Insights 
VT 
The SPDR S&P 500 ETF (SPY) is experiencing an impulsive rally beginning from a low on August 2. Initially, the ETF climbed to 647.04 in wave ((i)) before a dip in wave ((ii)) to 634.92. It then rose to 667.34 in wave ((iii)), followed by a pullback in wave ((iv)) with a pattern including a decline to 661.98 and a decline to 654.42.
Subsequently, the ETF continued its ascent in wave ((v)), marked by internal extensions. From the wave ((iv)) low, wave (i) reached 662.37 before a pullback to 657.88. It then nested higher to 665.8, dipped to 660.93, and rose to 670.74 in wave iii, ending with a pullback to 666.78 in wave iv. Provided the pivot low at 654.42 remains intact, the ETF is expected to sustain upward movement.
Financial Markets News
In other financial markets news, EUR/USD steadied due to recent Federal Reserve discussions, and the Dow Jones Industrial Average climbed by 250 points. Gold prices rose amid economic concerns surrounding a US shutdown, while Bitcoin maintained its position near $120,000 after recent highs. Additionally, FXStreet introduced a new design focusing on aiding traders in their financial endeavours.
We are in an upward impulsive rally for the SPY, so bullish positions should be considered. The key level to watch is the pivot low at 654.42. As long as the market remains above this point, the upward trend is expected to continue towards new peaks.
Given this structure, selling out-of-the-money put options with strike prices below 654.42 is an attractive strategy for the coming weeks. This allows traders to collect premium, taking advantage of both the upward momentum and time decay. A breach of that pivot low would be the signal to exit these positions.
Participation in Upside
Alternatively, for those wanting to directly participate in the upside, bull call spreads offer a defined-risk approach. This strategy can capitalize on the move toward new highs while managing the cost of entry. It is a way to profit from the expected climb in wave ((v)) without the unlimited risk of selling naked puts.
The current US government shutdown may seem concerning, but we see the market focusing on other factors. Looking back at the extended shutdown of 2018-2019, the S&P 500 actually rallied over 10% during that period, showing that political gridlock doesn’t always hurt equities. Furthermore, the September 2025 CPI report just showed inflation cooling to 2.9%, bolstering the case for the Fed to consider rate cuts next quarter.
This environment of uncertainty caused by the shutdown has likely elevated implied volatility. Traders can use this to their advantage, as higher volatility increases the premium received from selling options. However, it also presents a risk, making it wise to keep positions sized appropriately and to monitor the 654.42 support level closely.
