Samwise Quick Reference Handbook
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Could we see the end of a correction without a capitulation event?
Yeah. A good half happen that way. Usually capitulation requires a lot of high volatility and we just haven’t seen it. It’s been a very slow motion correction. Beyond the point loss, the how of it has been slow. No capitulation in the July 2023 – November 2023 correction or the march 2024 or September.
The only capitulation we’ve seen recently was August. Before that you have to go back to the bear market, covid and 2018.
can you define capitulation as you see it? thanks
I will let Sam describe it in his terms, but here’s from Investopedia.
This investipedia article is a really good definition. It plays it out well.
It’s an event where everyone think the stock market had ended and people who were on the fences about getting out, end up selling at the worst possible time because they only see five feet of them.
Usually the market goes down really big and then fully recovers those losses on the same day. It effectively ends the correction.
We had that in August. The QQQ opened down $20 and I can’t remember where it closed. But it clawed back most of that and then spent the next few weeks fully recovering the correction loses.
Often you get something like that to end a big correction. But not always.
Usually you need a bigger correction with a lot of fear involved I.e. the VIX needs to go up big time. That’s been missing here. The VIX is trending the overbought line. But just not up that much.
Sounds like me in September. I thought “well might as well sell now because I heard September is bad, I’ll just buy back in later”. Things dipped the day after I sold…and then started rallying the day after that
Luckily with your blog I was able to make back most of what I lost from that panic sell…until I bought literally the day before this correction. But I’ve learned my lesson and am holding firm through this correction despite being super anxious
How big is the “Trump” factor? What would happen if he changes his mind every day? Announcing new or increased tariffs for various trading markets, e.g. EU, then changing his mind again, and so on.
Would the market then simply decide at some point that it is time for a recovery, despite all continued, or even increased, uncertainties?
I mean, during COVID, he was also president, but he wasn’t that insane back then. They had a plan to recover from this by his more competent administration, and institutions like the FED cutting interest rate, etc.
good question. agreed – so many issues now and they seem to be compounding.
the past indicators were of a completely different environment. I have to wonder if the validity of these analysis work in a isolationist world where Trump is doing everything he can to piss everyone off
yeah. I want to avoid “this time it’s different” but maybe it is?
For the thread here. Read this daily briefing back on December 2, 2024. Back then, we were pretty adamant that a correction would start sometime in January. This was without any reference at all to Trump or Tariffs or anyting at all related to the economic environment. This was all cycle based reasoning & forecasting. I laid out the arguments, you can assess them for yourself. Throughout December, we made this argument repeatedly. I just picked a random date in December as I know we would have forecasted it. It’s probably repeated throughout December’s daily briefings:
https://sam-weiss.com/a-close-look-at-when-the-market-might-begin-its-next-correction-why/
Now the reason I bring this up is to make a really important point. Market corrections have very little to do with what’s going on in the economy. The economic environment determines the long-term trend in the market. They don’t really play a big role in determining the timing of corrections.
Major events do have an impact for sure as we saw with Covid. But in most cases, corrections occur naturally at timed intervals. The market climbs 20% over 70-100, it then sustains a correction. Then the financial press steps in and sells you a story as to why. That’s the sequence of events.
How can I or anyone else possibly know how things are going to play out in the month of January when we’re at the beginning of December? Think about that. We we were very specific here. January 1 to January 31 correction will happen. Volatility started December 19.
Note I don’t have forward future knowledge of events here. Yet, we’re able to make that forecast nonetheless.
Corrections happen due to cyclical issues. It’s why they can be predicted in this way.
The financial press then takes financial news and attributes them to the sell-off.
For example, suppose the Dow were up 1,000 today at the open. Here’s what you’d read in the AM:
Dow up a staggering 1,000 points as employment numbers not as bad as feared and as optimism grows about xyz tariff issue
If the Dow gapped down 1,000 this morning:
Dow crashes 1,000 points as Employment Numbers slip on Fears that Tariffs will drive economy into recession
One and the same economic indicator can be casted in a differenet light depend on what the market actually does. The financial press is reactionary.
