**Elliott Wave Analysis: S&P 500 Update as of December 3rd, 2025**
*Adapted and expanded from EWM Interactive’s original article by the EWM Analyst Team*
The S&P 500 has been in a persistent uptrend since bottoming out during the global COVID-19 pandemic in early 2020. As of early December 2025, the index is trading at record highs again, continuing a rally that has defied multiple bearish predictions in recent years. Applying Elliott Wave Theory provides a structured framework to understand where the current market action fits within the broader cycle and what might lie ahead.
This expanded analysis is based on the original EWM Interactive article, embellished with additional insights sourced from major financial platforms and institutions such as Bloomberg, Nasdaq, ForexLive, and historical data from TradingView.
### Current Elliott Wave Picture
According to Elliott Wave Theory, markets develop in a fractal pattern of five-wave advances followed by three-wave corrections. EWM Interactive suggests that the ongoing rally in the S&P 500 may represent the terminal stages of a large impulsive cycle that began after the lows in March 2020.
– **Long-Term Count:**
The advance from 2020 up to the close of 2025 appears to be unfolding as a five-wave impulse structure:
– Wave I: March 2020 to August 2020
– Wave II: September–October 2020 correction
– Wave III: October 2020 to January 2022
– Wave IV: Jan 2022 to October 2022 correction
– Wave V: October 2022 to present (December 2025)
– **Wave V Analysis:**
The final fifth wave seems to have extended far beyond earlier expectations. In classic Elliott Wave terms, the fifth wave in bull markets often shows slowing momentum despite price highs continuing. This aligns with current Relative Strength Index (RSI) divergences and sluggish market breadth seen across major components within the S&P 500.
– **Internal Structures:**
The fifth wave can itself subdivide into five smaller waves:
– Wave (1): October 2022 – February 2023
– Wave (2): February 2023 – March 2023
– Wave (3): March 2023 – July 2024
– Wave (4): July 2024 – October 2024
– Wave (5): October 2024 – Present (December 2025)
Assuming the above structure is correct, we are now in the final stages of wave (5) of V, which could mean a significant long-term top is drawing near — possibly within the first half of 2026.
### Technical Evidence Supporting a Cycle Top
Multiple technical factors are aligning with the Elliott Wave perspective that the market may be approaching a critical top.
– **Momentum Divergences:**
On the weekly and monthly S&P 500 charts, momentum indicators such as MACD and RSI are diverging. While the index makes new highs, these indicators are forming lower highs, suggesting weakening buying pressure.
– **Sentiment Overheating:**
According to data from the AAII (American Association of Individual Investors), bullish sentiment among retail investors is at its highest levels since late 2021. This has historically been a contrarian indicator, anticipating market tops.
– **Valuation Metrics:**
The CAPE (Cyclically Adjusted Price-Earnings) ratio, developed by Nobel Laureate Robert Shiller, is back above 30, indicating that stocks are richly valued. Historical analysis shows that when valuations reach this territory, long-term returns tend to suffer.
– **Breadth Weakness:**
According to data from Nasdaq and MarketWatch, fewer stocks are participating in the rally, with large-cap tech names like Microsoft, Apple, and Nvidia carrying much of the market’s gains.
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