The analysis centres on the performance of the 1-hour Elliott Wave Charts of SPY from November 21, 2025. The rally unfolded as an impulse structure which led to a higher high sequence, suggesting more upside potential. Members were advised against selling and to consider buying during dips in 3, 7, or 11 swings at specified zones called blue box areas.
The chart from December 17, 2025, showed a pullback in wave ((ii)), which ended in a zigzag formation. Buyers were expected to enter at lower levels, providing opportunities for a rebound. By December 30, 2025, SPY reacted positively after the pullback within the blue box area, allowing for a risk-free position and reaching new highs between $712.96- $722.81. Investors anticipated profit-taking and subsequent pullbacks in 3, 7, or 11 swings.
Disclaimer and Risks
The document is from the Elliott Wave Forecast Team and includes a disclaimer about the risks involved in market investments. It advises thorough research and clarifies that no personalised recommendations are provided, and the author is not held responsible for the information’s accuracy or timeliness.
The recent dip in the SPY was a predictable correction within a larger upward move that we have been tracking. This pullback found its bottom right where we expected, in the $673-$649 zone. The subsequent rally confirms this was a classic opportunity to buy, as the primary trend remains to the upside.
This technical strength is happening alongside favorable market conditions as we close out the year. Historically, the “Santa Claus Rally” period often provides a tailwind for stocks, a pattern we’ve seen play out in over 78% of years since 1950. With the latest CPI figures from earlier in December 2025 showing core inflation easing to 2.8%, market sentiment is leaning towards the Federal Reserve holding rates steady in their upcoming January 2026 meeting.
Market Outlook and Strategy
Given this outlook, we believe derivative strategies should be positioned for further upside into early 2026. Traders can consider buying call options with expiration dates in late January or February to capture the expected move toward the $712 target. Selling out-of-the-money put spreads would be another way to express this bullish view while collecting premium.
As we approach the $712 – $722 price target, it would be wise to consider taking profits, as the analysis suggests another pullback will follow. The CBOE Volatility Index (VIX) has been trending near its yearly lows around 14, making long-option strategies relatively inexpensive for now. We will be watching for the next corrective pattern to form after this current upward leg completes.
