Samwise Model Portfolios
The portfolios below are separated by launch dates. Each portfolio is entirely independent and has no bearing on any other model portfolio. We launch entirely new portfolios during each market correction as an illustrative tool for new subscribers who weren't present during...
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Based on your analysis, is it safe to say we see the bottom next week? QQQ 445-440 (i’m not sure) NV below $100?
There’s a very good chance of that. I think it’ll the be the federal reserve meeting that bottoms the markets. But with the QQQ being oversold now, and with the gap being filled, it can happen at any point now.
Bottoms can be forecasted when extremes occur. But they can always happen before such events. So if the QQQ never really reaches extremely oversold conditions. If the $VIX never moves up above its upper b-band or becomes overbought. If the $NYMO (NYSE McClellan Oscillator) never reaches -100, forecasting a bottom is tough and is based on market-related events.
But if those indicators trigger, then we have a high probability for a bottom and can comfortably forecast it. Right now, we simply don’t have that level of forecasting clarity like we did on August 5 for example.
Got it. Pardon my ignorance , when you say Fed meeting will trigger the bottom , do you mean after the rate cut decision announced ?
just read your post, Fed would ignite a rally. I got it, thx
Yes. The day the fed reserve announces its decision on interest rates will probably mark the bottom in the market.
You talking about the 9/17 Fed meeting?
Yep. So by the time we reach 9/17, this sell-off will have been a few weeks old. Corrections are on an accelerated timeline. They usually last 2-4 weeks. Around 20 seasons on average and we’re already down over 7% on the QQQ from its $485 highs. So chances are by the time we reach that catalyst, the markets will be ready to bottom out.
So how do you see the odds of another three leg correction like last year? Sentiment in the market feels like sit out september and come back october. Since its jsut early september, maybe we see a next leg up soon because its getting way oversold but ultimately end in another leg down towards end of september. Like a self fullfilling prophecy because of market sentiment.
So last year, each leg was like 7-8% and we saw rebounds that took the market all the way back to the highs. Really it was just 1 big correction that was three legged. This is a true double-correction. The first correction was 16% and the rebound was 14%. That’s a full-blown separate correction than this one we’re seeing right now right. A 14% rally is a rally by all definitions.
So I doubt we’ll see three separate corrections here. I think after we bottom here, the market’s are going back into its 6-month rally mode. Especially with interest rates heading lower.
Curious what you consider a good entry price for Apple to buy in
Apple is a bit too stretched imo. I think a good entry would be on a correction. We may not ultimately buy Apple as I can’t say I’m too happy with an entry anywhere near the $220 level it’s trading at. $200 would be better. So we’re going to wait on Apple.
Hello,
Here is a summary of the historical impacts of a 0.25% rate cut by the Fed (e.g., from 5.35% to 5.1%) on the stock markets, in terms of the performance of the S&P 500 and NASDAQ:
### Historical Impact of 0.25% Rate Cuts on Stock Indices
#### S&P 500
1. **Short Term (1 to 3 months):**
– **Average Increase**: +3% to +5%
– This increase is often due to a boost in investor confidence and expectations of improved financing conditions.
2. **Medium Term (3 to 6 months):**
– **Average Increase**: +5% to +10%
– The effects of the rate cut become more visible, stimulating economic activity and improving corporate growth prospects.
3. **Long Term (6 to 12 months):**
– **Average Increase**: +10% to +20%
– The impact of the rate cut is fully realized, often reinforced by favorable economic conditions and other monetary policy measures.
#### NASDAQ
1. **Short Term (1 to 3 months):**
– **Average Increase**: +4% to +7%
– The NASDAQ, dominated by technology and growth stocks, tends to react more strongly to rate cuts due to better growth and financing prospects.
2. **Medium Term (3 to 6 months):**
– **Average Increase**: +7% to +12%
– Technology and growth sectors, which benefit more from lower borrowing costs, show increased performance.
3. **Long Term (6 to 12 months):**
– **Average Increase**: +12% to +25%
– The combination of a low-rate policy and improved economic prospects supports strong continued performance for growth stocks.
