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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If a leg lower does indeed come, that turns this into a correction, right? If so, I assume the $512 covered calls are pretty safe. If you had to ponder a guess, how long would it take to get back up to this trading range (505-510) on QQQ?
So corrections come in all shapes and sizes, including the number of days. I’ll post a table shortly that shows the number of days it usually takes. It’s not a large number. The average regular 10% “run of the middle” correction usually ends within 15 to 20 trading sessions. In the vast majority of the time that’s what you see. And it takes not much longer after to get back to the highs.
But in smaller corrections like we’re seeing now it could be a 10-15 day correction. Technically speaking this correction is already something like nine days in. We were down all of last week and all of this week so yeah it’s been about 10 days. Percentage wise we’ve already hit -4.2% down. $516 at the highs and $494.50 at the lows.
So we could see maybe a down week next week, and then bottom by the week after. It would go something like that.
However, it’s important to note that during that period of time we will have another big rebound and potentially another big leg down. That’s assuming we even go correction. It’s best to look at this as segments.
Right now, the grading trading is merely indicating we’re likely to see another leg lower that ends at oversold territory again just like this one did.
This could easily be just a QQQ has another leg down and that’s that. The QQQ can become oversold on this next leg lower somewhere in the mid $480’s and that could be all she wrote for the correction.
Notice that in the Targaryen portfolio, we are positioned to capitalize on whatever happens. And that’s the way you really want to set things up. If the QQQ roll over then it will give us another opportunity to go fully long in the Targaryen portfolio. If the QQQ goes up, then we conclude our trade and we make 25% or somewhere thereabouts. And that’s a very good outcome for a mini trade.
And we should get more of those opportunities the QQQ goes over sold on the hourly pretty often
Do the broader market indices also indicate a second leg lower soon?
I’m curious about this, too, and was considering asking specifically about SPY. How much of a correlation is there between QQQ and SPY when QQQ experiences a correction?
Also wondering this. It seems like SPY has been outperforming QQQ, especially with QQQ at a strong $500 resistance — given this, would it be better to trade SPY rather than QQQ when it comes to a correction?
It could be that SPY doesn’t enter into oversold when the QQQ enters into a correction, so we might not see as big of a rebound.
The SPY is a more conservative, better diversified and lower risk ETF. It tracks all of the big stock sectors which mitigates sector risk. The QQQ is a tech heavy index/ETF that nearly always outperforms the SPY year after year.
So we like the QQQ for the return profile. The QQQ falls more heavily in corrections and generation much larger returns in recovery periods. In 2022, for example, the QQQ peaked at $408 and fell to $250 — that’s a 38.7% drop. The SPY barely made it into bear market territory at -20%. But then the QQQ also rallied from $250 up to $516 (over 100%) while the SPY went from $338 to $600 or 76%.
Recently, however, the SPY did perform a lot better on this recent rally from the August correction lows. The SPY rallied 18% versus the QQQ’s 21%. We usually see a wider performance gap. That’s very close.
Thank you for the detailed explanation!
Massive correlation. They correct together. The SPY just drops less than the QQQ and recovers less afterward. The QQQ is just a more volatility index. But they correlate almost exactly.
I posted an update to answer that question. Please see above. The answer is “yes” in the near-term, but not quite yet in the intermediate-term. Nothing in the SPY chart says “correction” yet. That can change depending on what happens next week. if it tests $600, fails and then falls to this week’s lows, that changes things because then we have a double-top.
Hi Sam, I missed the QQQ call sell yesterday, due to work. It looks like the same Nov. 29 call today is @$1.08 instead of the $2.15 price of yesterday. What do you recommend? Also we’re still waiting on today’s expiration action…correct?
If we weren’t somehow able to sell covered calls yesterday, we’d probably look to sell the $510’s today. That’s how we’d play it.
Thanks
Thanks, this is useful insight. I have been long in TQQQ in my other portfolio for a long time. I have just sold these positions and went into BOXX for now.
Hi Sam, could you add in some opportunity evaluation on google? Does it present a good buy opportunity? Also when buying into a stock when a correction is happening do you recommend spacing out the amount invested over time (maybe over a few days or weeks) to dollar cost average if there is a further correction at a potential for losing some profits or do you simply recommend going all in and reserving a small portion for hedging?
So for us, we were interested in Google maybe a month back. It was on our buy list. Same with Tesla. They both just missed our buy points. Just barely. We could have very easily owned both positions.
For Tesla it was $200 (gap-fill) and for Google it was down near $155 (huge support where we have also an inverse head shoulders breakout).
We may get interested in Google again if it continues lower down to the $150’s again. It may get there next week.
Google is clearly undervalued at a 22 P/E relative to its peers. I’ve noticed for at least the past 3-4 years now that Google hasn’t been treated all that way by the market. But undervalued is undervalued and there’s opportunity in it when it’s on the lower end of its P/E range.
Is it possible that we actually just have another 1-2 weeks of sideways trading (similar to what we had for much of October, pre-election), with some minor dips and rebounds scattered throughout?
That is possible, thought if we see another 1-2 weeks of sideways action, it really sets up the market for a not so great heading. Remember, we spent all of time on the SPY and QQQ consolidating/testing key points of resistance. The longer we stay there, the worse it is longer-term. What we need to see is a strong push taking the QQQ up to $530.
WARNING: NOVEMBER 22, 2024 PUTS HELD IN TARGARYEN PORTFOLIO EXPIRING TOMORROW & MUST BE SOLD BEFORE CLOSE TOMORROWAre we “closing” this?
There’s no need. we only need to close that if it expires in the money. We’re $5 out of the money. They’ll just disappear.
We won’t know the strike, stock, or expiration date until we get the correction. There could better opportunities out there with a high probability of a rebound than the QQQ.
I can tell you in August, we would have done the trade through NVDA no question. It was down too much, oversold and very undervalued. Everything pointing at this run to $150 we’ve had.
So back then it would be an easy $110-$120 call spread hedged with some downside puts. With the spread likely producing 150-200%, we can make the trade at a lower allocation allowing us to hedge well.
This time around, as it stands right now, we’d probably go QQQ. But won’t be 100% sure until we get there.
If we get down to like $465 and hit oversold on the daily, we probably buy the $480-$490 expiring in 6 weeks hedged by 2-week expiring puts. Something like that.