Samwise Quick Reference Handbook
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Hi Sam,
I’ve noticed you don’t tend to open positions early in the trading day. With the plan of action outlined above, are you still planning on making your purchases later in the day or are you strictly looking at desired entry price and not placing as much importance on timing since many indicators are showing an imminent rebound?
We might trade at the open depending on where the QQQ is trading. Where the QQQ is trading at the point that we put on the trade does matter. That is because the size of the rebound is dependent on the QQQ.
So we’re not strictly looking at the option pricing. We’re more looking at where the QQQ is priced when we put on the trade
So we’re thinking June/July at this point just to reduce anxiety. May is probably better for returns while July is better for mental stability
mental stability.. made me chuckle.. excellent start to the day..
Sam，thus morning you bought some may 525-535，correct? So far， I haven’t seen any june/july spreads for QQQ，I do have July for TSLA。could you clarify ? thx
We decided to stay with the May expiration and then we’ll transition on the rebound.
We put in on the May $525-$535 call-spread.
I did too, my average cost has been down quite a bit … waiting for the rebound
“Anyway, having gone through all of the historical correction data by hand over the weekend, I’m feeling like the best course of action is to simply buy some June 20, 2025 call-spreads and then sit back and wait.”
So you’re going to hold them through the possible second leg lower? Or trim as soon as the QQQ reaches ~$510-515 in expectation of an immediate second leg lower to ~$465-480?
Most likely we would trim the non-June positions and then hedge or get into the strangle.
Sam – thanks for this. last week in a comment you said bear markets tend to last 7 years. just wanted to clarify that – did you mean time between bear markets? and secondly – do you still anticipate another leg down off a rebound? thanks!
So bear markets tend to last 1-year and they occur every 7-years on average though lately it’s been more spread out. So it’s early to be thinking bear market as we just came out of one only 2-years ago.
Wow, very early morning trade. It’s already moving quickly.
Sam, several typos on these trades. Please review the qtys and portfolio names.
Do we have any plans to make moves in the long-term portfolios if we’re relatively confident in an intermediate-term bottom soon? For investors who didn’t buy in with Frey & Stark initially would this be a good time to go in?
I’m calculating that right now
We still feeling good about TSLA? ????
With Tesla it’s the same thing. We just have to wait for the snap-back rally and then assess from there based on how large the rebound is.
Today looks even brutal, Sam. The market is making new low. Is this capitulation? Looks like it’s never ending.
yeah this has been rough to watch
Possibly capitulation. Almost all capitulation happen on Monday morning. So we’ll see. It doesn’t feel like it. It still feels very small for capitulation.
We’re buying down here because the numbers suggests buying down here will be good in the end. However much further it goes from here we’re unsure about, but we are confident that on the way back up, these prices will be far eclipsed now. Hence we’ve bought today in size.
Sam, can you briefly touch on the NVDL purchase? I’ve stayed away from leveraged positions due to the daily rebalancing in the past. New to this one.
We like it long-term. We feel like the NVDL has done well over long stretches. It allows us to leverage long Nvidia without having to buy options that have an expiration date.
Normally, for Stark, we buy options. It’s options portfolio. NVDL is a substitute for that.
Sam
would it make since to buy TSLL . 2x leveraged etf for Tesla. I also have reservations of buying these because of the daily rebalancing.
Hi Sam,
About the Apple call in Stark. Is it in danger of major decay due to all of this volatility? Does it make sense to continue holding to expiration given the current market situation?
We’re holding January 2027 calls in Stark. That’s over a year and nine months from now. We’r enow really worrying about near-term shifts in volatility. Like our long-term positions are going to be held for the long-term and we’ll shift positions only to roll forward when the time comes to do that. At the moment, we’re not remotely thinking about reducing any of our positions in Stark even in the rebound.
Our stark positions are ultra long-term. I’d take a look at our strategy here:
https://sam-weiss.com/samwise/samwise-strategies/
Wow, the pain feels long and lasting
True
Maybe we should be buying puts just so the market will call our bluff and stop the bleeding by going sideways.
Are you gonna use the remaining ~300$ for Targaryen? I was thinking of bringing down my average cost down some more ????????♂️
We’ll add to the QQQ may call-spread.
