Samwise Quick Reference Handbook
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Does it have to make the $473 move today? Friday’s are rough for the market, so test + fail becomes a risk?
Also in that picture, is it to scale, or just depict general direction? $530+ in early May? Seems explosive beyond possible even under COVID FOMO scenario
It’s not drawn to time scale at all. But don’t underestimate what happened in Covid. Go back and look at the gains. they were insane. The post-covid rally was the most explosive I’ve EVER seen. There is no close analogue. Want to talk about this time is different? The Covid rally stands alone as the most explosive rally and goes completely off the charts.
The QQQ rallied from $159.82 where it bottomed on March 23 to $220.87 on May 11. That’s 35 total trading days. Oh and during that $159.82 to $220.87 move, the QQQ had a 10% drop, a 7% drop, a 4% drop and another 5% drop. We’re talking FOUR separate pulls-backs of significant length during the same 35-day rally.
Do you even want to know what that is applied to today. It’s 38.2% rally in 35-days. That would be like the QQQ rallying from $402 to $555 in 35-days from April 7 to May 22.
In 27 trading days, the QQQ rallied 33.41% or the equivalent of the QQQ rallying from $402 on April 17 to $536 on May 12.
So a Covid-type rally can very easily push the QQQ to well north of $500 by mid-may.
But that is a one of a kind rally driven partially on the back of QE. Notice that rally continued all the way until September before sustaining a major correction. By mid-June, the QQQ had made substantial new highs at $243.79 having rallied a total of 52.54% in just 3-months. By September, when it reached $294.61, the QQQ had rallied a grand total of 84.34% over a period of 5-months.
Note that while the QQQ did experience 5-9% pull-backs during the time, they were short-lived. They lasted a day or two. It wasn’t a true pull-back even within the context of our 3-5 sessions short-term pull-back cycle. We didn’t even get that. The QQQ only pulled back for 1-2 day and then made it all back up right away. See attached chart of the post-Covid rally. The most explosive rally we’ve seen since March 2009.
The rally would be welcome
No. Not at all. Why would we need to get there today? The key thing is that we don’t have a breakout unless we have an actual breakout. It’s meaningless to limp past a resistance point. A true breakout is surge way past the breakout point.
You’ll know it when you see it. A breakout tends to lead to an actually surge where the QQQ is up 4-5 points every day or more.
For example, suppose we close at $467-$468 today. we may gap-up above resistance at $473 tomorrow and close the day out at $476. That’s an example of how a breakout might happen.
or we might close at $465 tomorrow, and then gap-up to $471 on Monday and close out the day at $474-$475. the day after that, we’re at $479. That’s a breakout run.
The QQQ closing at $467 and then spend the next 3-4 days trading at $467 to $471 and back down to $467 is not a breakout. That’s the QQQ meandering around resistance.
Sam,
Do you think Googl’s earnings today will make an impact on QQQ by pushing it over 470 or pulling it back to 465-460 area?
It could very well do that. If the market likes what it hears on earnings, and takes Google higher, then it could cause the entire QQQ to push past resistance. What’s more, as other companies report, it could drive the entire market higher.
It can also have the opposite effect.
Google just popped after hours. QQQ popped too
POP POP POP, explosion !
blow out earnings
Hi Sam, in the bear market scenario described yesterday (scenario 1.3), what happens to the weekly and daily RSI charts?
Wouldn’t these become DEEPLY oversold long before we hit 260 on the qqq?
So they (weekly/daily) would not become deeply over sold. As we saw in 2022 it would take time to get to $250.
It’s not a straight shot down. Bear markets don’t generally play out that way. To get down to 260 would take 10 months or something like that.
We would have a big down leg, followed by a rally like we’re seeing now and that rally could be very substantial. Followed by another down leg that takes place over several weeks, followed by another up leg that takes several weeks.
It’s just that the down legs are bigger than the up legs, causing the overall long-term trend to go lower
In that scenario, you don’t get oversold on either of the weekly or the daily
If you look back to 2022, the weekly only became oversold one single time that’s it.
And in 2022, the QQQ dropped 40%. That’s the equivalent of the QQQ falling to the low 300s apply to today.
We might get weekly oversold one other time during the entire bear market.
With the daily chart, we might get a few oversold set ups.
Sam, If QQQ closes below $467 today, is it still likely to break above that in the next few days? Or would we be more likely to start going down again?
Literally closing at or above or below $467 has no bearing on anything at all.
The QQQ isn’t going to be more or less likely to break out just because we closed at 467.
Again for there to be a breakout, we have to actually break out and that means depart from this area completely
A breakout is self-explanatory. You will know it when you see it.
Sometimes stocks might limp into breakout territory, and that doesn’t really count for anything
Just like closing at 467 today doesn’t count for anything at all
What counts is if the QQQ surges above 470 and up to the 476 level or something like that
That’s a clear indication that we’ve moved past the entire $450-$465 zone.
And after that we would still need to see Moore upside otherwise what does it really mean?
When a breakout occurs, you see a substantial rise above the breakout line with continued forward, momentum for several days and weeks after that
Like the breakout doesn’t mean anything if we don’t make a move up to 490 right? If the QQQ stalls at the gap line of 476, then the breakout is meaningless.
A push well north of resistance merely increases the probability that we get a move up to 490.
Thanks Sam. How will we know conclusively if it has failed. If we drop below $460, does that mean the rally is probably over?
