Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
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In what scenario will we see the $550 zone? Is selling pressure on Bitcoin being taken into account?
It’s the other way around. Cryptos follow the markets.
The QQQ could fall to $550 if it continues doing what it’s doing now. If it’s next leg up tops at $600 and we get another down leg to a new low at $570, well then we our a continuation of the downtrend. That continuation is critical to the QQQ getting down into that lower zone.
We won’t know until the QQQ experiences another near-term top.
When/where do you see the correction bottoming right now from a QQQ perspective?
So the correction went for 8.83% which is definitely enough to constitute a correction. There’s no way to know how far a correction will.
What we can predict is this. if a correction has gone too far and the major capitulate indicators trigger, there’s a good 90-95% chance we’re at a bottom within an extremely narrow range of a bottom.
We can’t know if the QQQ prematurely bottoms. There’s no indication or any way to know if or when this could occur. We just don’t know.
We know that corrections generally go to at least 8%. we should at least see an 8% drop.
We know that rallies that extend beyond 25% returns — this one went for nearly 60% — should drop by more than 11%. In 80% of all past situations where the QQQ has rallied more than 25%, we get an 11% correction+.
That number rises to 95% for high vol rallies. That means this one has a 1-in-20 chance of only dropping by 8%.
This is quite literally true based on historical records. When you look back to high volatility rallies exceeding 25%, 40+ went for 11%+ and only 2 went for 8%.
We can’t know if this will be the exception. But we do know that in the overwhelming majority of the cases, the QQQ will drop by 11-14% or to $566 to $547 range for its lows. That’s what we know to be the in the majority of past corrections after rallies liek this one.
If durijg the drop, the QQQ RSI falls to 20, or the $VIX RSI rises to 80 or the $NYMO rises to 100, then there’s a high probability the market bottoms that day.
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SO to answer this question:
We don’t really give those types of forecasts. Instead, what we say is the QQQ should fall to a low between $547 and $566. Based on every correct going back to 1999, that is the most likely scenario.
Once the QQQ reaches a 30-RSI on the daily, however, there’s a 50-50 chance thte QQQ bottoms on that very session as 50% of all past corrections bottom the very session it reaches a 30-RSI.
So if we reach a 30-RSI at say $575, well then the odds of a bottom happening then are high.
If the QQQ reaches a 20-RSI, the odds skyrocket further.
As of right now, it’s hard to say. The QQQ has fallen 8.83%. That’s far enough to count as a correction. We won’t know if that is all we get until the QQQ goes beyond $650. At that point, it’s clear we’re on a new rally.
Rebound is still below 50 RSI hourly for now, does that suggest another leg lower is likely?
Also are we considering NVDA separately from QQQ at the moment because a larger retracement is expected for NVDA? In terms of the new allocations, are you avoiding NVDL this time around for the portfolios?
I’m assuming we’ll end up avoiding it. But it just depends on how far it drops. We need to see it drop by enough to warrant trading into it.
If it does fall by enough, we’ll close some of our QQQ and allocate to it.
In terms of the QQQ rebound, it doesn’t have to go all the way up to overbought. yesterday, for example, it only reached the 60ish level before peaking and then never even reached oversold on a 30-point drop from $614 to $584.
Isnt this correction pretty unusual the way its dropping? The number of legs down etc.? Although I’m starting to think its not too helpful to think in those terms..
I mean it’s weaker than what we’d usually see. It’s not uncommon to see multi-legged corrections. It’s just uncommon for the rebounds to go as far as they have been.
The July – August 2024 correction that went for -16% on the QQQ was a three legged correction and the rebounds were strong. But each leg down was significantly larger than each rebound.
Here, the each leg down has been larger, but not nowhere close to the same type of margins we see in larger corrections.
Like leg 1 going from $637 down to $597 made sene, but the rebound up to $625 didn’t make sense at all. What we should have really seen is about 38% retracement. So a sell-of from $637 down to $597 with a rebound to $610. From there, a drop to $580, rebound to $593 drop to $555. <– this would look more correction like.
So far we’ve seen three strong down legs and three relatively strong rebounds given the context.
$597 to $625 ($28)
$591 to $614 ($23)
$580 to $597 ($17)
So the problem lies in the rebounds rather than the selling.
Sam, We got within $.02 of $597 on QQQ today before it dropped. Could that mean the bounce is over and we’re going to resume down? Or are we more likely to go back up to $597-$600?
Impossible to tell. However, as I noted in today’s briefing, the QQQ rebound can go as far as $605 and it would be consistent with what we’ve seen thus far in the correction. We really don’t want to see it go much further than that or it’ll simply continue to weaken the overall downtrend.
Thanks Sam.
End of day/week thoughts?
hi Sam, do you do long term months or years trend line support/ resistance and parallel channel analysis on qqq spy or smh ?
do you think it is valid or just bunch of voodoo ?
They’re too long for there to be anything of value to derive from it. Rather than long-term trendlines, I do look at how the market has traded off of weekly overbought/oversold levels and the tendency for corrections to occur after so many weeks in the green.
Like the analysis we did a few weeks back on the number of green months in row leading to a sell-off played out. The QQQ did peak after that 8th month in a row and has pulled back 8% since. Now the month of November is looking like it could end up being a bearish engulfing candlestick. It could mean a down December and January. It could be a longer correction than usual.
The panic movement has finally stopped.
Should we see a rebound to $630 before a drop to $570, or is it still too early to tell?
It’s way too early to tell. We’ve post our analysis on it. You have to watch the hourly trend first. $605 is the line in the sand for the QQQ right now.
If the QQQ goes north of $605, it’s probably setting up for a breakout run.
how much north of $605 would suggest an impending breakout vs a peak? Does it depend on hourly RSI hitting any number?