S&P 500 E-Mini Futures (ES) has mostly moved sideways, with a slight upward bias, since October 2025. A short-term cycle from the 21 November 2025 low is still developing as a five-wave Elliott Wave move.
Wave 1 ended at 7043, the index’s all-time high. Price then fell in a zigzag: wave ((a)) ended at 6864.5 and wave ((b)) ended at 7011.5.
Wave Structure And Key Levels
Wave ((c)) dropped to 6791.6, which completed wave 2 at a higher degree. From 6791.6, the index turned up into wave 3. However, the market still needs a break above 7043 to rule out a larger double correction.
From the wave 2 low, wave (i) rose to 6925.75, then wave (ii) fell to 6828.5. In the near term, 6791.6 is the key pivot. Any pullback should hold above this level, ideally within a 3-, 7-, or 11-swing sequence.
Momentum is still tilted higher, but the bullish case needs confirmation from a sustained move above 7043.
Based on the late-2025 analysis, ES is in a constructive, but still unconfirmed, uptrend. The sideways trade since 7043 has helped build a base for a potential third wave higher. For traders, the main focus is the 6791.6 pivot. It must hold to keep the bullish outlook valid.
Options Positioning For Breakout And Support
With this setup, one possible strategy for the coming weeks is selling out-of-the-money put credit spreads with the short strike below the 6791.6 pivot. With the VIX recently near 14, option premiums are still reasonable for trades that benefit from time decay and from the market staying stable or moving higher. This fits the view that dips should find support as long as the key low holds.
For traders looking for a confirmed breakout, building long exposure with bull call spreads aimed at a move above 7043 can make sense. This limits risk while positioning for the larger upside move expected in a third wave. A strong close above the prior high would likely bring in new buying and speed up the advance.
This technical setup is also supported by recent January 2026 fundamentals: core inflation cooled to 2.8%, and job growth came in at a steady (but not overheating) 195,000. This lowers the risk of unexpected central bank moves and supports the market’s underlying tone. In past examples, such as Q2 2023, long periods of quiet sideways action have often been followed by strong, sustained trends.
Even so, discipline is critical. A break below 6791.6 would invalidate this bullish wave count. That would point to a larger double correction and require a quick shift to a defensive or bearish stance. In that case, traders would likely need to exit bullish positions and consider buying puts for downside protection.
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