Sounds good
Tesla is completely collapsing here, 15% down in a day..
got cheap way OTM puts… easiest money ever
At this point just worried we keep dropping an the 15% bounce hardly puts us back to where we were last week (deep in the red) – hard to watch, feels like the hits just keep coming
15% rally takes the QQQ back to its all time highs at $541. We’re talking 15% on the NASDAQ-100. individual stocks will go up way more than that.
$473 x 15% = $544
i envy your confidence but appreciate it (and your experience)
Did you read yesterday’s post? I’m only confident because of the data. Just look at the data. Examine all past corrections going back to 2010 and then consider the current environment compared to those past environments.
This environment is entirely average. The fundamentals that drove all of those past correction were either right in-line with today’s fundamentals or far far worse.
There’s nothing that concerning about current environment. The employment report this past Friday was extremely positive on an objective basis. When looking at it objectively, it was a very strong report.
Okay so now ask why this environment should be ANY different than all of the other 47 corrections we looked at going back to 2010. In all 47, the QQQ rallied AT LEAST 10% on the low end and when the QQQ has fallen more than 10%, that number surges to 15%+.
So why would anyone think this environment should be any different? We even showed that during the financial crisis itself, the market also rebounded big numbers.
My confidence here is derived from two things. (1) the data bares it out. (2) I was THERE for every single one of those events. I went through every one of those corrections. So I remember what it’s like to go through a selloff where it feels liek it’s never going to end. It always does end and the market always rallies hard of the lows.
I’d say if you’re concerned that the market is just going stay down here, I’d read the article and closely analyze the tables I posted.
Wow I somehow missed that post – yup just started reading. Appreciate this, thanks
Thanks, Sam. Perhaps we might be thinking ‘this time is different’ because the administration seems to be trying to bring down markets recognizing the short term pain they will impose, in order to achieve their agenda of bringing down rates? Also, could this is be ‘coordinated’ given the makeup of the administration with Wall St. background? (not a political statement, just observing what’s being said and done)
Hi Sam!
Had a question regarding how you classify corrections. So, let’s say in the hypothetical case where this correction is single legged and we bottom around the 470-480 area in the QQQ. Do you classify a potential second leg lower after the 15%+ rebound as a new “correction” or would you see this whole thing as a single correction? My understanding is you’d classify it as a single correction, but just wanted to double check! Are there any confirmations / indicators we can use to to discern between the rebound being early innings in a broader intermediate term rally vs. the 15%+ rebound ahead of another leg lower?
Thanks!
It really depends on how far and how long (as the rebound off the lows go). Look at the August correction, rally and September correction for example.
I have them classified as separate events. The QQQ retraced almost ALL of the losses after the August correction and then promptly began the September correction. Those two things can be viewed as one correction and if the QQQ had made new lows, we may have classified them as one big correction.
It’s very arbitrary to be honest. It just depends on proximity, rebound size etc.
Like for example, look at what happened in December. We fell 7-8% from $539 down to $500. Then we had some volatility, made it back to all time highs only 14-days ago and then we have this correction.
So it’s not always clear. Two-legged corrections listed on the chart have varying levels of rebounds. But it’s usually very well defined. For example, take the August correction for instance.
In July – August, the QQQ fell to $352.78 and then rebounded to $374.12 at one point. That’s a full 6% rebound over just a few days. We don’t really break that out as it’s own rally and correction because it happened in such close proximity to the next leg down.
That’s a standard rebound in a 2-legged correction. On that correction list, if you go back and look at any one of those 2-legged correction, we have 6-10% rebounds like that fairly consistently.
But if the rebound lasts several weeks, it leads to a major retracement of the losses and then we have a second leg or second correction, we’ll break it out and keep it as its own correction.
You can tell when we’ve done that by looking at the time element. If you see two corrections in close succession then the volatility is likely connected in some way.
Where’s $NYMO at today?
Barely down. The market isn’t uniformly red right now. More evidence that we’re probably in a multi-legged correction for sure.
What do you mean by “the market isn’t uniformly red right now”? Are you referring to % losses across multiple indices?
