The SP500 index, based on the Elliott Wave Principle, was expected to experience a pullback in early December before advancing. The index pulled back to 6824 on December 10 but did not reach the anticipated 6930-7010 range. Despite this, it currently trades around 6830, having broken below three key warning levels.
The Advance/Declining line reached a new all-time high on December 11, suggesting that a bear market is not in immediate development. If the index remains above the 6720 low from November 21, it could continue its upward trend, potentially reaching 7490 by late April 2026. This expectation is supported by historical cycles, such as midterm election year seasonality peaking around April 18 and Armstrong Pi-cycle turn dates targeting April 28.
Anticipated Market Trends
Anticipated top cycles have previously predicted significant market corrections. If the November low holds, the bull market might continue until April next year. However, dropping below 6720 could indicate a bear market commencement. This analysis, authorship of Dr. Arnout Ter Schure, suggests a potential max value of 7760 if the bull market persists.
Our view is that the recent pullback in the S&P 500 is a buying opportunity before the next major move up. The index is currently trading around 6830 after finding support near 6720 earlier this week on December 16. We see this as a temporary pause in a larger bull market, not the beginning of a bear market.
The key level to watch is 6720, which was the low on November 21 and was successfully retested this week. As long as the index holds above this price, our bullish outlook remains firmly in place. This support is critical because a break below it would suggest a much larger decline is underway.
Technical Analysis and Market Breadth
This technical setup is supported by strengthening market breadth, as the Advance/Decline line recently hit a new all-time high, a sign that participation in the rally is broad. Recent economic data has also been favorable, with the latest Consumer Price Index report for November 2025 showing inflation continuing to cool to an annual rate of 2.8%. This reduces pressure on the Federal Reserve to consider further rate hikes and supports equity valuations.
Based on seasonality and cycle analysis, we expect a potential market peak around April 2026, with an ideal target as high as 7490. Midterm election years historically see strength into the second quarter, and a similar cycle correctly identified the major market top back in January 2022. The CBOE Volatility Index (VIX) has also receded to 17 after a brief spike, indicating that immediate fear has subsided.
For traders, this outlook suggests buying call options with expirations in mid-2026 to capture the expected rally. A move towards targets above 7400 would make calls struck around 7000 or 7200 highly profitable. Using bull call spreads could be a prudent way to define risk while maintaining upside exposure.
Risk management should be centered around the 6720 support level. A decisive break below this price invalidates the immediate bullish case and should serve as a signal to exit long positions. Traders could also consider buying protective put options with strikes just below 6720 to hedge against an unexpected downturn.
