9:55 a.m. New York time

What’s happening now? In after hours trading the S&P 500 bounded off of the 61.8% Fibonacci retracement, fell back down to the lower Fibonacci level, 38.2%, and then climbed back toward 61.8%, falling short of its prior rise.

What does it mean? This could be the end game for the rise that began on May 3. Or maybe not. Given the state of the chart, I’m unable to see a definitive way forward for the near term.

What does Elliott wave theory say? Minor wave B, which began on May 3 at 2771, has met its requirements. Whether it can continue to rise depends upon whether it has traced three subwaves. I can count it in a way that shows that it has, but I can also count in a way the shows that it hasn’t. As is often the case with Elliott wave analysis, conclusions are more a matter of probability rather than certainty. The big picture is clearer: Minor B will be followed by a Minor C to the downside, which will complete Intermediate wave B and which will be followed by an Intermediate wave C to the upside.

What is the alternative? It’s possible, although I think it’s a low probability, that the peak attained on April 30 ended Intermediate wave C, and the subsequent decline was the start of Primary wave 3 to the downside.

What about my trades? The downward movement Minor wave C will be my last chance to make a profit on my three short bear call options spread positions on SPY: Lots 12, 13 and 14, all expiring May 15. (The lot numbers link to the entry analyses.)

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.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

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

By Tim Bovee, Portland, Oregon, May 6, 2020

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10:25 a.m. New York time

What’s happening now? The S&P 500 continues its upward move within an upward correction of the decline that began in February. The price has retraced half of its initial correction decline and has continued past that Fibonacci level.

What does it mean? The upward movement has satisfied its target requirements — between 38% and 79% — and could enter a decline at any time.

What does Elliott wave theory say? The present rise is a B wave of Minor degree within wave B of Intermediate degree within wave 2 of Primary degree. By the rules it must break into three waves, and at present it looks more like five waves to me. Given the normal ongoing uncertainty over what degree of wave is being counted, I’m unwilling to label it as three waves at this point.

What is the alternative? It is possible to label the high of April 30 as the end of the Primary wave 2, the low of May 3rd as the end of Intermediate wave 1  within Primary wave 3 and the present upward movement as Intermediate wave 2, although the internals in my count rule out that possibility. None the less, if the price moves below 2174, which is the end of Primary wave 1, then the alternative count is correct.

What about my trades? Continuing to hold three short bear call options spread positions on SPY: Lots 12, 13 and 14, all expiring May 15. (The lot numbers link to the entry analyses.) At this point, as is often the case with in-the-money short options positions, I would have a bigger loss if I exited down than I’ll have if they expire in-the-money.

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.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

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

By Tim Bovee, Portland, Oregon, May 5, 2020

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11:45 a.m. New York time

What’s happening now? The S&P 500 dropped to 2771 Sunday night and reversed to the upside, bouncing off of the 78.6% Fibonacci retracement level.

What does it mean? The price will next enter a short-term upward trend, the middle movement of three.

What does Elliott wave theory say? By my count the Minor A wave to the downside is complete, having shows five sort-of-unclear waves (I really find Minor A hard to count). Minor A is a subwave of Intermediate B to the downside within Primary 2 to the upside, all within Cycle 1, a major downtrend that began on February 19.

B waves tends to correct anywhere from 38% to 79% of wave A, so we can place a tentative target between 2850 and 2925, give or take.

What is the alternative? The alternative posits that Minor wave B is still not complete. If it moves below a 90% retracement of wave A (2742 on the S&P 500), then it is a Flat rather than a Zigzag.)

What about my trades? The clock is running out on my three short bear call options spread positions on SPY: Lots 12, 13 and 14. They all expire May 15. If SPY reaches below 261, then all will be out of the money and will expire for maximum profit (or be sold for a profit). Anything below 263 makes one position profitable. (The lot numbers link to the entry analyses.)

I one had a lawyer who’s favorite line was “It is what it is.” That sentiment seems to apply here.

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.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

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

By Tim Bovee, Portland, Oregon, May 4, 2020

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11:20 a.m. New York time

What’s happening now? The S&P 500 price decline that began April 30 so far has reached -4.5%, attaining its low point of 2830.75 in the early morning hours before the opening bell. It has since moved sideways in a very small intraday movement.

What does it mean? The decline is a correction to the downside within a correction to the upside. I expect the decline, when it reverses upward, to return to the 2965 level or beyond.

What does Elliott wave theory say? 

The decline has retraced 50% of wave A, within the 38% to 79% retracement range that is common among B waves within Zigzag corrections. The decline could end where it without violating any rules, swinging up again into a C wave that will complete Primary wave 2. A 79% retracement would bring the price down to around 2770. If it goes further, then we’re more likely looking at a Flat, which tends to retrace at least 90% of the A wave.

