3:30 p.m. New York time

The S&P 500 took back a bit of its fall today but remains below the Minuette wave 3 peak of November 29. I’ve updated the chart, below.

11 a.m. New York time

I’ve entered short bear call options spreads positions on IWM and posted an analysis. The positions are Lot 2020-2 for IWM.

10:40 a.m. New York time

The S&P 500 E-mini futures have dropped below their low in overnight trading, suggesting that a downward move has begun: Wave 5 of Minuette degree within wave 5 of Minute degree within wave 4 of Minor degree. I’ll start analysis for options entry today rather than tomorrow. Chart below updated at 10:45 a.m. New York time.

9:45 a.m. New York time

What’s happening now? The S&P 500 index and its derivatives continue to meander just below the upper boundary of the Diagonal Triangle that began in December 2018, the structure that has defined much of the market movement for the past two years.

What does it mean? The boundary defines how much upside is in the market. The S&P 500 E-mini futures are about 60 points below the boundary, a condition suggesting that the prospect for the next month or more is a downward move.

What is the alternative? Prices sometimes extend beyond the boundary, although the condition, called a throw-over, is short-lived.

What does Elliott wave theory say? The index is in the early stages of a downtrending 4th wave correction of Minor degree within a 5th wave of Intermediate degree. The 5th wave, when complete, will mark the end of the rise that began in 1974.

The close-up view, in the chart, shows the index tracing a downtrending 4th wave of Minute degree — down one from Minor — that is either in its 3rd wave of Minuette degree or a Minuette X wave subdividing a complex correction.

My trading strategy. Tuesday, December 1, is 45 days before the January options expire, on the 15th, making it the optimal day for entry. I’ll wait until tomorrow to decide on entering options positions. I’m leaning toward short bear call options spreads as my vehicle.

My share positions are all in SDS, an S&P 500 derivative that grows in value as the index declines.

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10 a.m. New York time

What’s happening now? The S&P 500 rose again during holiday trading of the E-mini futures, exceeding the high of November 26.

What does it mean? The upward correction that began November 24 continues and is now in its third wave. That wave should be almost over, and will be followed either a resumption of the downtrend or a separator wave that portends a complex correction pattern.

What does Elliott wave theory say? The present downtrend is Minor wave 4, and the present subwave is Minute wave 5 to the downside. That 5th wave is working through its 2nd subwave, of Minuette degree, an upward correction within the downtrend. The present rise within Minuette 2 is wave C of Subminuette degree. Following C’s completion, the next move will either be the beginning of Minuette wave 3 or a Minuette wave X, the latter being a dividing wave within a complex correction pattern. Second waves tend to be simple — A, B, C and done — and so I think the most likely outcome will be the start of Minuette wave 3.

Big picture, the price is still hugging the upper boundary (red line) of the Diagonal Triangle that began in December 2018. The smaller movements described above are all within Intermediate wave 5, which can be expected to carry the price down to the triangle’s lower boundary, presently at 2135 and continuing its gradual decline.

My trading strategy. On Monday I plan to think of entering options position that expire in January, most likely using IWM, which tracks the Russell 2000 index, as my vehicle. I’m continuing to hold my shares in the bear-oriented fund SDS.

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2 p.m. New York time

What’s happening now? U.S. stock and bond markets are closed for the Thanksgiving Day holiday. During a shortened trading day, ending at 1 p.m. New York time, the S&P 500 E-mini futures fell to a new low since the November 24 peak.

What does it mean? The new low increases the likelihood that a significant descent is now underway.

What is the alternative? It’s possible that the upward correction that began November 19 is still underway.

What does Elliott wave theory say? The likelihood is that Minute wave 5 of Minute degree is underway, possibly the final wave of Minor wave 4 to the downside, although 4th waves have a tendency to extend.s

My trading strategy. At present, staying out of options and holding on to my bear-oriented shares in SDS.

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3:30 p.m. New York time

Half an hour before the closing bell, the S&P 500 E-mini futures remain above their low set in the first half hour of trading. I’ve updated the chart below.

Holiday schedule. Thursday is a holiday in the United States and the stock exchanges will be closed. The closing bell will ring three hours early on Friday, at 1 p.m. New York time.

10:10 a.m. New York time

What’s happening now? The S&P 500 index and its E-mini futures completed an upward correction that began November 19 and began a decline.

