S&P 500 Elliott Wave Analysis: Is 7120 the Next Target Amid a Weakening Bull Case?

The S&P 500's trajectory toward a 7120 target by 2025, as outlined by Elliott Wave analysts, presents a compelling narrative of bullish momentum. However, this optimism is increasingly at odds with emerging structural risks and weakening economic fundamentals. A nuanced evaluation of market structure and correction probabilities is essential for investors navigating this crossroads.

The Elliott Wave Bull Case: A Path to 7120

Elliott Wave theory posits that the S&P 500 is in a five-wave impulse upward trend, with a critical 4th wave correction observed in early November 2025. The index's resilience-closing above key support levels such as 6630 and 6631-has reinforced the validity of this pattern, suggesting a potential final leg toward 7120. Recent pullbacks to 6785–6825 have been absorbed without triggering a breakdown, further supporting the continuation of the uptrend.

Analysts emphasize that adherence to the wave count hinges on maintaining above 6631, a level that if breached would necessitate reevaluation. A daily close below 6720, meanwhile, could signal a deeper correction to 6575 before resuming the rally. The market's ability to hold thresholds has been bolstered by a Zweig Breadth Thrust event-a technical indicator that, if it rises from below 40% to above 61.5% within 10 days, could amplify bullish momentum.

Weakening the Bull Case: Structural Risks and Divergences

Despite the technical optimism, several factors suggest a weakening bull case. Mike Wilson of Morgan Stanley has warned that a 10-15% correction is not only possible but expected at this stage of the cycle, driven by escalating U.S.-China trade tensions, funding market stress, and a rollover in earnings revision breadth. J.P. Morgan Research echoes this caution, noting that global growth slowdowns could curtail U.S. earnings growth and undermine the sustainability of the current rally.

Meanwhile, In Q3 2025, the Equal-Weight S&P 500 lagged behind the large-cap-dominated index, signaling a divergence in performance. This shift-from narrow leadership in mega-cap tech stocks to broader participation in small-cap and value equities-reflects a structural realignment but also underscores fragility. The Equal-Weight index's relative weakness suggests that the market's strength is increasingly reliant on a handful of sectors, a pattern historically associated with corrections.

Meanwhile, the Federal Reserve's cautious stance adds uncertainty. While the October 2025 rate cut to 3.75-4.00% signaled a dovish pivot, Fed Chair Jerome Powell has emphasized that further cuts are contingent on incoming data. The bond market currently prices in three rate cuts by year-end 2025, but policy divergence among FOMC members-ranging from a 50-basis-point cut to maintaining rates-highlights the central bank's internal divisions. This ambiguity could amplify market volatility, particularly if inflation or employment data surprises to the downside.

Balancing the Outlook: A Prudent Approach

The Elliott Wave analysis offers a clear roadmap to 7120, but investors must weigh this against the growing risks of a correction. A key test will be the S&P 500's ability to sustain above 6720 and 6631. A breakdown below these levels would likely trigger a retest of 6575, with the potential for a broader selloff if global growth concerns intensify.

For now, the market appears to be in a transitional phase. The Equal-Weight S&P 500's divergence from large-cap indices and the Fed's cautious policy stance suggest that the bull case is becoming increasingly fragile. While the 7120 target remains technically plausible, it is contingent on resolving trade tensions, stabilizing earnings revisions, and maintaining liquidity in funding markets.

Investors should adopt a dual strategy: maintaining exposure to the rally while hedging against downside risks. Monitoring the Zweig Breadth Thrust and key support levels will be critical. As always, the interplay between technical patterns and fundamental realities will determine the S&P 500's ultimate trajectory.