I’m talking across the entire stock market (NYSE & NASDAQ). Not just indicates, across all sectors of the market. For example, energy is up. Health tech is up. Health services. Communication. Non durable goods on the consumer side. There’s a lot of sectors in the green. At capitulation, you have everything down across the board. The $NYMO is still at -54. That’s yawner level.
The Android notifications were pretty sharp today.
I am envious of your optimism Sam. I see the tariffs and mass government layoffs and the general uncertainty caused by US foreign policy shifts causing a mass exodus of foreign capital from US stocks and that money not coming back until those items change which means no rebound. I have not sold anything, and am trusting the process, but I feel tempted to.
The market moves faster than and trades ahead of the fundamentals. All of that will be priced completely in before it ever shifts and the market will be rallying far before anything improves in the fundamentals. The financial press will scramble to tie fundamental news to the rally.
That’s how much operate. There are times that fundamentals can drive things. If the Fed came out and said they’re going to lower interest rates aggressively to combat tariffs, the market would bottom on that.
So there are fundamentals that can bottom the market. But the bad news will eventually be fully priced in and the market will start rallying on the future.
This happens where good news arrives or not right.
That’s why every single correction, crash, financial collapse and bear market have rebounds.
That makes. So in essence nothing fundamentally has changed in terms of financial reports due to the lag time. but stocks are expected to drop so they drops which triggers panic selling and eventually an over-reaction, causing it to snap back and recover some losses because there truly is no change in the fundamentals as of yet.
There is little to no immediate impact from tariffs, and any net effect could be minimal since the Federal Reserve has tools to counterbalance their impact.
However, the key point is that all fundamental news gets priced into the market before it ever arrives. The market has already factored in tariffs, volatility, and uncertainty. When stocks start rallying, it will happen before any noticeable shift in fundamentals.
This is exactly why the stock market crashed, bottomed, and rallied after COVID before lockdowns even began and before job losses took effect. The economic damage came long after the market had already returned to all-time highs. Many were confused by this, but the reality is that the market was rallying in anticipation of the future.
The same dynamic will play out here. The stock market moves ahead of real-world events. What’s happening in the market today is not tightly correlated with what’s happening in the world right now.
Why We Focus on Technicals
The technicals reflect the market’s true sentiment about the current state of affairs. The historical correction table and trend data provide valuable context about the market’s past perceptions of those fundamental events of the time.
Today’s sell-off should be viewed against the backdrop of past market cycles:
• If the QQQ falls more than it did during COVID, it tells us how the market perceives today’s risks as compared to COVID.
• If it declines less than the 2022 bear market, it suggests that the market isn’t overly concerned with current political turmoil to the level it was concerned about inflation back in 2022.
One of the biggest mistakes one can make is assuming this correction is fundamentally different from the 47 past corrections we’ve studied. The probability that this specific environment is unique—unlike any other correction before it—is extremely low.
If this time were truly different, we wouldn’t be down just 13%—we’d be seeing a 70% market collapse.
The market is outright telling you: this time is no different.
If it were, we’d be seeing a $VIX at 99 and stocks dropping 10% per day.
Thanks for taking the time to reply with such an in-depth answer!
I hope I am picking up what you are dropping down:
No immediate impact from tariffs because it was already priced in seeing as the tariffs are hardly a surprise and have been talked about for many months.
Yet it was time for a correction after such a tepid one in January so a normal correction ensues and you can measure it (13% over 14 days) vs the past 47 corrections and find that it is totally within the normal ebb and flow to be expected from a standard correction.
Were it not so then the vix and drop rate would be truly horrific.
I guess it is human psychology to always assume the worst despite having historical evidence to the contrary!
Hey Sam, so we are going to reduce on the rebound even if we are not yet at break even for our positions due to higher cost basis?
Also: why would we buy put spreads instead of just letting part of our long positions ride the rallye/use the cash from our reduced positions to lower cost basis a during the next leg lower?
So whether we’re up or down on a position has no bearing on what we should do in any given situation. That type of thinking is actually quite dangerous. We tends to make money on most trades. Corrections do pose tricky situations. But we have no problems taking a loss, moving on and then making money on the next trade. That’s the way to think about things. We’re confident in our future ability to make successful trades repeatedly.
