29 and the decline that followed is a 5th wave downtrend. If it reverses from its present level and declines further, that will also lend strengthen the case for the 5th wave.

The low point of the B-wave decline, 4235.50, is close to a 130% retracement of the A wave. B waves tracing a Flat pattern typically retrace 100% to 138% of the A wave. So the retracement a point in favor of the B-wave scenario.

But there are problems. The A-wave rise from February 27 appears to have five subwaves, which is characteristic of a Zigzag pattern and is not characteristic of a 4th wave. And the decline from September 29 appears to have five subwaves, which is characteristic of a 5th wave but not of a B wave, whether the pattern is a Flat or a Zigzag.

Waves sometimes (often?) lack clarity and can be interpreted several different ways. Given the lack of clarity on this chart, I’m sticking with the B-wave scenario but will quickly switch to the 5th-wave scenario if the decline resumes and carries the price a good distane below 4206, the 138% retracement level.

What are the alternatives? As the chart lacks clarity, every possibility is an alternative. I’ve picked the B-wave scenario for the chart and so am calling it the Principal Analysis. But both scenarios are equally likely.

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

What does Elliott wave theory say? Here are the waves that underly the analyses.

Principal Analysis:

• A downtrend, wave 3{-2}, began on July 27 and is underway.
• Within wave 3{-2}, a smaller downtrend, wave 3{-3}, began on September 14 and is in its initial subwave, wave 1{-4}.

The B-wave scenario:

• With wave 1{-4}, subwave 4{-5}, an upward correction, is underway, having begun on September 27 from 4277.
• Wave B{-6} within wave 4{-5} ended on October 3 and rising wave C{-6} is underway.

The 5th wave scenario:

• Downtrending wave 5{-5} is underway, having begun on September 29 from 4371.25.

Big picture:

• The wave 3{-2} downtrend is a subwave of wave 4{-1}, a downtrend that began on January 4, 2022.
• Wave 4{-1}, in turn, is a subwave of wave 5{0}, an expanding Diagonal Triangle that began on December 26, 2018.
• Wave 4{-1} may eventually reach the lower boundary of wave 5{0}, presently slightly below 1800 and declining further each day.
• Wave 4{-1} will be followed by rising wave 5{-1}, the final wave in the Triangle.

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)
• S&P 500 Futures and index:
• 4{-1} Minor, 1/4/2022, 4953.25 (down) (futures), 4818.62 (down) (index)
• S&P 500 Futures:
• 3{-2} Minute, 7/27/2023, 3502 (down)

Reading the chart. Price movements — waves – – in Elliott wave analysis are labeled with numbers within trending waves and letters with corrective waves. The subscripts — numbers in curly brackets — designate the wave’s degree, which, in Elliott wave analysis, means the relative position of a wave within the larger and smaller structures that make up the chart. R.N. Elliott, who in the 1930s developed the form of analysis that bears his name, viewed the chart as a complex structure of smaller waves nested within larger waves, which in turn are nested within still larger waves. In mathematics it’s called a fractal structure, where at every scale the pattern is similar to the others.

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, October 4, 2023

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

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.

Invesco Powershares QQQ (QQQ)

Lot 2023-1

Update 10/25/2023: I exited my short bear call vertical spread on QQQ, 24 days before expiration, for a $2.53 debit per contract/share, a profit before fees of $253 per contract. Shares were trading at $352.65, down $3.36 from the entry level.

The Implied Volatility Rank at exit was 46.9%, up 17.1 points from the entry level.

I exited on the 22nd day after entry because the position reached 50% of maximum potential profit, my normal exit point for options positions.

Shares fell by 0.9% over one day for a -16% annual rate. The options position produced a 100% return for a +1,659% annual rate.

---

I have entered a bear call vertical spread on QQQ, using options that trade for the last time 45 days hence, on November 17. The premium is a $5.06 credit per contract share and the stock at the time of entry was priced at $356.01.

The Implied Volatility Ratio stood at 29.8%.

Premium:	$5.06	Expire OTM
QQQ-bear call spread	Strike	Odds	Delta
Calls
Long	378.00	78.0%	21
Break-even	369.06	69.0%	31
Short	364.00	60.0%	41

The premium is % of the width of spread. The profit zone covers a 3.7% move to the upside and an unlimited move to the downside.

The risk/reward ratio is 1.8 :1, with maximum risk of $894 and maximum reward of $506 per contract.

How I chose the trade. I selected the short strike prices based on the expected range of the expiration close, based on the options pricing, and then adjusted the strikes to coincide with the expected range based on Elliott Wave analysis.

By Tim Bovee, Portland, Oregon, October 3, 2023

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

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.