Elliott Wave analysis of the S&P 500 (SPX) suggests the cycle from the 9 June low is nearing completion, with a five-wave impulsive sequence close to ending. Wave (i) peaked at 7579.93 before wave (ii) retraced to 7313.92, and the index then pushed higher in wave (iii) to 7816.7, as tracked on the one-hour chart. A subsequent dip is labelled as wave (iv), proposed to have bottomed at 7611.07, while a move above 7816.7 would help rule out a double correction.
Near-term direction hinges on 7611.07. If that pivot holds, the framework looks for an extension higher to complete wave (v) and finish the advance from the 9 June low, after which a larger-degree three-wave correction is expected. If the index drops below 7611.07, the reading shifts towards wave (iv) developing into a double correction, implying further consolidation before the rally attempt resumes.
Strategic Outlook and Seasonal Factors
We are closely watching the S&P 500 as it nears the final stages of its upward cycle from the June 9 low. With the index currently trading near the critical pivot of 7,611.07, derivative traders must prepare for a significant shift in market structure. If we stay above this level, we expect a final push past 7,816.7 to complete the five-wave pattern before a larger trend reversal.
This projected peak aligns perfectly with historical seasonal headwinds, as September is famously the worst-performing month of the year for the index. Historically, dating back to 1928, the S&P 500 has averaged a decline of about 1.2% in September, ending the month in positive territory only 44% of the time. This reliable seasonal weakness supports our expectation that a deeper three-wave corrective pullback is just around the corner.
Actionable Trading Plans for Both Scenarios
For traders looking to capture the remaining upside, we suggest using defined-risk strategies like bull call spreads if the index breaks above 7,816.7. Given the mature state of this cycle, we must keep stop-losses tight and avoid holding long positions too close to the estimated peak. As soon as the index shows signs of exhaustion at the highs, we should transition into buying protective puts or selling covered calls to hedge against the impending correction.
Alternatively, if the S&P 500 breaks below the 7,611.07 pivot, we must immediately prepare for a prolonged consolidation period. In this scenario, we should look to buy puts or establish bear put spreads to capitalize on the downward momentum of a double correction. Because corrections typically cause a rise in implied volatility, we can also look to write credit spreads to take advantage of inflating option premiums.