In fact, even with the QQQ now down 13% from its highs, we still feel confident that once the correction concludes, we’ll end up with positive returns overall.
but that requires playing the rebound and ensuing sell-off correctly. we have to reduce down, reposition and capitalize on the second leg lower. I just don’t see the market forming a v-shaped recovery from here.
The odds of that are now really really low. Today’s action sort of shifted the entire probability table. I think we probably have a total 15-18% correction on a multi-legged sell-off with a big long rebound in-between.
A table we may put together is a single leg table where we examine the largest legs down and whether a rebound followed or not. I”m sure what we’ll find its that with a selloff of this magnitude — without the $NYMO & $VIX triggering buy — it means we’re going to see a 2nd leg down minimum. Maybe 3-4 legs like 2018.
The key thing to realize is that in those environments–the first rebound is massive and it draws people into the notion that it’s over. Everyone gets convinced that it’s all over because of how aggressive the buying is. But it’s not.
“A table we may put together is a single leg table where we examine the largest legs down and whether a rebound followed or not.”
That would be really helpful????
Makes total sense, thank you. I think a lot of us are learning a lot during this correction which will make it a lot easier in the future:)
Could you maybe explain why going 50/50 long/short after the rebound is better than going cash and riding one half if it goes up or doubling down after a 2nd leg down?
I don’t know enough about this stuff yet..
Because the odds are really high of the market dropping now and we need to capitalize on every move.
What’s more, we have nothing to worry about if the market continues higher because our spread would skyrocket in that case. Enough to off-set any losses in the put-spreads.
For example, suppose we get to $500 and we buy the July $540-$550 call-spread and the $470-$460 put spread. They each costs $2.00.
If the QQQ continues rallying up its merry way to $540 and we have a full 15% recovery in process, then those calls will rise to $5 – $6 per contract.
The puts will lose 60-70% and drop to $0.70. That’s a $1.30 loss compared to a $3 to $4 gain.
On 40 contracts, we’re making a net $2.30 to $3.30 per contact. What’s more, after a move of that magnitude, we might close out the calls at $5-$6 and then use an opportune pull-back to close out the put-spread.
On the flip side, if the QQQ pulls back as we expect it might, the puts skyrocket to $5-$6 while the calls lose 50%. the big difference is the market will ultimately rally. Meaning, we’d be able to close out the put-spread and use the capital to get long at a huge reduction in basis.
if correction is multi legged are we still likely to see the 15% rebound in full?
The 15% rebound is after the correction ends. once the correction ends, the market returns to its highs. The rally is generally commensurate with the size of the sell-off. Look at the correction tables. Take the time to see what is posted there. If you have questions about the table or if there’s something that is unclear, ask. Here’s the table:
In fact, what you should do is take a very close look at the table and draw your own conclusions from it. What hte table shows is every correction going back to 2010. Some corrections are 1-legged. Others are multi-legged. Meaning, we had a big sell-off, a big rebound and then another leg down followed by a massive rally. That last columns shows which corrections followed that pattern.
But they all end and all lead to a large rally when all is said and done. I’d go through the table and think about what it says about today’s market. The QQQ peaked at around $541 and has bottomed somewhere around $471. Down about 13% from the highs over 14-days. Where does it fit within past corrections? What did other corrections like it do afterward?
Okay, the QQQ filled all the gaps. Can someone find the switch and turn it from DOOM to BOOM?
*click*
LOL !
Now if QQQ closes below 477 then we get a daily RSI below 30.0 which is good for a rebound.
Yeah sub-30 RSI on the daily is a whole different set of arguments. Unrelated to the correction analysis but points in the same general direction with the same general conclusions.
We’d have day 2 of sub-30.
seems like this was confirmed no?
Yes. This is day 2 of sub-30 RSI.
still thinking $465 is the likely bottom?
So becuase we don’t have capitulation indicators yet, we can’t reliably predict what the actual low point will be. If we saw the vix skyrocket today or if the $NYMO pushed down to -100, we’d come out and say with high confidence that the market has BOTTOMED. Note we don’t have a ‘bottom’ area yet.
