Near Term Wave Structure
If the count is correct, a partial rebound in wave (ii) could occur within the next few days. SPX has also dropped below the 200-day simple moving average for the first time since 9 May 2025. The next target area is near 6,079, which matches the 38.2% Fibonacci retracement of the 2025–26 rally, with the text also citing 6,078. The outlook is treated as valid while SPX remains below $7,002, and would be reassessed if price moves above $7,002. The S&P 500 appears to have made a significant top at $7,002 on January 28, and we are in the early stages of a new downtrend. The decline has been messy and overlapping, which suggests a “leading diagonal” pattern. This structure indicates that while the path down won’t be straight, the larger trend has shifted to bearish. Given this outlook, derivative traders should consider positioning for further downside. Buying put options or establishing bear call spreads are strategies aligned with the expectation of a move toward the $6,079 target. This level is a key Fibonacci retracement of the big rally we saw through 2025 and into the start of this year. We anticipate a short-term rally in the next few days, which would be wave (ii) of the decline. This bounce should be seen as an opportunity to enter bearish positions at more favorable prices. Any rally is expected to be temporary and should hold well below the critical $7,002 peak.Volatility And Macro Backdrop
Market volatility is confirming this nervous tone, as the VIX has recently spiked to over 24, a level not consistently seen since the fourth quarter of 2025. This rise in implied volatility makes option premiums more expensive, rewarding traders who correctly time their entries. This choppy price action since the SPX fell below its 200-day moving average for the first time since May 2025 underscores the market’s uncertainty. This technical weakness is occurring as recent economic data shows signs of strain. February’s CPI report indicated that inflation remains stubbornly above 3%, reducing the likelihood of friendly policy moves. Furthermore, the latest jobs report from early March, while not disastrous, pointed to a clear slowdown in hiring momentum compared to last year. We have seen similar sloppy starts to major downturns in the past. The beginning of the 2008 decline featured several sharp but ultimately failed rallies that shook out bearish traders before the main downward move took hold. The current price action feels very similar to those historical periods of transition from a bull to a bear market. The primary risk to this bearish view is a price move back above the January high of $7,002. As long as the market remains below that level, the path of least resistance appears to be lower. Traders should use that price as a definitive point to reconsider or exit bearish strategies. Create your live VT Markets account and start trading now.
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