The SP500 (SPX) is likely to keep climbing towards 7120, following an Elliott Wave pattern. A small 4th wave correction just finished, keeping the index above important support levels, currently 125 points higher (1.8%). In a classic impulse pattern: – The third wave typically extends to 161.8% – The fourth wave reaches 100.0% – The fifth wave can extend to 200.0% Recent data supports these predictions, showing the index at 6850, dipping to 6780, and rising to 6895, with a margin of error of +/- 0.03-0.3%.

Looking Ahead

Next, we expect a small pullback in the gray 4th wave to around 6785-6825 before the index rises to 6930-7010. Pullbacks during uptrends are usually shallow, which could drive higher fifth wave targets and get us closer to the 7120 goal. After that, a longer decline to about 5800 (+/-400) seems likely. Be cautious with short-term levels at 6827, 6800, 6738, 6660, and 6597. Breaking these levels reduces the chance of an uptrend by 20%. Dr. Arnout Ter Schure, with vast experience in the energy and environment fields, shares these observations. Since late November, the market’s strength suggests that the rally to 6895 is almost finished. We expect a minor pullback to the 6785-6825 area, which should be seen as a buying opportunity. The strong November jobs report, showing a steady unemployment rate of 3.8%, backs this positive short-term forecast. For derivative traders, the upcoming dip is a great chance to enter short-term call options or bull call spreads. The goal is to profit from the next rise towards the 6930-7010 range. A break below 6827 will be our first signal to reduce bullish exposure.

Long Standing Target

This next move is likely the final push toward our long-term target of 7120. As the index nears this level, the risk of a significant peak forming increases. We expect this to be the high point of the rally that started in April 2025. As we approach the 7120 target, we should shift our strategy to accumulating longer-dated put options, targeting March or June 2026 expirations. This prepares us for a potential long correction down to the 5800 area. Recent inflation data, which has risen back to 3.5% annually, supports the idea of an upcoming market-cooling event. Currently, the market shows signs of complacency, with the Volatility Index (VIX) dropping to 14. However, we expect this won’t last. This trend mirrors past major peaks, like late 2007, when low volatility preceded a sharp reversal. Be ready for significant volatility once we test the 7120 region. Create your live VT Markets account and start trading now.

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