No, I think we need to see the QQQ fall back down to the low 440s to say the rally failed.
Interesting take. May I know the reason for :
Didn’t yesterday we were in good confident that the QQQ won’t trade sideway the next 9-10 session ?
Sam, I know the market can go either way right now. But what level on QQQ would show that we’re going down? Would it have to break below $460?
https://x.com/rnaudbertrand/status/1915406570835644888?s=46
Former BW employee here, I often find what they say publicly aren’t consistent with what they have internally. also, the joke is that they predicted 12 of the last 2 recessions correctly.
Would you be willing to tell us more? I’d be very interested to hear anything you’re willing to share about BW
For one, a lot of the folks writing the Daily Observations (the newsletters as they were then called) are not the ones putting on the positions and making the investment decisions directly. They are really meant to be more thought leadership pieces than investment advice. BW also adopted pods after I left, so who knows how they make investment decisions these days.
Sam any commentary tonight about what we should watch for tomorrow?
There’s nothing to do right now. We’re just waiting for things to play out a little. Right now the QQQ is trading north of $170 which is good news. But it needs to keep going for a confirmed breakout.
it’s struggling
just hit overbought on hourly
EDIT: overbought, sitting at 71.14
so used to oversold conditions
Sam,
In your analysis, you mentioned that with a potential third leg down, QQQ could drop to its previous lows, and we could capitalize on that move by buying March 2026 puts. However, I began to wonder—what if QQQ instead goes on a bull run to $490 or even beyond $500 from here? How would the puts we purchased at $467 and $493 level affect the overall profitability of our QQQ calls? Would the gains from the calls significantly outweigh the losses on the puts, making the puts’ impact negligible? Or would we continue to hold the puts as a hedge against a potential correction later on?
Anyone is welcomed to chime in
Thanks,
So the March 2026 puts are a hedge for the long positions we own in Arryn Portfolio and Lannister Portfolio.
If you click and check those two portfolios, you will find that we are substantially more invested on the long side and we are on the short side
For example, in Arryn we own $80,000 worth of QQQ calls and only $17,000 of QQQ March puts.
We also own roughly $75,000 worth of Nvidia and Apple.
So we’re essentially $155,000 long and $17,000 short
If the QQQ were to run 490, we would go up massively. There’s a very strong chance our portfolio will eclipse 200,000 at that point.
Remember, we are in this for the long-term upside in the market
The March puts are only there to hedge against the potential of a crash or bear market.
When we buy those puts we’re not thinking about protecting against a normal correction.
We are buying those March puts to protect ourselves against a potential crash in the market.
They will slightly impact our profitability of course because we have $17,000 invested in puts.
Assuming we hold those all the way until March and they go to zero that’s a $17,000 loss on top of if we were long an additional 17,000 we probably would’ve made another 8 to 9000.
So it’s a $26,000 opportunity loss. At the end of the year if the market rallies, our portfolio will be $26-$27k worse off. But we’d still probably be up to $250-$270k in that case.
Totally worth the protection. So totally worth it. It is completely portfolio dependent. You have to do the math.
But for Arryn, it’s a slight impact on profitability in a rally.
Hi Sam,
if these portfolios were to hedge against a normal correction only, what kind of expiries & strike prices will you be looking at?
or say these portfolios have less than 5% of cash allocated for hedging & would want to look for those cost-friendlier kind.
So we wouldn’t hedge a normal correction. It would be too cost ineffective to do so.
Here’s what I mean when I say we don’t hedge against regular corrections.
A 10% drop isn’t going to lead to full loss mitigation. If the QQQ falls 10% after we’ve hedged, our hedges aren’t going to appreciate fast enough or be robust enough to off-set the 10% drop in the QQQ.
However, a 20% drop — as we just observed — will lead to enough of a robust gain to off-set the entire loss and then some.
So in that sense, we don’t protect against a regular corrections. And really regular corrections are very quickly resolved. If the QQQ sustains mere 10% drop, the market typically recovers almost immediately thereafter. So we’re not really worried about hedging against regular correction nor do we need to even worry about it.
What we do need to worry about and what we have hedged against pretty effectively was the 25% drop we just had. If you go back and look at the Arryn portfolio during that move down from $450 to $402, the Arryn Portoflio was rising every day as the put values had become larger than our calls. Now only that, we were essentially net short from $450 down to $400 because put-to-call ratio by percentages had shifted to the put side. That’s exactly what is supposed to happen.
Because the puts had risen 200%+, they were now a dominate part of the portfolio.
When it comes to risk management, you cannot mitigate ALL risks. Doing so would result in a 0% gain outcome. So we just hedge out the great potential impact and risk to the portfolio and that is bear market and/or crash. That allows us to always remain long to protect against opportunity risk.
I’m surprised NVDA has underperformed QQQ on the Liberation Day retracement. Dropped further and recovered less.
…and here we are QQQ currently up 0.05% and NVDA up 2.58%
Nvidia has actually market-performed or slightly outperformed during that period. Nvidia went into liberation day having closed at $112 and with the QQQ $7.00 below its closing price ahead of liberation day, Nvidia is now trading at $109.40. That’s only $2.60 below its liberation day closing price.
So it’s about market perform. And to be honest, Nvidia should underperform given its China exposure. Nvidia is more exposed than the broad market. Yet, it has largely followed the market down and back up again.