When we start rallying, you’re going to all of a sudden hear about good news. Trump reversing course on Tariffs. DOGE being reigned in. Whatever. But really think about the news that’s being delivered and ask yourself “Does this news warrant a 10% rally?”
Do Tariffs warrant a 10% correction when he Federal Reserve can easily off-set most of the impact to the economy?
this is such a good comment. i feel like this mindset is heavily under appreciated and shared
Yep. Technical analysis is one thing, but now the US has a president and an administration who are, in my opinion, unbelievably incompetent, and dangerous.
They have some kind of “plan” (rolling the dices probably, lol), which they are now trying to push through. No matter the cost.
Here’s what I’ll say. There’ s a very critical lesson to learn here. Very critical. Remember these thoughts. Write them down in a journal. I’m serious about this. Improving requires a post mortem.
We’ll post mortem everything we’ve done here after it’s all over and document exactly how we traded this entire correction.
Journal it. The “this time is different” argument is made at EVERY SINGLE CORRECTION without exception. There is no correction without a “this time is different,” argument.
if people believe that this time IS NOT different, then we’d have no selling. Why would anyone sell if they believed that the market was just going to recover a few weeks later? No one would reduce risk if they believed this time was no different than any other correction?
The reason it’s important to remember your thinking here is because investor psychology plays a significant role in outcomes.
Right now, I have 0% anxiety on the market. 90% anxiety about everyone else’s anxiety. That’s because after having through 30-40 of these events, I know how they play out.
I get the time dilation element and just rely on what I know to be the facts. I ended up getting too busy with the mobile app and other parts of the website that I simply never got a chance to finish chapter 6 before this correction started. We would have discussed this issue extensively in chapter 6 and we will once I get to it.
But for now, as an exercise, write down how you feel about the market today and see if your expectations end up paying out 2-months from now when this is all in the rear view mirror.
Then next time there’s a correction, you can reference it.
——-
We’re almost never in a unique time in history. Everyone wants to believe that today is unique. It’s not. Every market environment has its issues. The outcome is always the same.
solid take, much appreciated. I think most of us probably KNOW you are right but FEEL you are wrong. emotions being the enemy of solid decions here. thanks for this.
was never into the idea of journaling but this makes perfect sense. I went back to your post for the August September 24 correction and remember how much confidence you gave me to hold tight and now looking back after making new highs at 153 it all seems so silly
Thanks for the insight. Learned that investing psychology is different. I’ll keep that in mind.
appreciate the perspective Sam
Sam，at what point do you plan to buy? QQQ around 480? just want to get a reference point. thx
Probably right around there.
We’ll post a trade watch soon on what we’re doing.
saw that and am ready
Sam what percentage wise would be an outlier as far as one legged correction goes?
It wouldn’t be an outlier. They’re common. It’s 50-50. There’s just evidence that points in one direction or the other. I’ll reference back to that in a bit.
I meant % from the high’s to the lows. Like a 15% drop in a single leg. Would that be an outlier?
It would be on the rarer side. It’s happened a few times. Once in Covid and other time in the bear market.
Both times the market retraced HALF of the losses immediately after. I think covid we dropped 16.55% and rebounded nearly 11% in a very short period of tiem. That was before we then crashed afterward.
The bear market in 2022 saw something similar with the same retracement. I think the QQQ dropped from $408 down to $320 and then up to $370
Yeah. So here’s how the bear market started. The QQQ peaked at $408 a share dividend adjusted. Meaning if you look at the chart now it’s gonna say a different price, but it was 408 a share back in the day I remember the exact high print. The bottom of the first leg was at $323 also a price I remember.
That was a 20% drop on the first leg. The QQQ then rebounded $50 or 16% to 370 a share before continuing lower.
Notice how those two things are correlated. However much the market drops, it recovers by half of that. Oftentimes it’s even more.
In the 2022 bear market the retracement was 50 points when the initial drop was 85 points. so the recovery was even larger than 50%.
