What Goes Up, Must Come...Down?

My opinion on the correction chatter, plus PYPL and a competition update!

Author

Emanuela Elias
July 27, 2025

I’ve been seeing some chatter around the markets “needing a correction”. And while I get where it’s coming from, I really don’t see support for this just yet. Yes, we are sitting at new all-all time highs on SPX, but that doesn’t mean we are going to come tumbling down. Right now the structure still looks intact…but also, let’s take a moment to clarify a healthy pullback versus a correction because that word, “correction”, gets tossed around a lot, and I think it causes unnecessary fear.

Pullback vs. Correction: What’s the Difference?

A pullback is considered a normal, expected part of an uptrend. It’s a short-term dip, usually somewhere between 1% and 5% (but technically can be up to 10%), that gives the market or an individual stock room to reset. This could look like a move back to the 10 or 20 EMA on the daily chart, or even a controlled decline to a prior breakout level or support zone.

A correction is defined as a decline of 10% or more from a recent high. But in trading spaces like ours, people often use the term loosely, meaning they think something bigger is coming, or they’re expecting a sharp drop or shift in the greater trend.

My main takeaway for you is: let the charts do the talking, because, if you start calling for a correction every time an index or a stock dips, you risk getting knocked out of trades too early or jumping into puts before there’s real confirmation. I speak from experience. I used to try to call declines all the time in a rising market, only to have my positions (and profit) reverse after a day or two.

Not every pullback turns into a correction, and not every correction is obvious right away. Our job is to determine what a stock has the highest probability of doing based on what the charts are telling us.

SPX Outlook

Let’s take a look at the technicals here. If we zoom out, this recent push higher came after a digestion period that ran from July 3rd to the 22nd. Seasonality states that in mid to late July we may see some weakness, so could it be that, instead of breaking down, we digested sideways and are now continuing up? Or, will we get a pullback coming into this week?

SPX Daily Chart

We’ve cleared that February all-time high from earlier this year, and the market is rising along a pretty steady trend. If we’re going to get a pullback, it hasn’t triggered yet. Here are a few scenarios that could pop up:

  • Pullback to the 10 EMA (~6320): A dip to the 10 wouldn’t be unusual. If price pulls back and holds that level, it would still keep the trend intact. This has been the shallow reset level for most of this run. From here we could chop around to digest the new high.

  • Deeper move to the 20 EMA (~6250): If we lose the 10, next up is the 20. This would represent a bit more weakness but still nothing dramatic. I’d expect some chop or pause around there if it gets tested.

  • Drop to the 50 SMA (~6130): That would be about a 4–5% pullback, which is well within normal range but would feel more like a “correction” in sentiment. This level lines up with the high from February before SPX’s correction.

  • A few red candles to the uptrend line (~6335) : We might just chop around somewhere between the inner and outer uptrend line, letting the moving averages catch up.

So here we are. A sweet rise last week, and now we just watch how price behaves around those levels mentioned above. Stay grounded, stay flexible, and if nothing’s clear, don’t force it.

PYPL Update

PYPL finally broke out of the shaded box it had been in for months, between roughly 70.89 and 74.13, and popped above the 200 SMA, which was the key area I was watching. It not only cleared that level, but held above it on both Thursday and Friday, which is a solid sign.

PYPL Daily Chart

The structure here has been trending up, and now that price is above all major moving averages, we could start to see momentum build if those averages continue to rise and align.

That said, earnings are Tuesday, and I’m not touching this one until we see the reaction. If the price holds near this 76.70 to 78.75 zone, which includes both the 200 SMA and last week’s high, there might be a setup post-earnings. If that happens, I’ll be watching for a move toward 82 as the next key level.

Competition Update

June Standings - Top 5

For those newly joining this newsletter, I have entered a national trading competition again this year. I entered last year too but almost blew up the account I had entered with, so I decided to focus on fine tuning my trading plan. This year I started with a newly defined and simple strategy, and a lot less noise. As you can see Bob is whooping me right now, but I’m not giving up 😂. July has been a bit slow for me, so worst case I will still be around 450% YTD. I appreciate all cheerleading and positive vibes. I am looking forward to what the rest of the year brings!

Til next time!