The S&P 500 (SPX) has continued rising from the March low, with the move described as a mature five-wave Elliott impulse pattern. The current phase is presented as wave ‘v’, suggesting the pattern is close to completion.
Using Fibonacci extensions, a potential wave ‘v’ target is 7,231, based on wave ‘v’ reaching 61.8% of the length of wave ‘i’. Further extension levels are 7,344 at 100% equality and 7,525 at 161.8%.
Key Extension Targets To Watch
After the impulse completes, a pullback scenario is outlined using Fibonacci retracements of the full five-wave advance. A typical move is at least a 38% retracement, which would imply a decline towards 6,900–7,000, depending on where the peak forms.
The analysis also refers to a potential 2–5% decline as the pattern ends. The author is Zorrays Junaid of Alchemy Markets, with prior contributions to DailyFX and Elliott Wave Forecast.
The S&P 500’s rally from the March 30, 2026 low appears to be in its final stage. We are now watching for a potential top, which could lead to a 2-5% decline in the coming weeks. Traders should be preparing for a shift in market direction as the current upward impulse pattern matures.
Given the market’s strength, there is still a chance for a final push higher toward our first target of 7,231. With the VIX currently hovering near a two-year low of 13.5, call options can be used to participate in this potential last bit of upside with defined risk. However, this low volatility also signals significant market complacency, which often precedes a downturn.
Positioning For A Potential Reversal
The key levels to watch for a reversal are 7,231 and, if that breaks, 7,344. The recent March 2026 inflation report, which came in slightly hot at 3.6% year-over-year against a 3.4% expectation, could be the catalyst that stalls the rally. This is a similar setup to what we saw in the fall of 2025, when a surprise inflation print triggered a quick 4% correction.
As the index approaches these targets, traders should consider buying protective puts or establishing bear call spreads to position for a potential decline. These strategies can provide downside exposure while managing risk if the market continues to climb. The expected pullback target is the 6,900-7,000 zone, which represents a standard retracement of the entire move up from the March low.
This is not a signal to immediately short the market, but rather to prepare for a pending reversal. The latest jobs report showed a robust 275,000 jobs added, reinforcing the idea that the Fed has little reason to cut rates aggressively and adding weight to a potential near-term top. Therefore, layering into bearish positions as we test resistance may be a prudent strategy over the next few weeks.
