Samwise Quick Reference Handbook
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What is the target for QQQ and NVDA after this peak? Do we see drop down to 140 or so in NVDA case by August 1 st week or 2nd week. Or this is going to be a 3-4% dip and continue up?
Lots of recent and previous posts indicate the ranges Sam’s considering. 22-23% pullback on a QQQ drop of 8% for example.
So we’re expecting two separate types of pull-backs in the coming weeks and months.
First, we expect the entire stock market as a whole to peak very soon. Sometime by the end of July most likely and definitely by the end of August. Historically, the absolute longest rallies lasted 100 trading days. We get to 100 by the end of August. End of July makes the most sense for a variety of different reasons we’ve outlined.
Once the market rally ends during that period between end of July and end of August, we expect the NASDAQ-100 to decline by around 12%. For Nvidia, that means a decline of 22-27%. If it’s a 12% decline, then probably closer to 27%. If it’s an 8-10% decline in the market, then 22-23% drop. So for Nvidia, we’re expecting a decline to around $132-$136 depending on the circumstance. Quite possibly low $130’s or under.
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Second, and in the more near-term, we expect a decline of 3-4% one the QQQ with translates into a 8-10% decline in Nvidia. In a short-term sell-off, we can see Nvidia falling 12-17. $172 down to $155-$160.
For that we expect it to happen any day now. At some point within the next week we should see a peak and big decline.
From there, the market will rebound, come back to its highs and then suffer that much larger correction of 12% leading to Nvidia dropping back down to around $130 a share.
Who says the market has to come back to its highs? Couldn’t the 3-4% just turn into the 8-12%?
@ First Name — retests are standard default behavior for the market. But to be honest, we’ve seen segmented rally peaks lead right into a full blown correction. It doesn’t have to retest at all.
What we’ve seen a few times is this. Suppose the highs are at $565 on the QQQ. We might get a pull-back down to $547 and then the rebound only gets back up to $556. We’ve seen that happen plenty of times. In that sense, the segment top is the market top since no new highs were subsequently established.
The last segment top could also be THE TOP in the market. We’ve seen that happen plenty. Just open up a chart on the QQQ and you’ll see what I mean.
Did not know how rare is for prolonged overbought on daily for NVDA. Really just a handful of instance in the last 2 years.
So as we discussed today, it happens anytime Nvidia goes on a trading range setting run. Anytime Nvidia exits an old trading range for a new one, we tend to get these huge overbought runs.
But as we noted, they typically precede big sell-offs. Especially when you consider the overall returns.
The returns on each of those other rallies were pretty much the same. We’re right near the top end of the range for returns on big rallies like his. They all end right near 98-100% returns. Nvidia is above 100% returns now. $86 x 2 =$172.00
Hello Sam, In your opinion, wouldn’t the application of 30% to 45% rates in Europe and the increase in 30- and 40-year rates in Japan be adding fuel to the fire and therefore leading to a sharp drop like last April?
We already had this in August 2024 and September 2024.
Best
Karl
The fundamentals have ZERO impact on any of this. The market goes through cycles of ups and downs. The fundamentals could make sentiment more negative and if fundamentals are truly negative, then we could see more selling than usual. But I street clear from trying to predict where the market is headed based on fundamental factors because you can’t quantify anything like that at all.
There’s no way to predict the extent to which the market will react to certain news.
What is the precise casual argument here. The precise connection between fundamental events and specifically a 25% drop. Why not a 12% drop?
So will you close out the NVDA puts during the near-term decline (which was the original plan) or wait out the possible retest of the highs and then the correction (bottom?) which might take us too close to Sep 19th / expiration date?
I guess during the expected near-term decline, there won’t be any solid indicators telling us if the market will directly decline further into a full-blown correction or gearing up for a retest first?
So at that point, by selling the puts during the 8-10% decline (probably with a small loss), we risk missing out on any profit if the correction starts immediately and if we hold the puts we risk the puts getting cooked if the retest and following correction take too long to unfold? Is there any way to tell which is more likely once we reached the 8-10% decline? Or does it make sense to close out the puts once we reach the 8-10% decline to reduce risk and go for a new position again only if there’s a retest of the highs afterwards.