The B wave down so far, to my eye, has more than three waves, which violates a rule of Elliott wave analysis. I’ll wait for some clarity before reaching a decision about what’s next.

What is the alternative? I have no alternative at this point.

What about my trades? With my three short bear call options spread positions on SPY,  Lots 12, 13 and 14, all expiring May 15, I’ve reached the point where the Elliott wave analysis is fairly irrelevant. The positions presently have a range of 6% to 11% above maximum potential loss, so I hold them, since at expiration my loss will be less than I would have if I exited now. If the price dips down to the 2600s before expiration, I could get out with a small profit. So, in terms of trading, it’s very binary: Either the S&P 500 drops enough to allow me a profit, or it doesn’t, and I have a loss. A very simple analysis.

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.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

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

By Tim Bovee, Portland, Oregon, May 1, 2020

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9:45 a.m. New York time

What’s happening now? The S&P 500 rose above the 61.8% Fibonacci retracement level, which is a common turning point, and then turned and at the opening had declined 20 points below the retracement level.

What does it mean? The index, possibly has completed its upward movement and has begun a descent, perhaps to levels near 2717, the beginning of the most recent leg up.

What does Elliott wave theory say? The internal form of the Intermediate A wave, within the Primary 2nd wave upward correction, has satisfied all requirements. The ensuing B wave’s end point will depend upon whether the Primary 2 second pattern — the second part of a complex correction — proves to be a Zigzag or a Flat. A Flat pattern would carry down to 90% or more of the length of wave A; a Zigzag would typically have less of a decline relative to A and in no case would it move beyond the start of A.

What is the alternative?  Two alternatives: Wave A is not yet complete and the rise will soon resume, or what I’ve labeled as wave is really a wave C, and what I’ve labelled as wave B is the beginning of the Primary 3rd wave down, which will reach new lows in the crash that began on February 19.

What about my trades? I’ve set stops on my three short bear call options spread positions on SPY, Lots 12, 13 and 14, all expiring May 15. They will be triggered as soon as each lot shows a minimal profit. Basically, it’s a tactic that says, Get out without a loss but don’t hang on for big profits. (The lot numbers link to the entry analyses.)

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.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

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

By Tim Bovee, Portland, Oregon, April 30, 2020

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9:55 a.m. New York time

What’s happening now? The S&P 500 bumped against the Fibonacci 61.8% retracement of its fall that began February 19. The index peak in the rise beginning March 22 is 2926.75, just below the 2930.12 Fibonacci point.

What does it mean? The 61.8% retracement level is often a place where market movements pause or reverse. I have long considered

What does Elliott wave theory say? The rise is wave 2 of Primary degree within wave 1 of cycle degree. Structurally, it is part of a complex upward correction within the larger downtrend. The first part of the correction had a Zigzag form. If the present leg up — Intermediate wave A within Primary wave 2 — peaks around the 61.8% retracement level, then it will have a Flat form. Once the present A wave is followed by B and C waves, it may mark the end of the upward correction, or it the movement could extend yet again.

In my experience this sort of complexity is a bit unusual in 2nd waves. Not unheard of, but 2nd waves tend to be simple Zigzags, leaving the fancy morphologies to 4th waves.

What is the alternative? A move beyond the start of Primary wave 1, at 3397.50, would mean that we aren’t in Primary wave 2 and something else is happening. It would demand a major recount.

What about my trades? It is 16 days before my three short bear call options spread positions on SPY expire: Lots 12, 13 and 14, all expiring May 15. (The lot numbers link to the entry analyses.) Their current status ranges from 12% to 17% above maximum potential loss. So what makes sense is to hold until they either fall below or expire for 100% of maximum loss.

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.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

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

By Tim Bovee, Portland, Oregon, April 29, 2020

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10:55 a.m. New York time

What’s happening now? The S&P 500 pierced 2885, the prior high, attained on April 16, within its correction to the upside within a larger downtrend that began February 19. After peaking at 2913.50, it then reversed and moved back below the level of the prior high. (The piercing is marked with a yellow oval.)

What does it mean? The upward correction is extending. The first portion took 24 days to complete, and although it is not guaranteed, the second portion will likely take a similar period to complete its work.

What does Elliott wave theory say? The piercing of 2885 broke a firm rule in Elliott wave theory: A second wave cannot move beyond the beginning of the 1st wave that preceded it. Since it was pierced, then the hypothesis that the 3rd wave of Primary degree to the downside is underway has been discredited. The Primary 2nd wave has developed into a combination. The first portion — A, B, C — of Intermediate degree was followed by a rather shallow X wave, which separates the portions, and will likely be followed by either a Flat or another Zigzag. Within the current movement, the count of the Intermediate A wave is complete, and the pullback suggests the possibility that a B wave to the downside has begun. Wave B will be followed by a wave C.

