The S&P 500 maintained its bullish structure through the end of 2025, despite experiencing a corrective pullback. In late November, it approached previous all-time highs but failed to break out decisively, suggesting a corrective phase with support near 6800. A significant drop below 6872 could disrupt this pattern, although the index appears to be in an extended bullish impulse that may continue into 2026.
The index is projected to gain further within subwave (3) of a five-wave bullish cycle, potentially pushing it into the 7000 area. The overall outlook presents an unfolding extended impulse within wave III, which could conclude in 2026. This analysis is available in a recorded webinar streamed on 5 January 2026.
Related Market Movements
In related market movements, the US ISM services PMI improved to 54.4 in December. GBP/USD is likely to range between 1.3470 and 1.3535, while NZD/USD gains amid softer US ADP data. JPY outperforms in G10 amidst quiet trade, and GBP/USD consolidates near 1.3500. Meanwhile, the EUR holds steady ahead of the NA session. The 2026 economic outlook suggests stable growth, though uncertainties from 2025 remain influential.
We are viewing the current S&P 500 pullback as a temporary correction, not the end of the bullish trend. The structure that began in late 2025 remains positive, with significant support expected near the 6800 level. This dip could present an opportunity before the next move higher.
Last week’s jobs report for December showed a moderate payroll gain of 110,000, calming fears of an overheating economy that we saw earlier in 2025. This supports the idea that the bull market can continue without aggressive Fed intervention. The VIX has also climbed to around 19, reflecting the current uncertainty and making option premiums richer.
Trading Strategies in a Volatile Environment
For those confident in the support level, selling out-of-the-money puts with strike prices below 6800 could be a viable strategy in the coming weeks. This approach allows traders to collect premium while waiting for the bullish trend to resume. A break below the 6872 level would be a signal to reconsider this position.
A more conservative approach would be to wait for a decisive breakout above the 7,000 mark. A sustained move into this area would confirm the start of the next bullish leg. At that point, buying call options or establishing bull call spreads could capitalize on the expected upward momentum.
The broader economic picture from late 2025, including the strong ISM Services reading of 54.4, reinforces a foundation for growth. While the outlook for 2026 appears constructive, we must remember the potential for volatility remains. This environment favors strategies that are bullish but have defined risk.
