Samwise Quick Reference Handbook
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Right now, it feels like it’s in complete free fall.
Good morning. Thank you for the update. Is there any chance the lows will happen premarket? Is there any value in buying before the open?
I believe you posted somewhere capitulation is often correction ending, but also yesterday posted that there is a very high chance of a 3rd leg.
Can you explain which one is likely to prevail here?
seconded
Yeah it is often correction ending, but in reality, it’s more like leg ending. However, what you have to understand is that we could see a major rally that lasts for several weeks — even several months — during the rebound.
For example, in 2022, we had a rally that went from June to like August where the QQQ rallied 26%.
It’s very often correction ending because many corrections aren’t as large or as long as we’re seeing right now.
But with the hard sell we’ve seen now, it’s unlikely we’re going to bottom right off capitulation.
Though it did happen with Covid. We went straight into v-recovery. in 2015, we rallied 20-25% and then came back down to test the lows several weeks later.
Capitulation ends the selling we’re seeing right now and leads into a major rally. That’s what capitulation generally is. In probably MOST cases, it is correction ending. But that is because most correction aren’t so protracted.
What will you be looking for to determine the type of rally we are seeing, correction ending vs bounce-before-lower-leg?
It’s the way the rally unfolds. Let me give you an example. Suppose the QQQ rallies to $500 in 5-days. It just goes on a massive run of $20 a day over 5-sessions or something like that. We saw the QQQ up to $445 today right? So you can see that it’s something the market can very easily do. A run that aggressive, tells us that we probably bottomed.
But suppose instead the QQQ rallies to $470 over 3-weeks. That’s a pretty sizable rally — off of $400 lows — but it’s not exactly explosive. That would be a normal big 15-20% rally.
The story is in the rally. We haven’t seen the rally yet so there’s really no way to know until it happens.
What we can say is today probably marks the bottoms.
$20/session would be insane…
Obviously things could change since we’re still in the premarket, but with stocks seemingly recovering from their overnight prices, is it possible that capitulation already happened (either overnight if that’s possible or maybe Friday)?
Nevermind! They’re going back down again
For the trading portfolio, at this point to you still think that the July expirations are optimal or August would be better?
So in terms of overall timing, July/August aren’t fundamentally different. What matters is whether the market winds up going into a bear market or whether this ends up just being a major correction. If it’s a major correction, we can see the market back up to its highs well before July as we’ve seen in prior major corrections of this same exact magnitude — covid, 2018 etc. They all recovered in a few months time.
Covid bottomed in late March and almost fully recovered by mid-May. So it really depends on what the market decides to do here. If the correction simply ends on this leg, then July is fine.
There are definitely scenarios where the market can bottom here completely. The biggest of which is if the market believes that the worst of the tariff debacle is behind it. Meaning, even though the impact is yet to be felt, if it doesn’t get any worse or if the market feels like that we’ve reached a peak in the trade war, then it could easily be correction over.
The impact isn’t as damaging to the market as is the escalation itself. For example, if Trump pulls back on Tariffs or if countries start negotiating and it’s clear that the escalation is over, correction is probably over with it.
Sam – would today be a good day to start “white walker” portfolio given the magnitude of the pullback? for those who haven’t exactly matched your long term portfolios, might be an opportunity to start one. thanks
House Bolton seems appropriate lol
hahaha i like that but portfolio “stark” is not just dead yet despite the “red wedding”
Stark is going to do well. By the end of the year, it’ll be deep in the green.
Sam can’t say this, but in my opinion if one would buy Stark, except the puts, at the price of the market now, it would be a very nice entry.
So we’ve closed the puts and will use the capital to get long here.
Is the capitulation happening right now?
yes. Do you see it? The market is skyrocketing. This is what capitulation looks like. You’re seeing it right now.
Here. We. Go.
What’s with the slight dip? Profit taking?
we’re just in high volatility right now.
Sam is the pullback now perfectly normal during capitulation?
yeah. The key thing is the market needs to close well off of its lows today. Remember, hollow red bar is what we want to see today. That means it can close red — and often does close red — but the key is the deep reversal off of the lows of the day.
Hello Sam,
Do you think NVIDIA’s behavior is “normal”?
