The S&P 500 is described as trading within a bearish Elliott Wave framework. Price action is presented as consistent with a move from a corrective phase towards an impulsive phase, with the broader wave count still labelled as valid. On higher time frames, the wave sequence is described as incomplete. The index is stated to be following a projected bearish path, with more downside legs possible before the corrective cycle is labelled as finished.

Lower Time Frame Scenarios

On lower time frames, attention is on internal sub-waves that may affect near-term timing and momentum. Two scenarios are outlined: a deeper corrective pullback before another decline, or a shallow or sideways consolidation followed by a quicker drop. The text states that confirmation from wave structure and price behaviour may determine which scenario occurs. It also references an accompanying video that sets out higher and lower time frame wave counts and key markers to monitor. Neerav Yadav is identified as a futures trader active since 2014. His stated focus includes energy futures, gold, indices, stocks, and other instruments. We see the S&P 500 showing signs of a topping formation, which aligns with the broader bearish wave structure. The index has rejected the 4,400 level for three straight weeks, and last month’s weak retail sales data, which showed a 0.5% decline, reinforces this cautious view. This pattern suggests that a period of market rebalancing or a new downward move is becoming more likely.

Options Positioning Considerations

This market behavior is reminiscent of the volatility we saw throughout 2025, where stubborn inflation kept the Federal Reserve from cutting rates as quickly as anticipated. We believe the lingering effects of that tightening cycle are still suppressing corporate earnings guidance for the second quarter of 2026. The current setup indicates the market has not fully priced in a potential economic slowdown. For derivative traders, this suggests a two-pronged approach over the next few weeks. One option is to position for an immediate drop by acquiring puts, while the other involves waiting for a potential relief rally to establish bearish positions at more favorable prices. The choice depends on one’s risk tolerance for a short-term counter-trend move. We are watching for structural confirmation before committing heavily to a directional move. A key indicator will be the CBOE Volatility Index (VIX), which has already climbed from 18 to 22 over the past ten days, signaling growing investor anxiety. A decisive break below the S&P 500’s 50-day moving average would serve as a strong signal that the next bearish leg has begun. Traders anticipating a sharp, immediate move down might consider purchasing near-the-money puts with April or May 2026 expiries to capture the initial momentum. For those expecting a more prolonged decline after a period of consolidation, longer-dated puts with lower strike prices could offer a better risk-reward profile. This provides a way to express a bearish view while managing the timing uncertainty. Given the sharp reversals we witnessed in the fall of 2025, using defined-risk strategies like bear put spreads could be prudent. This involves buying a put and simultaneously selling another put at a lower strike price, which lowers the initial cost and caps the potential profit. This approach allows participation in a downward move while protecting against a sudden and unexpected market rally. Create your live VT Markets account and start trading now.

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