The reason we said $465 to $480 as at the bottom range is because past corrections beared that out. When you look historically, there aren’t many one-legged corrections that go beyond that point. We’d be in novel territory going beyond $460.
That’s the main reason for saying $465 – $480 as at the likely bottoming range ahead of a rebound. Make sense?
But there are actual bottoming indicators that will give us a very high confidence in forecasting a bottom. the problem is those indicators haven’t flared up. And they commonly do in corrections like this. This is why I think we’re going to see another leg lower after we rebound first.
I think we need to now see real capitulation before this whole thing ends.
But we can see a massive rebound between now and then. For example, most rebounds go for 50% retracement. That means half of hte losses are often clawed back on the first real rebound. It actually. happens MORE OFTEN than not.
Right now that is +$36 off of the low $468 lows. $505 a share. Which makes sense. It would make sense for th QQQ to test $500 before sustaining a second leg lower. That’s where we’d reduce down and go 50-50 long-short.
Then if we get a second leg down, we’ll make money on the short side, close the puts, hopefully get an actual capitulation and then go full 100% long again.
That’s a very profitable path if it all unfold that way.
Sam, is there ever a point like today, where the short leg of a spread so deep in the green, you take profits and turn it into a straight call?
So my take is to just simply buy a new position instead of closing the short leg. T hat’s because by purchasing the short leg, you’re just investing MORE money into that option and expiration.
So rather than allocate in that manner, we prefer to just buy a whole new position. If that position makes sense, then we’ll close it.
thanks Sam. after the second leg down, what would you expect?
Chances are the correction ends by then and we rally back to all-time highs. It’ll be a bigger correction like we saw in August 2024. But the end result should be back to the highs and higher.
Inflation reports are releasing on Wednesday and Thursday. Those could be the turning point for a rebound?
Very possible. Inflation report is often trend changing.
I filtered your table for data for the high octane era of between Jan 26, 2018 to Feb 19, 2025 with a ‘%Pct. Loss’ of -16.25% to -10.25%:
1. I noticed that 2023 is missing. Is the reason behind this due to the after effects of a bear market causing 2023 corrections to be smaller due to how much damage the market already took in 2022?
2. Considering that this correction thus far went to ~13.34%, the only time the correction went to lower a ‘%Pct. Loss’ were due to some extraneous events/cycles. Would you categorize a 2nd leg down as a separate correction (like you showed for Aug 2022 and Sep 2022 in the table, and as well as when you mentioned in the past that potentially Aug 2024 Sep 2024 could be 2 different corrections in the past)? I am thinking we are waiting to see how far retracement actually goes here.
3. For corrections and rallies when the high-octane era first started, I am guessing that you used older data points from the melt-up era to conclude your analysis at the time? I also filtered your table for data for the high octane era of between May 13, 2010 to Sep 19, 2014 with again a ‘%Pct. Loss’ of -16.25% to -10.25%, and It seems very much like a coincidence that a pattern/theme from a previous era shows up in future eras, but it clearly works based on your table, but I am not sure why that is the case? Trading is way more easily accessible to retail traders which I would think that is where higher volatility and liquidity comes from in this era, and since this type of data isn’t uncommon between professional traders and firms maybe they invest and trade at these points as well causing patterns to form?
4. Separately, your Daily Briefings are very informative, impactful, and a lot of your analysis’ are also very technical in nature. The winning ticket here seems to be to stick to good habits and good decision making based on past numerical data. Would it be wrong to incorporate behavioral economics in either exacerbating or mitigating future corrections and rallies to refine projections if we already have an overall working formula?
5. I really enjoyed the exercises you put out in your Daily Briefings. Aside from already reading articles and readings from other parts of the website, would you be able to give any other exercises on what would be interesting to investigate in your chart(s) and correction table?
(1) 2023 was a very bullish year in the stock market with very few pull-backs. It kicked off the new bull market.
The stock market bottomed after the 2022 bear market in late December or early January. After one last final pull-back that bled into 2023 I believe, the stock market literally went on two back to back 100 trading day rallies. We had a record breaking 36% rally followed by a 32% rally. So there just weren’t major corrections in 2023. In fact, the QQQ rallied from February 2023 to July 2023 non-stop. It trended up the entire time with small $9-$10 pull-backs in-between each leg up.