What is the alternative? I’ve got nothing at this point. The piercing of the 2885 level makes the preferred count quite clear.

What about my trades? I hold three short bear call options spread positions on SPY: Lots 12, 13 and 14, all expiring May 15. (The lot numbers link to the entry analyses.) The development of a combination pattern within the 2nd wave correction guarantees that the positions will produce losses.

My best bet will be to exit at the end of wave B. Wave A began at 2717.25. If the present pattern is a Zigzag, then a move below 2717.25 will violate a rule of Elliott wave analysis, and something other than a Zigzag is developing. If the price fails to retrace 90% or more of wave A, down around 2730, then it is a Zigzag. So a Flat will give me the best chance to mitigate my losses, and a Zigzag could well give me some good mitigation.

Holding on here. Waiting is.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

On the 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

By Tim Bovee, Portland, Oregon, April 28, 2020

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(Corrected the title day to Monday instead of Tuesday.)

10:55 a.m. New York time

What’s happening now? Stocks continue their rise that began April 23, reaching 2865 on the S&P 500 before swing into a very low level sideways move. The price at today’s high is within 20 points of its peak since the downward movement from February resumed on on April 16.

What does it mean? The market continues its correction within a larger downtrend. A movement above 2885 would change that assessment.

What does Elliott wave theory say? The present rise is a 2nd wave of Minor degree. It had appeared last week that the 2nd wave was complete, but such proved not to be the case. If today’s sideways movement flips into further decline, then Minor wave 3 will have begun. This small-scale drama is happening within Intermediate Wave 1 of Primary wave 3, both downtrending.

What is the alternative? If the price moves above 2885, then Primary wave 2, which by my preferred count ended April 16, is fact not yet over but instead is adding another zigzag or perhaps a flat to its journey. Ultimately, Primary wave 3 will begin. The question is when.

What about my trades? Holding. If Primary wave 3 is underway, then my three short bear call options spread positions on SPY will be profitable. If Primary 2 still has work to do, then the positions will be unprofitable. The entry analyse for the positions are linked to the lot numbers: Lots 12, 13 and 14, all expiring May 15.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

On the 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

By Tim Bovee, Portland, Oregon, April 27, 2020

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10:35 a.m. New York time

What’s happening now? The S&P 500 pierced the upper boundary of its channel ceiling yesterday and continues the opening stages of the resumption of its decline following completion of an upward correction.

What does it mean? The decline will carry the price down to the lower 2100s or below that level, perhaps significantly so.

What does Elliott wave theory say? I’ve placed the end of Primary wave 2 to the upside at 2885 achieved on April 16. The price declined to 2717.25 on April 24, the end of a small degree 1st wave in the early stages of an Intermediate 1st wave with a Primary 3rd wave, both declining the outset of the middle section of the Cycle 1st wave down that began February 19.

What is the alternative? The Primary 3rd has yet to show much vigor in its decline, creeping cautiously below the channel ceiling. It is conceivable (although barely) that the Intermediate C wave of the Primary 2nd wave is developing into something more complex than a zigzag.

What about my trades? Today is management day, the day I sell my profitable options positions. None of my three short bear call options spread positions on SPY are profitable at this point, so I shall make no trades. The options are 21 days away from expiration on May 15, which gives the price time to pick up the pace of its decline. Here are links to the entry analyses of the three trades, Lots 12, 13 and 14.

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

On the 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

By Tim Bovee, Portland, Oregon, April 24, 2020

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10:30 a.m. New York time

What’s happening now? The S&P 500 has retraced a Fibonacci 61.8% of its decline from April 16 and is approaching the upper boundary of its channel (the dotted black line in the chart).

What does it mean? The Fibonacci level and even more so, the channel boundary, are common reversal points to the downside at the end of  a rising market. The correction appears to be nearing its end.

What does Elliott wave theory say? The rise from from April 22 is wave 2 of the Minor degree . The first leg of the rise, wave A of Minute degree peaked on April 22 after retracing 50% of the Minor wave 1 decline. The Minute B wave was shallow and swift, and has been followed by Minute wave C, which appears to be in its most energetic phase, the 3rd wave of Minuette degree. The end of Minor wave 2 will mark the start of the Minor 3rd wave, which will carry the price down a minimum of 700 or so points, to the 2100s, and most likely well below that level.

What is the alternative? Minor wave 2 could by the rules stretch out into a complex form, such as a double zigzag. This isn’t the usual shape of 2nd waves, and I don’t expect it.

What about my trades? Holding on amid heavy losses to my three short bear call options spread positions on SPY: Lots 12, 13 and 14, all expiring May 15. (The lot numbers link to the entry analyses.)

Terminology. Here are some links to information about some of the technical jargon I use.

• Elliott wave analysis
• Fibonacci level

By Tim Bovee, Portland, Oregon, April 23, 2020

Read More »