What does it mean? The downward movement, when complete, will mark the end of a larger downward correction.

What does Elliott wave theory say? Minute wave 4 ended on Tuesday at 3655 on the futures — 3642.31 on the index — and began to decline as Minute wave 5. The end of Minute 5 will also mark the end of Minor wave 4, a downward correction that began November 9 from 3668 on the futures, or 3645.99 on the index. Minor 4 is the penultimate subwave of Intermediate wave 5 to the upside.

My trading strategy. I’m playing the Minor degree for options, so I need to see Minor for reach its end before entering a position. I’m playing the Primary degree — two degrees up from Minor — and am continuing to hold my positions.

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1 p.m. New York time

Although the Dow Jones Industrial average moved above its high of November 9, the end of Minor wave 3 to the upside, neither the S&P 500 nor the index-based E-mini futures have exceeded that level. I’ve updated the E-mini futures chart below.

9:45 a.m. New York time

Holiday schedule. Thursday is a holiday in the United States and the stock exchanges will be closed. The closing bell will ring three hours early on Friday, at 1 p.m. New York time.

What’s happening now? The S&P 500 E-mini futures rose slightly overnight, continuing the upward correction that began November 19.

What does it mean? The upward correction will most likely stay below the upper boundary (red line on the chart) of the expanding Diagonal Triangle that began in December 2018. Presently the boundary is at 3674 plus change.

What does Elliott wave theory say? The upward correction is wave 4 of minute degree within downtrending wave 4 of Minute degree, which began November 9. One degree higher is wave 5 of Intermediate degree, which began December 26, 2018.

My trading strategy. I’m reluctant to enter new options positions during the holiday week, since traders taking time off results in lower liquidity and in turn means a higher likelihood of surprises. So I’ll turn to analyzing new positions on Monday. I’ll continue to hold my shares in the bearish exchange-traded fund SDS.

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7 a.m. New York time

What’s happening now? The S&P 500 index continues a largely sideways movement within an upward correction that is in turn part of a downward correction.

What does it mean? Having touched the upper boundary (red line) of the Diagonal Triangle that began in December 2018, the price is now working its way down in a move that will eventually reach the lower boundary, which is presently in the vicinity of 2125.

About the chart. I’ve moved the subwaves of the correction up a couple of degrees, so that what had been labelled the Subminuette degree {-4} is now labeled the Minute degree {-2}. The ambiguities are still in place, but as the parent wave plays out, the new labeling seems increasingly more likely. If events lower the likelihood, then I’ll change the degree structure in my analysis.

What does Elliott wave theory say? The present sideways motion is wave 4 of Minute degree, an upward correction, within wave 4 of Minor degree, a downward correction, both within uptrending wave 5 of Intermediate degree.

My trading strategy. By my rules the entry period for the options that expire January 15 begins tomorrow and will run through December 8, and I’ll be considering whether to enter and what vehicle to use in light of my Elliott wave analysis. I know that Minor wave 4 will carry the price lower, and that’s the wave I would want to catch. Except it’s a 4th wave, which can be tricky, if the the variety of forms they take. A short iron condor is one possibility, if I can construct it with a sufficiently wide zone of profit. My stocks, which are in the bear fund SDS: I’m continuing to hold them in anticipation of a decline to the lower boundary of the Diagonal Triangle.

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3:30 p.m. New York time

Half an hour before the closing bell, the S&P 500 index and investments based on it continue to work through the Subminuette wave 4 upsdice correction.

9:55 a.m. New York time

What’s happening now? The S&P 500 index continues to work through the very early stages of a decline that will eventually carry it from present levels in the 3500s down to the 2100s or below.

What does it mean? The pattern unfolding since December 2018 has been an expanding Diagonal Triangle. The present decline will eventually carry down to the Triangle’s lower boundary, and that then climb back up to the upper boundary to complete the pattern, and indeed to complete all of the market’s rise since the mid-20th century. (The boundaries are shown on the chart as red lines.)

What does Elliott wave theory say? The present decline is Minor wave 4, a subwave of Intermediate wave 5 within 5th waves of Primary and Cycle degree. This chart, going back to the beginning of 2020, shows how small a movement there has been so far. Early days.