In July 2023, the QQQ peaked at $388 a share and proceeded to sustain THREE separate corrections and rallies that all ended in early November 2023. So we rallied from February 2023 to July 2023, had a few months of volatility and then began a new rally from November 2023 to March 2024. In march 2024, we had a minor correction followed by another big rally that ended in July 2024 and lead into the major July – August 2024 correction.
There were no major corrections between February 2023 and July 2024. Hence why there are no events in 2023.
(2) We can’t categorize a second leg down in this correction as being a separate correction until we see what happens.
For example, let’s suppose the QQQ rebounds to $505 a share over 7 trading days, peaks and then falls to $450 a share 10-days later. If that happens, then the rebound and 2nd leg down would be considered part of the same correction. The total correction would be $541 to $450 (-$91 & 16.82% down) over 30-days. That’s how it would be classified.
Alternatively, if the QQQ starts rallying tomorrow and that rally extends all the way to $535 a share over a 4-week period of time where the QQQ peaks and then begins to pull-back down toward the lows, we’d classify that as a separate correction. That’d be particularly true if the QQQ then fails to make a new low as happened September 2024.
(3) The pre-and-post melt-up eras are very similar. Almost identical in fact. The volatility profile and trading evnrioeents were exactly the same. in fact, the melt-up era was a very unique environment and all other trading environments are the same.
The melt-up era occurred due to the Bernanke put and massive free liquidity in market. Market participants viewed risk as non-existent. T hat’s why the $VIX fell to extremely low levels near 10 at times and why there were no corrections. The thinking at the time was that if we have a recession, Bernanke, Yellen & Co would come to the rescue. If no recession happens, then stocks go higher. Either way, stocks go higher. That thinking was perverse during the entire era.
(4) So the hard part about incorporating behavioral economics is the subjectivity. Hard numbers are what they are. We try not to deviate too much from what the data suggests.
(5) There are a bunch of different correlations. But just can’t think of any off the top of my head. It will come up when relevant.
Hi Sam!
You mention most capitulation days tend to happen on Monday or Friday. I’m assuming there is some investor psychology at play here.
Here is my stab at the psychology behind this
Of course, I’m sure there are more reasons than this, but would love to hear your thoughts!
I’m sure this is something you’ll address in your Investor Psychology investing basics section, but until then this question will have to do 🙂
Thanks!
So we rarely get capitulation on Friday. It happens, but it’s more rare than Monday or Tuesday even. Here’s what happens and why Monday’s specifically are capitulation days.
After a long week of heavy selling with the market down significantly throughout the week, it’s not uncommon for investors to fear going into the weekend holding positions. Especially when there’s volatility in the news like during the financial crisis or COVID. So a lot of investors dump those positions on Friday at the close causing a huge down day to end the week. Often you even get new lows being made in after-hours with the market down several more points. For example, if today were a Friday and the QQQ ended the day at $468.50 (lows), I might sell-off $4.00 in after-hours down to $464. There’s just no silver lining in sight. Even after-hours looks bad.
When investors go into the weekend with literally no light at the end of the tunnel, the fear feasters to such a degree that the futures on Sunday night open down massively and just sell-off all night long. Then on Monday morning fear hits a fever pitch and you get the recipe for capitulation.
You end up with a huge gap down where the last remaining weak hands sell, bears cover short positions and new buyers step in and go long. This causes those who just exited to try and chase to buy back thier positions which puts even more upside pressure in the market. You get a huge buying frenzy that often leads to a full reversal.
Friday capitulation happens differently. It occurs at the end of the day. Similar circumstances as above. Investors throw in the towel at the end of the day expecting everything to go to shit over the weekend and so you end up with premature capitulation. Buyers step in and manage to take a deep red market into the green by the close of trading. Then on Monday you get a big gap-up and the rally starts.
Tuesday capitulation happens after a beating on Monday (same formula but with no capitulation on Monday). So you get the same festering fear over the weekend, people throwing in the towel on Monday and then you get a delayed capitulation on Tuesday.