So we bought September puts specifically because we might need to stay in the trade longer. When we calculate time to expiration and price, holding through the next correction was part of the analysis.
It really depends on how much Nvidia pulls back on the segment. We’re holding the puts until the QQQ goes through a correction most likely.
What you need to realize is that there’s always some level of risk in every trade we put on and the risk of the QQQ taking too long to top is extremely small.
Remember, even if the QQQ were to extend to a record duration rally — which given the size of the move overall, the fact that the QQQ is already on its 4th segment, the way the QQQ is trading right now (doji’s, reversals and small bars), and all of the other analysis that points to the end of July — we’d still very likely see Nvidia down near $130 by mid-to-late September.
Here’s why. Most of the decline in correction is front-loaded. So suppose the QQQ peaks at the end of August, those first 2-3 weeks of selling will be the heaviest. In fact, those first 10-days will see the meat of the decline.
Go bak and look at previous Nvidai peaks and notice how much of a percentage loss the stock took at the beginning of the sell-off and then near the ned.
For example, last July Nvidai went from $140 down to $116 in the first 3-days of the correction. First 3-days. That’s 24-points. It then spent the next few weeks retesting the highs and eventually getting down to $90 a share at the lowest. That’s 24-points in the first 3-days and then $26 in the last 3-weeks.
Nvidia went from $143.00 in February and declined to $104 in the first 12-13 days. It then sent the next 3-weeks eventually grinding from $104 to a low of $86 in April.
But notice how the first few days and weeks of the correction are extremely heavy. That’s what you can expect here.
The QQQ also declines in similar fashion.
Unlikely to make any specific trades just because of the 3-4% pull-back. Depending on how far Nvidia goes, we could exist our Nvidia puts in the short-term trading portfolios.
The 3-4% pull-back expectation is more observational than anything. It’s something to anticipate based on how market rallies have historically unfolded. If the QQQ becomes oversold, it might be worth a near-term long trade depending on how things unfold.
Hi Sam,
Do you mind expounding on
What is the technical / psychological reasoning as to why this means bullish at a bottom and the reverse at the top? Not the most savvy with the technicals surrounding the sticks so anything helps 🙂
Thanks!
Okay. So if the market is declining in a bearish downtrend, you’re going to have the opposite of white candlesticks. Bears want to see the market gap-down, sell-off all day long and close at the lows of the day. This is a filled RED Bar. Closing at the lows of the day and making new lows keeps the momentum to the downside. Look at any sell-off and it’s often marked but several consecutive days of filled red bars. Maybe a small Green Day here or there and maybe even a full white candlestick. But most of the trend will be marked by fully filled red bars open low > sell-off > close at the lows.
What might signal the end of that trend is the appearance of hollow red bars. Days where the market gapped down to open the day very red before it recovered much of hte losses and closed way above the opening price but still in the red. That is a hollow red bar. The closing price is above the opening price but in the red.
It signals a reversal becuase buyers are starting to step in and stop the trend of gap-down, sell-off and close substantially lower than the open. Instead, we get a gap-down, buyers step in and it closes way above where it opened but not quite green. If it closes green, that’s fine too. It would then be a white candlestick in that case.
Okay. So now why is it bearish at tops? Because it means instead of gapping up, running and then closing at the highs, we have a gap-down, recovery and close well above the open, but still in the rend. It indicates bears starting to come in to sell the market.
Is the first part about QQQ? Not sure if by 1-2 points you mean dollars or percentage points, but it closed a single cent higher than it opened so even in the unlikely case that “points” means “cents”, that seems bearish
NVDA closed higher than $171, but not by much ($171.37)
Points and dollars are interchangeable. Percentage points references percentage declines.
Nvidia dropping 10-points is the same as dropping $10.00. Really, points are supposed to only reference declines in the indices. But convention has often lead to them being used interchangeably to refer to moves in the indices and stocks alike.
