The analysis looks at the 1-hour Elliott Wave Charts of SPY starting from November 21, 2025. The rally formed an impulse structure, indicating potential for higher prices. Members were advised not to sell and to think about buying during dips of 3, 7, or 11 swings in specific areas known as blue box zones.
On December 17, 2025, the chart showed a pullback in wave ((ii)), ending in a zigzag pattern. Buyers were expected to step in at lower levels, creating chances for a rebound. By December 30, 2025, SPY reacted positively after the pullback within the blue box area, setting up a risk-free position and reaching new highs between $712.96 and $722.81. Investors were looking for profit-taking and further pullbacks in 3, 7, or 11 swings.
Disclaimer and Risks
This document is from the Elliott Wave Forecast Team and includes a disclaimer about the risks of market investments. It advises doing thorough research and indicates that no personalized recommendations are provided. The author is not responsible for the accuracy or timeliness of the information.
The recent dip in SPY was expected as part of a larger upward trend. This pullback reached the projected bottom in the $673-$649 zone. The following rally confirms this was a classic buying opportunity as the main trend continues upward.
This technical strength aligns with favorable market conditions as the year comes to a close. Historically, the “Santa Claus Rally” period often boosts stocks, a trend seen in over 78% of years since 1950. The latest CPI figures from December 2025 show core inflation easing to 2.8%, prompting market sentiment to lean towards the Federal Reserve keeping rates steady in their January 2026 meeting.
Market Outlook and Strategy
Based on this outlook, we believe traders should prepare for further upside into early 2026. Consider buying call options with expiration dates in late January or February to take advantage of the expected move toward the $712 target. Selling out-of-the-money put spreads is another way to express this bullish outlook while earning premium.
As the price approaches the $712 – $722 target, it may be wise to take profits since the analysis indicates that another pullback is likely. The CBOE Volatility Index (VIX) has been near yearly lows around 14, making long-option strategies more affordable for now. We will keep an eye out for the next corrective pattern after this upward move completes.
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