I find its behavior strange. Like you, I expected a sharp drop at the opening, but the momentum of the rebound and then a decline leaves me perplexed!
In any case, if the momentum picks up at this level, could NVIDIA likely hit $120 or even $140 again within two weeks?
You got a 140 Call-Spread in April 17th, lol ?
Some of us do from the Jan 2025 Targaryen play. It was a fair play before we went into all this, but can’t win them all.
I don’t want Taragaryen to go away
Sam – waiting for right time today to buy LT? closer to when markets close?
Sam, I have reasons to believe that capitulation might be only for tomorrow.
1- the surge today was in part driven by a (unfounded) rumor that the postponing of tariff were actively debated
2- Asian markets are on a steady undisturbed crash trajectory
3- QQQ has snapped back to the last 3-days tangent
Edit: 3-days
If you’re feeling confident about today being capitulation/bottoming/end of a leg at lest, how come we don’t buy any shares for long term portfolios?
Well we are. That’s what we’re doing right now. Today we’ll be buying across the board. Just waiting for the markets to stabilize a little. We’re less than 2-hours into the trading day right now.
Wow Sam, I never know our QQQ call-spread 525/535 can be worth less. Currently 100% lost right now, lol.
I know, I wonder what the plan is here?
Our plan for that spread at this point is to try and recoup whatever value we can off of the likely rally over the next several weeks. But as we mentioned in the portfolio page and throughout the site, the Baratheon & Targaryen portoflios were extremely high risk portfolios. We launched them at 1/10th (baratheon) and 1/20th (Targaryen) the size of our other portfolios. The entire portfolio was intended to be a 5% or 10% allocation relative to the other portfolio strategy.
In fact, the ONLY reason they’re broken out separately at all is becuase it would be pragmatically difficult to make the same repeated trade in each of the long-term portfolios separately. So we just broke it out as its own strategy.
But I think in the future, we may just combine because the sizing of the trades does need to be stressed. They were meant to be very small positions that if they worked, great. If they don’t, it doesn’t have impact at all. That’s how they were intended and set up.
in terms of how Baratheon/Targaryen recover from here, it will probably depend largely on how Nvidia and Tesla trade in the coming months as we have July expiration trades in both that have the ability to restore the portfolios.
So plan from here is:
(1) Close the QQQ positions on the rally;
(2) Close the Nvidia & Tesla positions in July
From there, we will combine. We’re going to close Baratheon & Targaryen and simply add them to each of our long-term portfolios.
Anxiety levels shouldn’t be this high over small 5% and 10% positions at all. Especially seeing as how the 6 long-term portfolios performed during this downturn. Arryn is up 40%. the others are down mildly. Stark being the worst, but even Stark will produce in the end.
I still think Targaryen given the objective should be isolated.
Can’t be because I can tell already there are too many people allocating far more than they should. You know when we launched it, we noted that it could take 2-3 attempts to get it right. You get crashes like this and it makes it extremely difficult to both execute the strategy while coming out clean on the other side of a crash.
The good news is that crashes like this are extremely rare. So we might do this, but I think we’ll do through the portfolios so it’s very clear just how small the trades really are.
Yes, but I do recall you said $5K max, no more than 5% of portfolio, on multiple instances.
I also don’t know how much people are over allocated, as opposed to just feeling the outsized losses relative to the basis. Common stock drops 20%, but the option spread drop 90% due to the obvious factors. I get the feeling it’s closer to that than overallocation. Should we call it overreaction? Wink.
Finally, I’d like to add there are some of us who follow your moves to a T, and others that pick and choose what they like, then decide to go bigger, smaller, sit something out etc. based on whatever they feel. I understood your whole overaching objective here as portfolio construction. That includes trading and longterm, and unfortunately, I feel those who just enter and exit willy nilly, are missing valuable learning opportunities on setting up resiliant portfolios.
I don’t man. While we did state and restate and state again — even while it was successful — that trading is inferior (hell it even says so on the portfoio page itself) the way some of hte comments read, it’s as if some went way beyond that.
So I think there’s just too much moral hazard with keeping the portoflio seprate.