My trading strategy. I’m out of options at present. The analysis shows very limited prospects to the upside and significant likelihoods to the downside. A clear acceleration of Minor wave 4 to the downside will be my signal to start trading short bear call options spreads. Regarding shares in the bear-oriented exchange-traded fund SDS: The end of Minor wave 4 could be a selling opportunity. The idea would be to ride Minor 4 to the lower boundary, take profits, and switch to a bull-oriented fund to ride Minor 5 to the upper boundary.

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3:30 p.m. New York time

I’ve updated the chart at 30 minutes before the closing bell. The chart shows wave 4 of Subminuette degree has begun its run to the upside.

9:50 a.m. New York time

What’s happening now? The S&P 500 E-mini futures dropped sharply in overnight trading, from a daily high of 3623.25 down to a low of 3542.50.

What does it mean? The decline came as five waves, meeting the requirement for completion of the decline that began November 16. The next movement will be an upward move that will stay below 3668, and perhaps below 3623.25.

What is the alternative? There’s sufficient ambiguity in wave counting that the decline might not yet be over, and that would put off the rise to a later date.

What does Elliott wave theory say? These are all small-scale movements within Minor wave 4, a downward movement that began with the 3rd wave peak on November 9, at 3645.99 on index, 3668 on the futures. The overnight decline was wave 5 of Micro degree, and it completed wave 3 of Subminuette degree, which began on November 16 at 3637 on the futures.

The usual caveat: I’m uncertain about the degree of the subwaves of Minor wave 4. It could be that what I called Micro will turn out to be Minuette, and what I call Subminuette will be counted as Minute, moving the present count up by two degrees. But I’m not willing to reach that conclusion yet.

My trading strategy. In terms of Elliott wave analysis, I won’t be willing to re-enter options until I can resolve the ambiguity in judging the degree. I want to catch the main decline within Minor wave 4, and at this point I can’t define when that would be.

No ambiguity about my bearish shares in SDS. I’m hanging on at least until the price approaches the lower boundary of the Diagonal Triangle that began in December 2018. The red line on the chart is the upper boundary of the triangle.

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3:30 p.m. New York time

Wave 5 of Micro degree, possibly, has begun the final downward push within wave 3 of Subminuette degree. The chart is from half an hour before the closing bell.

10:15 a.m. New York time

What’s happening now? The S&P 500 E-mini futures crept continued to trace a small-scale upward correction within a much larger uptrend that is nearing its end.

What does it mean? The uptrend is part of the last movement of a rise that began in 2009. Its completion will cascade to longer trends, completing the rise since 1974, and, a level higher, since 1932. So it’s a really a big deal.

What does Elliott wave theory say? The rise since December 2009 is Intermediate wave 5 within Intermediate wave 5 (began in 2018) within Primary wave 5 (began in 2009) within Cycle wave 5 (began 1974) within Supercycle wave 5 (began in 1932).

At a smaller level, Minor wave 4 — a subwave Intermediate 5 — is underway, beginning on November 9, when Minor wave 3 reached completion.

Intermediate wave 5 has taken the form of an expanding Diagonal Triangle, and I expect Minor wave 4 to reach the lower boundary (the lower red line) before Intermediate 5 climbs to new heights.

My trading strategy. The Minor degree is the clock governing my options trades: Short bear call spreads for Minor 4, once it starts the middle wave of its decline, and short bull put spreads for Minor 5. As the longer-term chart shows, Minor 4 is just getting started.

For my bearish shares (the inverse fund SDS) I’m playing the Intermediate waves.

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3:30 p.m. New York time

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

9:55 a.m. New York time

What’s happening now? The S&P 500 continues to work their way downward within a countertrend correction.

What does it mean? The downward movement will be followed by a rise above the November 9 high, completing the countertrend correction and beginning a decline to the lower boundary of the Diagonal Triangle that began in December 2018.

What is the alternative? The Dow Jones Industrial Average reached a new high, exceeding the November 9 peak. If the S&P 500 does the same — it hasn’t yet on the indexes or the futures — then the analysis would show the new peak to be the beginning of the downward correction.

What does Elliott wave theory say? The November 9 peak marked the end of Minor wave 3 to the upside and beginning of Minor wave 4 to the downside. Both waves are components of Intermediate wave 5 to the upside, a Diagonal Triangle forming the final sub-wave of Primary wave 5, which began in 2009.

My trading strategy. I’m delaying entry into options positions — short bear call spreads — until I’m certain that Minor wave 3 is truly over. I’m continuing to hold my bearish stock positions.

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