Insights 
VT 
The short-term analysis of the S&P 500 ETF (SPY) shows an ongoing upward cycle from the April 2025 low. This cycle is expressed as a five-wave impulse, with wave (4) completing at 646.17 and the final leg, wave (5), featuring internal five-wave subdivisions.
Wave Analysis
Wave ((i)) peaked at 665.13, dipped to 653.17 in wave ((ii)), rose to 665.83 in wave ((iii)), and fell to 660.28 in wave ((iv)). Wave ((v)) reached 670.23, concluding wave 1. Following this, wave 2 formed a zigzag pattern, bottoming at 651.41.
Wave ((a)) dropped to 658.93, wave ((b)) rose to 668.71, and wave ((c)) fell to 651.41, completing wave 2. The ETF has resumed its upward movement in wave 3, with wave ((i)) increasing to 672.99 and wave ((ii)) descending to 663.30.
A pullback is expected to find support against 646.17, preparing for more upward movement. Overall, the analysis indicates continued upward momentum with clear support levels.
The S&P 500 ETF is signaling a clear upward path, suggesting that we are in a strong third wave of a bullish cycle. This structure implies that any short-term weakness should be seen as a temporary pullback rather than the start of a new downtrend. The path of least resistance remains higher for the coming weeks.
Trading Strategy
For derivative traders, this means we should look to establish bullish positions on dips, with the recent low of 663.30 acting as an initial area of interest. Buying call options or initiating bull call spreads on pullbacks toward this level could offer a favorable risk-reward setup. A deeper retracement toward the 651.41 low would present an even more compelling entry point for longer-dated options.
This technical outlook is reinforced by last week’s resilient economic data, which showed Q3 2025 GDP growing at a 2.5% annualized rate. Furthermore, the latest Core PCE inflation reading came in at 2.8%, continuing the gradual cooling trend we have seen since the summer. This macro environment supports further equity gains without signaling an overheating economy that would force the Fed’s hand.
The Cboe Volatility Index (VIX) is currently trading near 18, which is elevated enough to make option premiums attractive for sellers. This is a similar setup to what we observed during the choppy but ultimately bullish market of late 2023, where selling puts on weakness was a consistently profitable strategy. We could use cash-secured puts or bull put spreads with strikes below key support levels to generate income while waiting for an entry.
From a risk management perspective, the 646.17 level is the critical support that must hold to keep this bullish structure intact. A move below this price would signal that the impulse wave that began at the April 2025 low has failed. As long as the price remains above that point, the primary strategy should be to position for more upside.
