Key Levels And Downside Map
If the index holds below 6,575, further downside is mapped towards 6,494 as a key reference level. This view depends on the corrective pattern continuing. Two routes are tracked next. One is a direct, impulsive fall towards the downside targets; the other is a sideways phase, such as a flat or triangle, before another drop. The approach focuses on following pre-set scenarios and adjusting to price action as it develops. Further chart detail is provided in the related video. We have been tracking the S&P 500’s decline from the 6746 level, and the recent move toward 6600 has followed our expected path. This reinforces the bearish bias we identified earlier, suggesting more weakness is ahead. The market is reacting to last week’s inflation data, which came in at a stubborn 3.5% year-over-year for February, dashing hopes for any near-term rate cuts from the Federal Reserve.Trading Paths And Strategy
The broader structure points to a complex correction from the high near 7011, and we believe the final C-wave down is still developing. This view is supported by slowing economic growth, with final Q4 2025 GDP figures showing a revision down to 1.2% and major corporations guiding earnings lower for the first half of this year. We are now watching for a sustained break below the 6575 support level to confirm the next leg down. For traders anticipating this drop, buying put options on the SPY or SPX provides a direct way to position for a move toward our 6494 target. A decisive break of 6575 would be the signal to consider adding to these bearish positions. Looking back at similar setups in 2022, a failure to hold a key technical level often preceded a rapid decline. We also see rising market fear, with the VIX climbing from its 2025 lows to trade consistently above 20 in recent weeks. This suggests traders are increasingly buying protection against a significant downturn. Derivative traders can use VIX call options or strategies like put debit spreads on the S&P 500 to capitalize on both the downward direction and the expected increase in volatility. If strong bearish momentum takes hold, we could see a sharp, impulsive decline directly toward the 6494 area. This scenario is becoming more likely as weekly jobless claims have ticked up for the third consecutive week, suggesting the strong labor market of 2025 is finally beginning to soften. In this case, shorter-dated puts could offer significant returns if the move accelerates. Alternatively, the market might enter a sideways consolidation period above 6575 before the next major drop. This chop would likely frustrate purely directional bets but could be an opportunity to sell call credit spreads with strike prices well above recent highs, like 6800. This strategy allows for collecting premium as the market either drifts sideways or slowly bleeds lower. Create your live VT Markets account and start trading now.
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