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S&P 500 how deep the pullback can be


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S&P 500 saw a brutal correction last week. Now the big question: Where is the support and how deep the correction we are looking at?

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S&P 500 how deep the pullback can be

  1. 1. Charting S&P500: Where is the Support? Jan 24 2013 Deepak Singh
  2. 2. Panic on the Screen
  3. 3. S&P500 Daily Chart Strong Uptrend: Pullback to 100 dma = Buying Opportunity? The support of 100 dma working since last 12 months
  4. 4. THE BIG QUESTION Will Bulls come and buy the dips near 1760-1775 band OR Are we looking at deeper correction?
  5. 5. What IF: There is a deeper correction Trading Rule: When an Index fails to hold established support – it falls to next level of established support When markets are in strong Uptrend: there is tendency of False Breakdown i.e. Create Panic, Bounce Back and Resume Uptrend. It means S&P500 can breakdown below 100 dma and then bounce back and resume uptrend. This is where it becomes tricky
  6. 6. S&P500 Weekly Chart Next established level of Support: 50 week ma In 2012: S&P500 used to hold 50 week ma as support area.
  7. 7. Deeper Correction If S&P500 breaks down below 1760-1775: then it can collapse to levels of 1680 i.e. 50 week ma and still be in Bull Market
  8. 8. Breakout Bull Market S&P500 managed a stunning breakout when it moved past Double top resistance of 1540 which indices held for 12 years
  9. 9. The Big QUESTION The Breakout Level of 1540 is now the rock solid support level for S&P500. Can indices correct 16% from 1850 to test this as support?
  10. 10. Summary Are we looking at Normal Healthy pullback to 100 dma i.e. range of 1760-1775? Are we looking at Deeper correction to test 50 week ma of 1680 as support?
  11. 11. Summary Are we looking at Dramatic Sell off of magnitude of 16% from HIGHS to test 15401560 as support? LETS TAKE one level at a time. Right now: we need to focus on 1760-1775 as first level of support
  12. 12. Trade the market as you see it Trends Persist longer than one can imagine Benefit of Doubt should go to Bulls i.e. Do not rule out False Breakdown Corrections are Brutal and Swift. Any breakdown below 1760 will be sharp and swift As always, there is risk in the market – there is no guarantee
  13. 13. Thank You • Disclaimer - The state of the market presentation is Deepak's perspective on the market. The presentation is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this presentation you agree to make no trade relying in whole or in part on the comments of the writers • Chart Source: and Yahoo Charts • For Feedback: Send email to