So those are the three days we most often see capitulation occur. Though in most cases it follows the brutal sell-off on Friday, fear feasters over the weekend to major gap-down on Monday. Just like we had on August 5, 2024. That’s the last true capitulation we’ve seen.
—
Notice not all bottoms require capitulation. You can see a day like today represent the bottom. We’ve seen this happen before. The market just gaps up on Tuesday and a rally just randomly starts. We’re oversold. We hit a 30-RSi and it is Monday. So we can easily see a bottom just occur out of thin air without any sort of capitulation. A gap-up could do it.
It’s just that when capitulation occurs, it typically happens on a Monday.
Interestingly, I heard a lot of traders echo exactly what I’ve talked about today. I heard a number of people on CNBC mention how the $VIX isn’t high enough for capitulation. That there’s no bottom yet for lack of capitulation. Too many stocks in the green etc.
That in and of itself is contrarian. The fact that so many people are seeing the same thing could lead to a reversal on its own.
Could you elaborate on that last part:
Why is that contrarian? If other traders are talking about the same thing as you then wouldn’t that cause people to not want to step-in and buy, thus delaying the reversal?
So there’s a saying the market tries to make fools out of as many people as possible. Anytime you hear a bunch of people making the same arguments, usually the opposite happens. That’s the contrarian aspect of everyone looking at the $VIX and saying, “oh look. no capitulation. The $VIX isn’t moving higher.”
It doesn’t mean that we’ll now all of a sudden rally. It just means that it is a contrarian point when everyone sees the same thing and talks about. It’s like Fight Club. If no one mentioned it, it would be better lol.
But if 15 people go onto CNBC and say the same damn thing, then it starts to become contrarian.
Sam in the last line if your briefing at the time of the comment you said:
“Notice if the QQQ follows the same path as those three examplea above, the QQQ would essentially rebound back to its highs in just 3-weeks. That’s how aggressive the rebounds were.”
Does this include the entire second leg? Is this the full rebound, even in the case of a multi leg correction? For example, rebound tomorrow to 500, drop to 460 in say 5-10 days then fully rebound back to highs 540 all in 3 weeks, or is the 3 week marker the next rebound only including this leg?
No. It does not include the second leg. It will be one or the other. What we’ve shown here is that this would be a novel case to continue on with multiple legs. The other three prior cares lead to rallies right away.
If this ends up multi-legged, then it will add 10-day for so to the process. The time it takes to go down on a second leg and the time it takes to recover.
We’re still in the camp of two legs down, but those three cases all went full rally mode off of a full correction bottom.
After hours, QQQ 465, NVDA 102! Bleeding accelerates! I hope we see the light at the end of the tunnel soon! what you, Sam?
Sam it seems like you are fully committed to the market following its cycles despite whatever trump is doing to the economy. Can you share what makes your conviction so strong that all this sell off is simply the market going through its cycle and not a byproduct of trumps actions in office? Surely you can agree that this is completely different territory than the correction last August when we had a stable government that wasn’t trying to upend everything in its power. I just really want to understand the mindset you have to staying calm in this turbulent environment.
The market moves through cycles regardless of who’s in office. When it’s going up, the message is always about fundamentals—stocks are cheap, and you have to buy. But when the market goes down, they run out of explanations and start throwing around uncertainty, recession fears, and tariffs. The press doesn’t know what to say, so they bring in the technicians to talk about moving averages and other indicators.
This sell-off isn’t about Trump—it’s just part of the market’s natural cycle. The same people who tell you to buy during rallies are now scrambling for reasons to explain the decline.
This is correct.
Sam can speak more to this but consider how many times people have said “it’s different this time” during other market corrections. Trust in the data from prior years, and you’ll see a rebound in the short term is inevitable.
To begin with, I’m comparing to just August. I’m comparing this environment to the 47 prior correction that came before this one going back to 2010 and to the financial crisis that came before that. August is just one single correction.
First you want to look at the 47 prior corrections as a whole and then tease out the various trends. The common themes found in every correction. Examine at how markets behave during corrections generally.
