Support Zone And Fibonacci Alignment
The 6712.08 low lines up with a 100%–161.8% Fibonacci extension of wave ((w)), with the measured range given as 6629–6768. This area is treated as a support zone in the analysis. After the pullback, the Index turned higher in wave 3. A break above 7002.28 is required to confirm the wider correction has ended, otherwise a broader corrective pattern may still be in place. The analysis notes the cycle from the April 2025 low is mature and could end at any time. In the near term, the outlook stays positive while the 6712.08 pivot holds. Based on the recent price action, we see that the S&P 500 has likely completed its corrective wave down to 6712. This level acted as significant support, and the market is now poised for a potential third wave higher. This suggests a shift from a defensive to a cautiously bullish stance in the coming weeks.Trade Implementation And Risk Controls
To capitalize on this expected upside, we should consider buying near-the-money call options or implementing bull call spreads. The initial objective is a move back toward, and ultimately above, the January 28 high of 7002.28. This strategy allows us to participate in the rally while clearly defining our maximum risk, which is prudent given the market’s maturity. This technical outlook is supported by recent economic data that has calmed market fears. The February jobs report showed a healthy, but not overly inflationary, addition of 195,000 jobs. Furthermore, the latest CPI data printed at 2.8%, continuing the trend of disinflation and giving the Federal Reserve room to remain patient. Looking at market expectations, futures are pricing in a greater than 90% chance that the Fed will hold interest rates steady at its meeting later this month. This stability follows a better-than-feared Q4 2025 earnings season, where over 75% of companies beat their profit estimates. These fundamental factors provide a tailwind for the technically-driven rally we anticipate. Strict risk management is essential, and the key level for our bullish thesis is the pivot at 6712.08. A definitive break below this point would invalidate the immediate upward scenario and suggest the prior correction is deepening. Should this occur, we would quickly close bullish trades and could initiate positions using put options to hedge against further declines. The primary confirmation for a stronger, more sustained rally will be a decisive break above the 7002.28 peak. We can use this level as a trigger to add to long derivative positions with increased confidence. Until that breakout occurs, our positions should remain tactical and appropriately sized. Create your live VT Markets account and start trading now.
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