SPY’s Next Big Move: Reading the Wave 3 Setup Building Above $716

SPY spent the back half of June doing what corrective waves do: chopping sideways, shaking out early buyers, and testing patience. As of the July 1 update, that correction looks finished — and the ETF has already started building the next leg higher. Here’s the full breakdown of the wave count, the exact price levels that matter, and what would prove this setup wrong.

The Setup: Where SPY Stands Right Now

On the 45-minute chart, the rally off the March 31 low has unfolded in a clean five-wave sequence at Minor degree. That advance concluded wave (1) at $760.4. From there, SPY entered a corrective phase — wave (2) — which pulled the ETF back before finding support at $716.55. Since that low, price has turned higher again, and the early structure of the next impulse, wave (3), is already visible.

In plain terms: SPY finished its “up,” went through its “down,” and now the question is whether the next “up” has real legs — or whether this is just another bounce inside a larger range.

How SPY Completed Its Wave (2) Correction

Wave (2) unfolded as a textbook zigzag — a sharp, three-legged A-B-C correction rather than a slow grind. That distinction matters: zigzags tend to resolve faster and more decisively than sideways “flat” corrections, which is one reason the reversal off the $716.55 low looks constructive rather than exhausted.

• Wave A declined to $721.23 — the first, sharpest leg down from the $760.4 high.
• Wave B recovered to $756.68 — a deep bounce that came close to retesting the wave (1) high, which is common in zigzags and often tricks traders into assuming the correction is over.
• Wave C pushed down to $716.55, completing the corrective sequence and marking the low of wave (2).

That $716.55 low isn’t just a chart footnote — it’s now the single most important price on this chart. As long as SPY holds above it, the bullish wave count remains intact.

What Wave (3) Looks Like So Far

Since the $716.55 low, SPY has been building the early internal structure of wave (3). Sub-wave ((i)) topped at $739.89, followed by a shallow pullback in sub-wave ((ii)) that held at $732.09 — a retracement of roughly 33% of wave ((i)), well within normal range for a second-wave pullback that hasn’t threatened the broader structure.

This is exactly the kind of “building a base” price action Elliott Wave traders look for before a third wave accelerates. Third waves are typically the longest and most powerful leg of an impulse, and they rarely announce themselves loudly at the start — they tend to look unconvincing right up until they aren’t.

The Two Levels That Decide Everything

This entire setup comes down to two prices. One confirms the bullish case outright. The other invalidates it completely.

What History Tells Us About Wave (3) Rallies

Third waves are where Elliott Wave trading actually pays off, because they’re statistically the wave most likely to extend well beyond a simple 1:1 relationship with wave (1). Using the length of wave (1) — roughly $43.85, if we treat the June low near $716.55 as the reference — traders typically project wave (3) using the following Fibonacci extensions:

These aren’t guaranteed outcomes — they’re probability zones. But they give traders a rational way to scale out of a position rather than guessing at “resistance” with no structural basis.

Trading Plan: How to Approach This Setup

1. Confirm the higher-degree trend firstSPY’s advance from the March 31 low is impulsive, which means the path of least resistance remains up as long as $716.55 holds.
2. Watch for shallow, corrective dipsPullbacks that stay in three or seven swings and hold above recent sub-wave lows support the bullish case. A sharp five-wave decline would not.
3. Use $716.55 as your structural stopThis is the level that invalidates the entire wave (2) low and the bullish count built on top of it — not an arbitrary percentage-based stop.
4. Treat $760.4 as your confirmation triggerA decisive close above this level removes the “double correction” risk and is typically where more conservative traders add to positions.
5. Scale targets using the Fibonacci extensions aboveRather than picking one price target, plan partial exits at the 1.0×, 1.618×, and 2.0×+ extension zones of wave (1).
6. Reassess if wave (3) internals break downIf price fails to hold above the ((ii)) low of $732.09 with a clean five-wave structure, it’s worth revisiting whether wave (2) is truly finished.

Zooming Out: The Macro Backdrop Behind This Chart

Wave counts don’t exist in a vacuum, and SPY’s technical setup lines up with a broader fundamental picture that’s been described as unusually earnings-dependent this year. Much of the S&P 500’s 2026 gains have come from corporate profit growth rather than investors paying higher multiples, and Goldman Sachs strategist Ben Snider has called the upcoming Q2 earnings season — which begins in mid-July — a critical test for whether that structure holds.

At the same time, market breadth has been historically narrow, with a large share of the index’s gains concentrated in AI-infrastructure-linked mega-caps, and valuations sit at levels rarely seen outside of the dot-com and pandemic eras. None of that contradicts the bullish short-term wave count — but it does explain why confirmation above $760.4, rather than blind conviction, is the more disciplined way to engage with this setup heading into earnings season.

Common Mistakes When Trading a Corrective-to-Impulsive Transition Like This

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