In July, the SP500 demonstrated a continuous rally, diverging from the anticipated seasonal patterns and Elliott Wave predictions. The index reached the $6380-6460 zone, surpassing forecasted levels and staying above the critical warning markers of $6177 and $6061, indicating a potential for a pullback.
The SP500’s recent rise increased the warning levels to $6363, $6336, $6281, and $6201. Despite this, no signs of a pullback have manifested. The projected green W-5 target of $6690-6820 remains within reach, aligning with the larger third wave target of $6738-7121, signifying an ending diagonal pattern.
July Price Movement
While July’s price movement diverged from the post-election seasonality, the SP500’s ability to remain above crucial levels suggests the continuation of upward movement. It is advised to watch for a closure below $6336 to anticipate the potential onset of green W-4, while considering the broader target.
The broader financial landscape shows the EUR/USD rebounding around 1.1450, GBP/USD experiencing mixed fluctuations around 1.3200, and gold stabilising slightly north of $3,300 per ounce. Bitcoin remains in a $116,000-$120,000 range, marked by ongoing whale buying and a record-low OTC balance.
As we enter August 2025, the S&P 500’s powerful rally from July tells us to respect the upward momentum. We should consider that this strength could carry the index towards the $6690-6820 target zone. Maintaining long exposure through call options or index futures seems wise while the market remains this strong.
Market Structure and Correlation
However, with the index so extended, we must also prepare for a potential pullback. We will be using a close below the $6336 level as our primary signal to shift our bias. Buying protective put options with strike prices below this mark could be a cost-effective way to hedge existing long portfolios.
The current market structure feels similar to the melt-up we saw back in late 1999, where momentum ignored overbought signals for an extended period. The CBOE Volatility Index (VIX) is currently hovering near 18, up from its June 2025 lows, which suggests some traders are beginning to price in higher risk. This supports the idea of owning some options to profit from a potential increase in price swings.
Looking at other assets, gold is showing strength by holding above $3,300 per ounce, which is impressive given the dollar’s recent stability. Data from the World Gold Council’s Q2 2025 report showed continued buying from central banks, likely providing this price floor. For currencies, the Euro’s bounce near 1.1450 follows recent ECB commentary suggesting their rate cut cycle may be over, while the Pound’s mixed signals around 1.3200 favor range-bound strategies.
In the crypto markets, the signs for Bitcoin are very bullish. The combination of sustained whale buying and record-low Over-The-Counter (OTC) balances, confirmed by exchange data showing a net outflow of over 50,000 BTC in July 2025, points to a brewing supply squeeze. This makes us favor long positions, using call options or futures while viewing the $116,000 level as a critical area of support.
