E-Mini S&P 500 – The final move of the five-wave cycle

The E-Mini S&P 500 nears the 7,471–7,230 resistance zone, signalling a potential end to the five-year bullish cycle and a possible 15% corrective phase ahead.

The E-Mini S&P 500 appears to be completing the final leg of a five-wave Elliott-wave sequence that began in 2020. This structure has guided the index through one of the most persistent bull runs in modern history. Price action is now approaching the 7,471–7,230 supply zone, which aligns with long-term Fibonacci extensions and multiple historical resistance levels.

A five-year structure reaching maturity

• Wave (I) started from the pandemic low in March 2020 and established the foundation for the post-crisis recovery.
• Wave (II) unfolded during 2022, coinciding with the Federal Reserve’s aggressive tightening cycle. That corrective phase produced the first major reset of the expansion.
• Wave (III) delivered the strongest impulse through 2023-24, powered by AI optimism, resilient corporate earnings, and easing inflation expectations.
• Wave (IV) formed a mid-cycle correction earlier this year, marking profit-taking and sector rotation.
• The ongoing Wave (V) appears to be the final stretch of the advance — the point where momentum historically begins to fade as euphoria peaks.

Technical confluence and exhaustion signs

The upper band near 7,471 represents the 161-8 % Fibonacci extension of Wave (III), while 7,230 sits at the top of a multi-year supply zone visible on weekly charts. This confluence suggests a high-probability exhaustion region.

Momentum indicators are already flashing early warnings:

• The RSI on the weekly timeframe is near overbought levels and beginning to diverge from price — a classic sign of slowing momentum.
• The MACD histogram has flattened even as price pushes higher, indicating potential energy loss within the current leg.
• Volume has remained steady but not accelerating, implying participation fatigue rather than new inflows.

Historically, both prior corrections within this five-year sequence produced declines of roughly 12–18 %. If that rhythm repeats, a 15 % retracement from the 7,400 region would target 6,244 – 6,200, matching prior Wave (IV) support.

Macro environment aligns with late-cycle behaviour

The macro backdrop strengthens the case for cautious optimism rather than unchecked bullishness:

• Inflation remains sticky, with core readings hovering above the Fed’s 2 % target.
• The 10-year Treasury yield has stabilised near 4-5 %, limiting valuation expansion for equities.
• Corporate profit margins show signs of compression as wage costs and refinancing expenses rise.
• The U.S. fiscal deficit continues to grow, increasing Treasury issuance and draining liquidity from risk assets.

Together, these factors mirror classic late-cycle dynamics — robust headline data masking emerging fragility underneath.

Scenario framework

Base Case – Controlled Correction (Probability ≈ 60 %)

Price completes Wave (V) around the 7,471 – 7,230 zone and retraces toward 6,244. Such a pullback would represent a healthy reset within a still-intact long-term uptrend. Rotation into defensive sectors and a shift from growth to value could characterise this phase.

Extended Case – Deeper Structural Reset (Probability ≈ 30 %)

Should liquidity tighten faster or a policy shock occur — for example, renewed inflation prompting additional rate hikes — the correction could extend toward 5,800, retesting the Wave (IV) base. That scenario would still align with Elliott-wave symmetry but signal a more extended consolidation period before the next structural advance.

Low-Probability Bull Extension (≈ 10 %)

If inflation drops sharply and the Fed signals imminent easing, momentum could stretch beyond 7,500 toward uncharted territory. However, with both RSI and MACD diverging, that path appears limited.

Historical rhythm and market psychology

Each major correction since 2020 has served to reset investor sentiment before the next advance. The current environment feels similar to the late stages of previous bull expansions — optimism high, volatility low, and speculative positioning heavy. Recognising that rhythm helps traders frame risk: euphoria is rarely the start of a new wave, but often the end of the existing one.

Institutional takeaway

Institutional desks tracking multi-year cycles are likely already reducing exposure in the upper supply band while maintaining hedges through options or short-volatility overlays. Retail traders should avoid chasing momentum this late in the sequence and instead plan around reaction zones — 7,230 up top and 6,244 below — where institutional footprints often reappear.

Summary

The E-Mini S&P 500’s five-wave advance that began in 2020 is approaching completion. The 7,471–7,230 range stands out as a technically and structurally significant resistance area, where historical wave symmetry, momentum divergence, and macro headwinds converge.

A 15 % correction toward 6,244 would not invalidate the broader bull cycle — it would likely serve as a structural reset within an ongoing secular expansion. Traders should focus on discipline and confirmation rather than prediction as this long-running pattern nears its terminal stage.