Not sure if you’ve gone through correction before. I’ve been through 60-70 of these probably by now. They’re all largely the same. The only difference between them is how long they go on for and how many legs down we ultimately experience. But they all generally follow the same playbook.
This particular correction environment is no different than every other past correction environment we’ve seen going back 15 years.
This is important to understand. Every single correction that came before this correction ALSO HAD ITS REASONS TOO. It’s not like we had 47 prior corrections that had no good reason behind it. They did. We recovered anyway. <—- this right here is the conviction. All 47 prior corrections followed the same general path and same general retracement rules. That’s the whole underlying basis for conviction.
I’m not holding or hiding any cards here. You have the data posted right there in the Current Outlook. Look through it. Do a deep dive. Go back to each of those correction environment and see what was going on at the time.
Here’s another way to pose this question to yourself. We have a list of ALL PAST CORRECTIONS going back to 2010 right? Each of those corrections had their fundamental reasons underlying the sell-offs and each one reached a certain percentage loss, number of days down, and each one lead right into a rebound. Bracket this.
The NASDAQ-100 (QQQ) is now down more than 13% from its highs presumably on Tarffis & President Trump’s policies. (Though I think it has very very little to do with any of that). But let’s say for the sake of argument it does. That puts this correction in the top 10 (out of 47) going back to 2010.
Now how much do you think the market should go down in total on Trump policies & tariffs and why? Compared to all previous sell-offs, how much should the QQQ go down by in this envriomrenit? Does that nubmer make sense when compared to other past corrections AND compared to the fundamentals of those markets at the time?
That’s the key question here. An answer to that question can be found by simply looking at the data and having a general sense of what happened in those previous corrections. If you were there and have a sense of what happened at the time, then you’ll be able to answer that question with some conviction.
So far you’ve compared to August. Compare to the totality of all corrections now. You’ll get your answer. Read the Current Outlook — particularly the intermediate-term outlook — and that will tell you why I have conviction.
Take a close look at this table. Note how this correction is now the 13th largest correction going back to 2010. This includes the u.s credit downgrade, the European debt crisis, the China trade war in 2018, the inflation bear market in 2022, covid, the May 6, 2010 flash crash, the 2015 flash crash, and other sell-offs. It’s 13th out of 47 now.
Why should this environment be the 13th largest sell-off going back to 2010? Is this level of selling justified given the fundamentals?
But more important than all of that. Setting aside whether it should be down this much or why. Setting all that aside, look at the columns regarding Rally Pts & Pct Gain. Those columns show what happened immediately after the QQQ bottomed. That’s the part that is important for our purposes. Not only that, we know that every previous sell-off of this magnitude or greater corresponds with a 15%+ rally from the lows. you can see that by looking through the rally column.
You see this directly on the chart as well. Every correction immediately leads into a large rally. That’s why we’re invested the way we are. Because we know all past corrections lead right into rallies. All 47 have done so with a 100% past win-rate. 47 is a pretty strong sample of past corrections.
Don’t watch the premarket lol. They rarely represent what we’re likely to see tomorrow. The QQQ is now at $473.25 right.
is it always this many questions in the comments section? I am trying to remember what it was like buying the 430 leaps last August and it must have been the same back then too?
and just like that Sam was right all along and I hope everyone was invested all in and is getting ready to sell and buy the strangle if that is still the plan.
A bounce is inevitable, but the lower we go seems like the lower the peak of that bounce will be. Ain’t looking great!
The size of the rally is actually correlated with the size of the sell-off. Going lower doesn’t lower the bounce. we’re bouncing to $500 either way. It just increase the size of the rally. That’s why some rallies are 7% and others are 18%. The key is 50% retracement + resistance. so the logical place the QQQ is going to go is $500 a share on the rebound. Right now, the 50% retracmenet is $505. And today’s pull-back to $468 was going to happen no matter what. The market has to retest before it can move ahead.
It’s either bullish hammer / reversal or retest. We’re not going to be down hard one day and start climbing the next randomly without retesting the lows. It’s what the QQQ does after retesting $468 that matters here. We want to see it hit yesterday’s lows, bottom and then climb. That’s an indication that we have a major support line at $468-$470 — which we do as that was the gap line in September.