When someone sees a $65,000 position in Jan 2027 leaps, and then a $1k position in Nvidia calls or a $3k position in Tesla or $2k position in QQQ call spread, it will drive the message home more readily I think.
So look. The entire point of the trading is to keep one’s busy while the big thing work. The big investments should be in the long-term.
The smaller trades should do two thing. (1) to keep one’s hands busy so they don’t touch the large long-term stuff; (2) to potentially produce a big return off of a small capital base that can then be funneled into the larger investments.
Every time I’ve ever produce a big return on trades, I’ve then shuffled that into long-term investments.
But that means sometimes reallocating to the trade side when it doesn’t go well.
But all of this only works if one is disciplined in the allocation to begin with.
Is there a reason why you wouldn’t trim down the NVDA and TSLA positions on the next rally along with QQQ? Like, trim down the NVDA and TSLA positions and then re-position on the subsequent pullback. Or is the answer dependent on the nature of the rally (i.e. v-shaped recovery with no 3rd leg vs. a third leg down to retest the lows)?
Trump said 50% retaliation tariffs effective tomorrow
https://www.reddit.com/r/wallstreetbets/comments/1jtohbt/a_short_summary_of_the_craziness_that_happened_in/
At 10:10 AM ET, rumors emerged that the White House was considering a “90-day tariff pause.”
At 10:15 AM ET, CNBC reported that Trump is considering a 90-day pause on tariffs for ALL countries except for China.
By 10:18 AM ET, the S&P 500 had added over +$3 TRILLION in market cap from its low.
At 10:25 AM ET, reports emerged that the White House was “unaware” of Trump considering a 90-day pause.
At 10:26 AM ET, CNBC reports that the 90-day tariff pause headlines were incorrect.
At 10:34 AM ET, the White House officially called the tariff pause headlines “fake news.”
By 10:40 AM ET, the S&P 500 erased -$2.5 TRILLION of market cap from its high, 22 minutes prior.
Do you see this rally becoming severely stunted with the constant back and fourth on tarrif and counter-tariff threats between the U.S. and other countries?
No. I won’t be “severely stunted.” here’s what will happen. If the news is bad, we’ll rally anyway and the rally will be significant. At a minimum, we’re going to rally 15-20%. Probably 60-70. If the news improves and the market feels that hte worst is behind us, we may straight up v-recover the same way we did with Covid. Remember, we started rallying in Covid as the economic impact and bad numbers kept rolling in. If there’s resolution, we rally. Impact no one cares about at all.
So resolution can help drive the market back to its highs. No resolution, we’ll see a big rally anyway. That rally will likely end and we’ll probably see another major leg down. That’s if we get no resolution.
Points
60-70 points of upside. So you have to look at the correction table. All corrections at this level — 25%+ — was followed up with an immediate 20%+ rally. A 20%+ rally would be $80.00 of upside on the QQQ.
in fact, the rallies were even larger than that. The top 5 largest sell-off — which now includes this selloff — went for 23.28%, 25% (this correction), 25.92% (2015), 27.58% (2022) and 30.39% (covid).
Now if you look at the corresponding rallies they were 41.62% (covid), 24.42% (2022), 28.30% (2015) and 27.68% (2018).
this correction is now LARGER than 2018.
Notice the rally sizes? They coincide with the size of the sell-off. 2022 was a bear market rally that ended and resulted in teh market going back to the its lows.
That didn’t stop a 24.4% rally from happening anyway.
Sam – did you decide to go NVDL vs. NVDA leaps for Arryn? Or NVDA leaps investing soon?
So in some we went Leaps and in other cases we went NVDL. I think they’ll both end up with the same outcome. On the recovery, those are all likely to double in value minimum.
Hi Sam,
In your Disclosure: Disclosure: I personally bought a very significant position in NASDAQ-100 (QQQ) January 2027 $400 calls today with cash I freed up from out of market investments. Will trade this exactly the same way as I would Arryn, Stark and Lannister. That’s the type of strategy I employ.
You bought QQQ 2027 $400 strike for January, however, later in your trade alerts they said June 2027, could you clarify if there’s a typo on the month? thx
I personally bought January 2027. For some portfolios, we decided to go a little more conservative by adding 6 months to expiration. Strategically, I’m employing the same strategy. That is buying long, waiting for a bounce, shaving and purchasing a hedge.
