The S&P 500 has once again returned to the 7,500–7,600 area, which we previously highlighted as an important technical zone. This region is particularly interesting because it lines up with the previous swing highs from June and July, meaning that former resistance can now potentially act as support during the current correction.
From an Elliott Wave perspective, the decline from the recent highs still appears corrective, as we can so far count only three waves lower. This leaves the possibility that the index is forming a higher-degree wave 4 correction rather than starting a larger bearish trend. The reaction from the 7,500–7,600 area is also encouraging, as price has already produced a nice impulsive reversal higher from this support zone.
The key level to watch now is the upper channel line, followed by the 7,700 area. A decisive recovery above this resistance would provide stronger confirmation that wave 4 has likely completed and that the S&P 500 is entering the final push higher within wave 5 of the projected ending diagonal.
As long as the structure remains supported above the recent lows, we can therefore still allow for another move to the upside. However, traders should remain aware that wave 5 would represent the final leg of the ending diagonal, so any further advance should be monitored carefully for signs of exhaustion and a potential larger-degree correction afterward.
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