The S&P 500 held its strong upward trend until the end of 2025, even with a small pullback. By late November, it reached close to its past all-time highs but couldn’t break through, indicating a phase of correction with support around 6800. If it drops below 6872, it could change this trend. Still, the index seems to be in a strong upward movement that might continue into 2026. It is expected to rise within subwave (3) of a five-wave positive cycle, potentially hitting the 7000 range. The overall outlook shows an ongoing strong upward move within wave III, which may end in 2026. You can find this analysis in a recorded webinar released on January 5, 2026.

Related Market Movements

In other market news, the US ISM services PMI improved to 54.4 in December. The GBP/USD is likely to trade between 1.3470 and 1.3535, while the NZD/USD is rising due to weaker US ADP data. The JPY is performing well against other major currencies, and GBP/USD is stabilizing around 1.3500. The EUR remains steady ahead of the North American session. The economic outlook for 2026 points to steady growth, but uncertainties from 2025 still play a role. We believe the current pullback in the S&P 500 is temporary and not the end of the upward trend. The pattern that started in late 2025 is still positive, with strong support expected near the 6800 level. This dip could be a good buying opportunity before the market moves up again. Last week’s jobs report for December showed a moderate gain of 110,000 jobs, easing concerns about an overheated economy from earlier in 2025. This suggests that the bull market could continue without strong action from the Fed. The VIX has risen to around 19, indicating uncertainty in the market, which makes option premiums higher.

Trading Strategies in a Volatile Environment

For those who are confident about the support level, selling out-of-the-money puts with strike prices below 6800 could be a good strategy in the coming weeks. This allows traders to collect premiums while waiting for the market to turn bullish again. However, if the index drops below 6872, it’s time to reconsider this strategy. A more cautious approach would be to wait for a clear breakout above the 7000 mark. A sustained movement above this point would confirm the beginning of the next upward trend. At that time, buying call options or setting up bull call spreads could take advantage of the expected increase in prices. The broader economic context from late 2025, especially the solid ISM Services reading of 54.4, supports growth. While the forecast for 2026 looks positive, we should remain mindful of the potential for volatility. This scenario favors bullish strategies with defined risks. Create your live VT Markets account and start trading now.

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