Thanks, Sam. I’ve been following your strategy on QQQ and it’s been very effective and profitable. QQQ is a money machine, imho
Arryn portfolio is doing really well, thank you for updating us consistently on the portfolio. can’t wait to see how stark end up playing out I think as long as leaps portfolio is consistently hedged they may be in my risk appetite
The Arryn Portfolio was really lucky to be honest. Like back in January it was up 70% and at that point I felt a need to protect profits. originally, our hedge was build on the idea of protecting our $100k original investment. But the moves we made in January were aimed at trying to protect our $70k in gains.
And guess what? it worked. We obviously didn’t protect all of it as the downturn wasn’t quite large enough. Had the QQQ fallen 30%+, it would have gone up to +70k. But at this morning’s lows, Arryn was trying at $147,000. So we did well protecting the gains.
And now that we’ve shifted to the long side, if the QQQ rallies back to its highs, we’ll be at $220-$250k no problem.
So arryn is set up to do really well long-term.
Really, I feel pretty good about all of our long-term portfolios across the board. They’ll all do well.
New short term portfolio suggestion that would reduce anxiety/risk:
Aim for ~50% return by trading during corrections ~2x per year (for about 100% return every year), but always with a hedge (put or put spread). Thoughts?
Reason for 50% return per trade and not 100% is because of the cost to hedge (obviously). I plan on doing this personally but i’d be more confident if you did it, and it would also be more fun.
Is there a reason why you decided to purchase positions in the LT options portfolios, but not the LT common stock portfolios? I would think it to be the opposite since LT options are still inherently “riskier” than common stock; albeit the time horizon is pretty long so maybe the risk differentials isn’t as severe.
We did buy position in the common stock portfolio. We added a 20% allocation. For the long-term options portfolio we simply had to rebalance. Arryn this morning was still net short even afer having sold half of our primary put position on Friday.
That’s how strong the put position was starting to override things. All we did today in the options portfolios was close out our puts and get long again.
The puts served their precise purpose. To off-set losses sustained to our long positions in a downturn.
The QQQ reached -25% today. That’s extremely rare. We’re talking top 5. This event will be referenced in the future as a major market event in-line with Covid, the 2022 bear market and the 2008 financial crisis and others. It’s a major deal.
So it does warrant getting fully net long. That’s what we did today. we closed out the puts and went long.
We also added 20% to our common stock portfolios though.
Turns out I asked too soon 🙂 You purchased those positions like 5-15 minutes after I posted my comment.
Sam, where do you want to see today close?
Surprised to see Tom Lee’s comments with a change of tone.
what did he say?
Hello Sam Congratulations on entering the market. I also followed the move on NVIDIA long at $94 and NVDL at $26. What are your price targets for this rally before the likely decline in a few weeks? Should we expect to target $120 to $140 before a pullback to $110?
2 pull backs 2 weeks later in 2008 and 2020 there
Hello Sam,
Can you help me with that ?
Best
Karl
Hello Sam,
Can you help me with that ?
Best
Karl
Hey Karl — so as we mentioned in the actual daily post, our expectation is for the market to rally 15-20% from its lows at a minimum. That’s $460 to $480 on the QQQ from a low of $402.
How once we’ve seen a rally of that magnitude, we’ll have to assess whether it will continue higher or whether it will peak. There’s no way to know this until we reach $460-$480 area and see how the market trades.
Basically the market is going to retrace back to its old trading range nearly as fast as it left it. It was trading between $460-$480 in normal functioning markets and it will go back to 460-480. If the market is bullish and it wants to go back to its highs, it will press above $480 and test its $500 resistance. If it’s still bearish, we probably peak at $460-$480.
The $VIX table you posted makes total sense. in 2008, we had an actual crisis, and so the $VIX got as high as 90. 45 wasn’t going to cut it.
In may 2010, we had the flash crash to start the correction. So the $VIX shot up to 40 in the very first few days of the correction. So that was really really early. The correction continued until August. That’s why in 2010 you see red weeks later.
In 2020, same thing. We had extreme volatility VERY EARLY in the Covid crash. hence why you see more red after the high vix.
