Samwise Quick Reference Handbook
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Is it possible that the correction simply doesn’t happen here? And if so, what would be the move for the model portfolios in that case
He’s answered this extensively. There might never be a correction again. /s
????
Relevant comment from other day:
https://sam-weiss.com/major-reversal-at-day-80-marks-potential-start-of-correction/#comment-4866
It’s very possible the market might not have a correction ever again. That’s always possible. The question isn’t whether that’s possible, but whether it’s probable.
The stock market is more likely to buy 10 lottery tickets in a row and win all 10 than it is to not have a correction. But it’s possible.
It depends on how you definite a correction? I definite it by 8%. So the chances that the stock market rallies from now until 3075 without a correction is extremely low. But future events by their nature have a non-zero probability. Which means that it’s not 0%. There’s a chance that in some universe out there, there’s a stock market that does not sustain a correction.
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Hi Sam,
What is the NvN rule?
Thanks!
N = number of days up
V = versus
N = number of days down
One way to look at momentum is to consider any group of days and consider how long it took for the market to add x% of value compared to the number of days it took for the market to lose y%. And the reverse is important too.
For example, let’s consider this pull-back. The QQQ peaked at $574 and dropped to a low of $551. It did this in 2-days. If it takes 2-days for the QQQ to recovery back up to $574, then it’s equal. All things being equal, the bulls lost nothing here. But suppose it takes 5-6-7 days for the QQQ to get back up to $574, that’s typically bearish because it means the down momentum is stronger.
What we showed is that it took the QQQ 19-20 days to go from $551 to $574 and only 2-days to go from $574 down to $551.
great post today. I feel like it’s a jab at me and my earlier comment in the best possible way. Thank you, Sam
No, coincidentally, I had written it before I even saw your comment. The last update took me about two hours to write.
But I’ve had this type of comment raised at least three or four times a week by a bunch of different people.
It’s not directed to anyone person directed at the general question.
Hi Sam , what do these generally indicates?
continues up to 575 quickly & falls under 570 = indicates topping
up to 575 slowly = next rally segment underway?
falls & give back half gains = correction in process?
So when the market reaches a high point, pulls bak 3-4% as the QQQ has, it creates an automatic dangerous inflection point for the market next time it visits the highs. IF after the 3-4% pull-back, the market/QQQ rallies back to the highs, struggles to make new substantial highs and then reverses course i.e. sells off back under $570, it’s a double-top. A failed retest.
Think about what that means naturally. Let’s suppose technicals as a discipline didn’t exist at all. Think about what it means when a stock or asset approaches a price point, sells off or oterhwise loses value and then tries for a second time to get above that price and yet fails to do so again. Naturally, it’s an indication that the market (supply/demand) has determined that the original high price-point is the highest level buyers are willing to go. It’s an intrinsic indication that the market is weakening.
Confirmation of that dynamic comes when the asset falls back under the low point.
So here the QQQ high is around $575 right? The QQQ low of last week was $551. The QQQ is up decently on the week now. If it continues to move higher, gets to anywhere near $575 but then fails to move higher, that in and of itself is an indication of a weakening market. If then falls back to $551 and then breakdown, that’s a very strong indication that the correction has already begun. It’s a standard double-top.
And the QQQ doesn’t even need to really get near that point. If it gets up to $572, it’s still a double-top because the QQQ rallied $20 and failed to get through the highs.
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This dynamic exists ANYTIME there’s a pull-back. Every segmented rally pull-back leads to a potential double-top. The market MUST get through the highs for the rally to continue.
Here, with the QQQ having pulled back 4%, it has to erase those losses and then make new highs for the rally to continue. Anything short of that is a likely top.
If the QQQ rallies back to $575 and then dilly dallies or trades sideways for a week or so, probably a top. It’s an indication that the market doesn’t want to make that next move from the $570’s up tot he $600’s.
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If the QQQ slowly grinds its way back up to $575 in what looks like a strong consistent segmented rally and if the QQQ pushes through $575 and moves above $580, well then it’s probably a new segment.
Hello Sam,
Thank you for your analysis once again.
I’d like to address the NVDL issue in particular to clarify your comments, even though I agree with them. I have a counter-example, my own.
I already mentioned this in the comments.
During the April correction, I bought from April 16 to April 23
– NVIDIA x10, x5, and x6 at almost their lowest.
PRU of 0.177 for NVIDIA x10.
I sold when NVIDIA rose to $135, selling at $1.32 for NVIDIA x10 because, like you, I anticipated a drop to $110-$115 before a rise to $150.
I was really disappointed, even though I made almost 10x gains in one month…
If I had kept my NVIDIA x10s with a value of $10 today, I would have made almost 60x in 3 months.
I didn’t expect NVIDIA to go over $170 before January.
In short, this is a doubly huge opportunity cost because:
– the loss of earnings is there…
– such a drop and such a low price won’t happen again anytime soon…
The last time was between April 2024 and June 2024…
However, in the event of a 30%+ drop in NVIDIA, holding leveraged options for a long time could be costly.
In the meantime, I’m waiting for the price to drop before repositioning myself, but I’m sure if it continues to climb to $200+, I don’t know if I’ll be able to absorb this opportunity cost…
This is the second time this has happened to me; I also sold too early in June 2024.
In short, here’s a perfect counterexample to help you weigh the NVDL argument.
Read more…
Karl
Unlimited Structured Warrant 10x Long
I didn’t catch a question? IS there something you want me to answer? So Nvidia broke out to a new trading range. It happens every 4-6 months. The last trading range lasted a full year. It broke out to the new range. It was an inevitable outcome.
But like with the last three big runs Nvidia has had, the stock is likely to lose about 25% of its value in the next correction.
High $130’s at the moment. The only thing that can change that is a larger market correction. But let me tell you. Whenever the market sustains a major correction like we had in January – April, it is far less likely to sustain another right afterward. They’re typically spread out.
If the QQQ falls 8%, we may get a 22% drop in Nvidia. If the QQQ falls a standard 10%, 25-27% and if the QQQ falls 12-14%, we might see a 30% drop in the stock.
Nvidia is very unlikely to fall under $130 at this point. And recently, it has outperformed its standard beta. On the last 4% pull-back on the QQQ, Nvidia only dropped 6.77%. Normally, we would have seen a 12-13% drop in the stock. So it outperformed by a measure of 2:1 in the recent segment.
Sam – does NVDA earnings in August have any impact on correction for broader market? In the past, did it have any impact? PLTR seems to drive the market up with its earnings atleast in the am. Do you think any correction is delayed until NVDA earnings?