The SPDR S&P 500 ETF (SPY) is in a strong upward rally that started at a low on August 2. The ETF first increased to 647.04 in wave ((i)), then dipped to 634.92 in wave ((ii)). It rose again to 667.34 in wave ((iii)), followed by a pullback in wave ((iv)) which dropped to 661.98 and then to 654.42. After that, the ETF continued to rise in wave ((v)), featuring internal extensions. From the low of wave ((iv)), wave (i) climbed to 662.37 before pulling back to 657.88. It then increased to 665.8, dipped to 660.93, and reached 670.74 in wave iii, finishing with a pullback to 666.78 in wave iv. If the pivot low at 654.42 stays intact, the ETF should keep moving upwards.

Financial Markets News

In other financial news, the EUR/USD stabilized due to discussions from the Federal Reserve, and the Dow Jones Industrial Average rose by 250 points. Gold prices increased amid worries about a potential US government shutdown, while Bitcoin hovered near $120,000 after reaching recent highs. Moreover, FXStreet launched a new design to better assist traders. Given the current upward trend for the SPY, traders should consider bullish positions. The crucial level to monitor is the pivot low at 654.42. As long as the market is above this level, the upward trend should continue towards new highs. Considering this situation, selling out-of-the-money put options with strike prices below 654.42 is a smart move for the weeks ahead. This strategy allows traders to earn premiums while benefiting from the upward momentum and time decay. If the market breaks below that pivot low, it will be a signal to exit these positions.

Participation in Upside

For those who want to profit directly from the upside, bull call spreads offer a managed-risk approach. This strategy can take advantage of the expected rise towards new highs without the unlimited risk of selling naked puts. The ongoing US government shutdown might seem alarming, but the market appears to be focused on other issues. Looking back at the lengthy shutdown from 2018-2019, the S&P 500 actually gained over 10% during that time, suggesting that political gridlock doesn’t always harm stocks. Additionally, the September 2025 CPI report indicated inflation cooling to 2.9%, strengthening the case for the Fed to consider rate cuts in the next quarter. The uncertainty from the shutdown likely increased implied volatility. Traders can capitalize on this since higher volatility raises the premiums they receive from selling options. However, it also creates risk, so it’s smart to keep positions appropriately sized and closely monitor the 654.42 support level. Create your live VT Markets account and start trading now.

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