This situation is probably more similar to the other scenarios. We’ll probably see green weeks later because the $VIX shot up to 45 late in teh correction unlike those outlier events (2008, 2010 and 2020).
Hello Sam,
Thanks for your analysis.
NVIDIA rally is x2 or x3 powerful ? So we can easily see NVIDIA at 130-140$ soon into 2 weeks ?
Actually, NVIDIA’s rebound surprises me a lot… +17% in two sessions since its low on April 7 at $87.14! That’s huge, more than twice the QQQ’s gain over the same period, or +6.78% for the QQQ.
At the same time, I remember you said that given its BETA, NVIDIA generally moved at x2 to x3 for the QQQ, so that makes sense…
If the expected rally is +15% to +20% for the SP500, can we conclude that we’ll see NVIDIA move at x2 to x3, or +30% to +60%, or from $113 to $139?
I think the 125-130 window makes sense… it’s still an incredibly violent rebound and I would find it surprising to see NVIDIA back at $88-$100 for a while… it was still the deal of the year yesterday! Well done and thanks again for your mental coaching on managing emotions!
Hey Sam,
What is your plan with the trading portfolios now? Will you try to recoup as much value as you can and then unwind them and close those portfolios?
I get why you want to do them differently, I guess trading nowadays does always attract the Wallstreetbet-kinda guys.
So yeah, we might do that. But we would still make trades we would just make them in the other portfolios.
We will just fix it to all of the option portfolios. It requires a lot more legwork, but I think it’s safer overall.
I think if people look at comparative positions, it will really send a message about how small these positions need to be.
sam you mentioned about the possibility of bear market, but i remember you mentioned in ine of your earlier posts that bear markets are typically every 7-8 years and we just had one in 2022 so there is very less chance of that currently. So can you please explain your thought process behind the possibility of bear market now?
It’s the size of the sell off that’s concerning. But as we’ve also mentioned, there are plenty of 20% selloffs that don’t go into a bear market.
You’re right that it’s early. It’s way too early. But when you have a sell off that extends to 25% there is always the possibility of a bear market.
I also hate the way the chart looks. That entire period between December and January looks really bad.
The chart looks exactly like the top we had in 2022. It’s very glaring.
In fact, it’s so glaring we wrote about it in January. We dedicated an entire article to the notion that we might be entering a bear market.
I Should’ve listened to those instincts. Though the problem is, we’ve had so many previous instances where we had a consolidation top like that, and it didn’t lead to anything at all. No bear market. no correction even.
Is it just more or are VIX puts the easier play right now? Almost seems too easy?
Edit: put spreads ro reduce the effect of IV crush
Sam, What is the chance that this rally only lasts for a day or two (and is only 3-5%) and then fizzles out and we retest the lows? Would that be unprecedented, or is that a possible scenario?
The big thing Sam keeps stressing is that a) market moves before sentiment shifts, then once the sentiment shifts they’ll publish positive news and attribute that as the reason the market rallied; b) he’s also reiterated that number 1 deeply over sold on the RSI is a big deal, 2 back to back oversold instances in tight timeframe where the first rally is on the weaker side leads to a far more explosive second rally, and 3 yesterday we had the VIX, NYMO and daily oversold which all further support a rally.
Sam has said 12-15% and more likely on the higher end and when looking at the tables the rally could easily go for 20-25%
What we’re waiting on now is the rally to unfold and depending on how it unfolds there are some moves to be made. How explosive and the way it moves up will give a lot more clarity on how far it might go and what the 3rd leg down could look like if there is one.
This is exactly right across the board. We’re already up about 10% right now. $402 to $440. But if the rally were to fizzle out at only 3% I.e. $402 to $414, then we’d remain oversold. It would just extend oversold conditions and we’d remain oversold until the market rallied.
But that’s moot anyway as the market is doing precisely what we’d expect and what we stated would happen even in the middle of last week.
Capitulation Monday. You saw it. QQQ crashed, recovered and closed green.
Now we’re expecting a total 15-20%. $460 to $480 and from there we’ll have to see whether the market is moving forward or whether we get more selling.
I meant could we fizzle out 3-5% above the close yesterday, like in the 440-445 range?