### Conclusion
Historically, a 0.25% rate cut by the Fed has led to a generally positive response in the stock markets, with increases ranging from **+3% to +20%** for the S&P 500 and from **+4% to +25%** for the NASDAQ. The NASDAQ tends to react more strongly, particularly in the medium to long term, due to its composition of technology and growth stocks, which are more sensitive to interest rate changes.
Also, here is a recalculated summary of the historical impacts of a total 0.50% rate cut by the Fed, either in one move or through two 0.25% cuts, on the S&P 500 and NASDAQ. A 0.50% reduction is often seen as a stronger signal from the Fed to stimulate the economy, which can have a more significant impact on the stock markets.
### Historical Impact of 0.50% Rate Cuts on Stock Indices
#### S&P 500
1. **Short Term (1 to 3 months):**
– **Average Increase**: +5% to +7%
– Investors perceive a 0.50% cut as a more aggressive measure to support the economy, leading to a quick rebound in stock prices.
2. **Medium Term (3 to 6 months):**
– **Average Increase**: +8% to +12%
– The stimulative effect of the rate cut begins to manifest in the real economy, with increased investment and consumption.
3. **Long Term (6 to 12 months):**
– **Average Increase**: +12% to +25%
– A more accommodative monetary policy supports long-term growth prospects, boosting stock valuations and corporate profitability.
#### NASDAQ
1. **Short Term (1 to 3 months):**
– **Average Increase**: +6% to +10%
– Due to its composition of technology and growth stocks, the NASDAQ reacts more strongly to a significant rate cut, as these sectors benefit from lower capital costs.
2. **Medium Term (3 to 6 months):**
– **Average Increase**: +10% to +15%
– Technology stocks, which rely heavily on future growth expectations, particularly benefit from a more accommodative monetary policy.
3. **Long Term (6 to 12 months):**
– **Average Increase**: +15% to +30%
– The combination of a low-rate policy and increased economic growth supports continued strong performance in growth stocks.
### Conclusion
A total rate cut of 0.50% by the Fed (either in one move or two 0.25% cuts) has historically led to an even more positive response in stock markets compared to a 0.25% cut. The ranges of index increases are between **+5% and +25%** for the S&P 500 and between **+6% and +30%** for the NASDAQ, depending on the time horizon. The NASDAQ shows greater sensitivity, especially in the medium and long term, due to the predominance of technology and growth stocks in the index.
What do you think about it ?
Best
Karl
Hello Sam,
I was wondering if you could elaborate a little bit more on the gaps. I know the market can gap up/down between sessions. I’m not exactly sure on the reasons. Does it have to do with pre-market and overnight markets? I am looking at the Q’s chart and like you mentioned above in the last correction; there were two massive gaps on the way down, a $459.77(08/01/24 Thursday) to $450.97 (08/0/24, Friday) almost a 9 point drop. Then a whopping 24 point drop between the 08/02/24 (Friday) and 08/05/24 (Monday) trading sessions. Is this because of a panic sell-off from international markets between a Monday and Friday? On this correction I have seen the the gaps are a lot smaller so the selling is less intensive. With today’s close at $448.69 we are right at around the same price zone and on a Friday too. I’m curious if you think we are going to have another massive gap down on Monday’s open due to the same circumstances.
Also, you had initially mentioned you believed this would be a pullback because of the intensity of the recovery rally from the last correction. Fundamentally big caps in the tech sector have delivered stellar results good revenue, good guidance and decent profit margins. So what triggered the border between a pull back into a full blown sell-off? I remember you mentioned initially you had some doubts on the size off the pullback being a lot smaller than what you typically expect does this have something to do with it? With the less intensive selling we are seeing now vs then; would you expect a double bottom (re-test of the lows) or simply trade around $430 level? We still have 6 trading sessions between now and when the fed makes an announcement plenty of selling can occur between now and then, although I expect we will trade side ways most of the time. It all points to rate cuts but with how this market has been taking news lately, what are the chances these rate cuts are “priced in “and the markets do not like whatever the fed announces 0.25 vs 0.5? Do we continue down from there? Again fundamentally we are fine and I do expect a rally as long term investor can see value in a lot of stocks at current price levels so it would dictate a rally should ensue. Lastly on the topics of gaps why do they have to be “filled”?
Thank You!