The S&P 500 Index (SPX) has finished its corrective pullback and is moving upwards. The overall bullish pattern remains intact, with the price honouring key support and confirming the correction’s completion.
SPX declined in wave ((ii)) after finishing wave ((i)) at the previous high. This downward move unfolded as an A-B-C correction, concluding near the 1.618 Fibonacci extension at approximately 6693. This area also corresponds with blue box support on the chart.
Beginning Of New Bullish Sequence
Following a stabilisation near the lows, SPX began to rise, marking the end of wave ((ii)). The index is now starting a new bullish sequence in black wave ((iii)), beginning with wave (i) and a slight pullback as wave (ii). Provided the price remains above 6519.34, the index is expected to continue in wave (iii), targeting the 100%-161.8% Fibonacci extension of wave (i), translating to a range of 6854-6914.
The Elliott Wave structure suggests continued upward movement, indicating a resumption of the broader bullish trend for SPX. Selling is not advised, as dips are anticipated to be corrective and should find support.
With the corrective pullback appearing complete, the broader uptrend in the S&P 500 seems poised to resume. The recent low around 6693 acted as a strong support level, and the subsequent bounce is the first sign of a new bullish phase. We are now looking for a sustained move higher, confirming that the market has absorbed the recent selling pressure.
This technical outlook is strengthened by favorable economic data from this month. The latest CPI report confirmed that core inflation has eased to 2.1% year-over-year, and the Federal Reserve’s neutral commentary from their meeting this week has calmed fears of any near-term rate hikes. We have also seen the VIX, a measure of market volatility, fall from its recent highs back into the mid-teens, suggesting trader anxiety is quickly fading.
Strategic Trading Opportunities
Given the immediate upside target of 6854-6914, we believe buying call options is a straightforward strategy. Traders could look at January 2026 expirations to provide enough time for this move to play out, potentially targeting strike prices around 6850 or 6900. This approach directly capitalizes on the expected upward momentum while clearly defining the risk involved.
For a more conservative approach that generates income, selling out-of-the-money put credit spreads is also appealing. By setting the short strike of the spread below the recent lows, perhaps around the 6600 level, traders can profit from both a rising market and time decay. This strategy aligns with the view that any further dips should be shallow and finds support well above the 6519 invalidation point.
We saw a similar setup unfold in the late autumn of 2024, when a sharp but brief market dip was quickly followed by a powerful rally into the new year. That period also showed how buying into weakness during a strong structural uptrend can be highly effective. This historical context provides a useful model for the price action we anticipate in the coming weeks.