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Also, it’s not supposed to be so precise. When we say Today’s session closing within 1-2 points of the open would be bearish, the reason for that is because of the overall grouping of candlesticks looks very choppy. We have dojis, reversals and small white candlesticks. It’s not really a strong move. generally, in a really, what we want to see is a strong $4-5 moves up followed by another $3-5 of upside with closes at the highs of the day.
The way the market is moving higher right now is very suspect and when we see this type of action after a long run, it almost always means a top. It’s a consolidation type top.
Hey Sam,
Stepping back, how are you feeling about sentiment right now? Is the market in a bit of a euphoric rise in this push higher? It’s been practically vertical.
I had another analyst doing elliott wave and called a huge pullback weeks ago that never came. I have no idea what to expect. Just looking for an entry point without chasing.
So if you focus on sentiment, then you’ll always be behind the curve perpetually because sentiment shifts very rapidly and for no reason whatsoever.
I don’t really focus on sentiment at all. It’s a red herring in every sense of the concept.
During market declines, sentiment is deeply negative and reaches a peak boiling point. How positive do you think the sentiment was on April 7? What type of predictive power did that have beyond facing everyone who focused on sentiment to exit the market?
The same happens at peaks.
This isn’t euphoric at all also. What we’re seeing is standard. This literally occurs in every single standard rally. Euphoric is what we saw on Covid with the QQQ just making one insane high after another with huge long stretches of parabolic move up.
Note the segment isn’t even above average. It’s below the average. Meaning, the gains right now in the market over the last three weeks is smaller than what we see on AVERAGE.
We’re at 7ish percent return. The average is 8.5% over 10-days. We’re in the 7’s on 17-days.
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It’s important to draw your own conclusions based on the evidence presented. The reason I outline everything is that people can read what I’ve outlined and either agree or disagree and come up with a very precise reasoning for thier own forecasts.
My actual conclusions are based on what I’ve presented. This is important. If you read the last few weeks of analysis, it’s centered on what?
The QQQ rallies 70-100 days before peaking. This has been the case for every single rally going back to 2010. They all take the same exact shape. Correction > bottom > rally 22-36% > rally 70-100 days > correction.
You see that in the table.
So when you say, “I hae no idea what to expect,” what precisely goes through your mind when I say, look at the table, it shows every rally peaking at 70-100 days and 22-36%. We’re currently at day 70 TODAY. The rally has extended to 40%.
If you think it’s going to go longer than the 70-100 day range that we’ve seen in every other past rally without exception, then why? If you think it’s going produce substantially larger returns than it already has at 40%. Why?
Then we outlined a whole bunch of other correlative data. First, there seems to be — based on empirical data — a rally correction schedule with July being the most likely month for a peak month. The last two Julys for example lead to a peak in the market with an August correction. Curiously, both 2023 and 2024 had nearly identical rally-correction schedules. We had bottoms in March – April in both 2023 and 2024 with rallies extending to July in both instances.
We’ve seen that all rallies follow the whole segments routine and that 4 seems to be the magic number. We’re at 4 now.
We have the QQQ dropping dojis, small reversals and generally bearish candlesticks.
^all of these things are evidence for a peak happening at the end ofJuly (80-days) or end of August (100-days) with the most likely peak happening sometime between then: end of July to end of August. We can end at Day 84 for example.
Thanks for the detailed breakdown. I see where you’re coming from with the focus on structure and historical patterns over sentiment. Your data on the rally lengths and typical corrections is convincing and lines up with what I’ve seen.
When I said I had no idea what to expect, it was more about being caught off guard by how quickly and strongly this rally extended without the pullback many of us were anticipating. That threw off my usual approach. For example, NVDA running well past 125 without revisiting that level surprised me.
That said, I’m aligning my view with the framework you laid out. It’s hard for me to rely on historical patterns but I’m open to it. If the peak does happen between late July and August, it would be consistent with the cycles and data you shared. I appreciate the clarity and reminder of your take on sentiment.