The same exact thing is going to happen here.
The QQQ is going to recover half of the losses very rapidly
Like the market has never just sold off in one straight leg down even in the worst environments. At least not any time in the last 24 years that I can recall. I don’t remember how the post 9/11 bear market played out.
I’m pretty sure we had a pretty strong rebound after 911 and then the market continued lower after that.
But post 2003 era there has never been a correction crash or bear market that didn’t have a big recovery that immediately followed.
Even the 2008 financial crisis had huge 10% rallies that occurred in a single session.
it’s sort of an either or situation. we either get a rebound that ends and then a second leg lower. or the market will rally all the way back to the highs without warning .
When the rebound happens and we’re halfway through, we are unlikely to have any huge hints on whether the market is going to continue higher or whether it’s going to pause and then have a second leg now.
And so the way you have to play it is to situate yourself for both outcomes
Thats where the strangle strategy comes in the play.
would it ever make since hypothetically in following example: say Tesla was bought high with leaps deep in the money that expire 2027 to roll the leap options to even deeper in the money OR take the money and buy July spreads you have mentioned.
Can’t really touch on this at all but to say we keep our long-term investing totally separate from our trading. The trading makes up a small percentage. It’s very actively managed. But it’s a small percentage. The stuff we own long-term we don’t mess around with.
I do think from a long-term investment point of view, it makes sense to be more aggressive when the market is at the depths of a correction and then reduce down as the market rallies.
Let me add one thing here. I’m a very very strong proponent of being in ultra long-term calls for long-term investments. It’s why Arryn, Lannister and Stark are invested in December 2026 and January 2027 calls. That’s where we stand in the long-term.
makes total sense, I love your logical approach thanks
And the market takes Sam words personally again. Is 480$ the lowest Sam ?
There’s a long day ahead of us. It’s 12:20 pm on a Friday. We are a lot longer to go. We could be a lot lower than here. That’s why we’re treading carefully here.
A lot of people hate Tesla now because of Elon. 3 Tesla cars near me were heavily vandalized and damaged. Also a charging station was destroyed. I also saw a couple polls that 83%-86% would never take a Tesla Robotaxi. With all hate and bad sales will that affect the price moving forward?
It’s affecting the stock now. But people have short-term memories. It’s why Tesla is down 45% right. So his political impact is getting priced in. But Tesla will bounce back all the same.
Elon Musk should really divorce himself from the company if he’s going to get into politics. It’s not really fair to the company or its investors.
I total support his decision do whatever he feels like doing. If he wants to get into politics, all good. But politics has a tendency to touch nerves. Anyone else would’ve been fired by now.
I’m sure at some point he’s going to feel the pressure. But I do think that Tesla’s stock will rebound nonetheless and a lot of it will do with people taking the other side of the trade. Part of it all be opportunity and part of will be the cyclical nature of the stock. It has pretty much been on a permanent boom and bust cycle for different reasons.
And every time it’s always “Tesla-ending” catalysts and cause these huge swings.
I know right ? Elon is using his Tesla money to fund DOGE and SpaceX or sth.
Hi Sam,
Would love your thoughts on the interplay between correction ending and correction length here. We’re 12 days into the correction. This sounds like a short correction duration so it must be difficult to call the end of the correction now, but I’m sure there have been past corrections this short as well. Is this why we’re still treading carefully?
So we’re 13-days today counting from the day we hit the highs. So when putting together that table we posted yesterday, we count the day of the high as Day 1 in every case we’ve listed.
At 13-days, we’re be just slightly below the typical range of 15-20 days. Take a look at the Intermediate-Rally Table and pay close attention to the correction duration column. you can see that there are plenty of sub-10-day corrections.
In fact, 14/35 of all corrections going back to 2010 lasted 15-days or less. That’s the last 25-years. That’s 40% of all corrections amounted to 15-days or less. We’re on day 13 right now.
Minor adjustment: would be cool if you could zoom into graphs on mobile without needing to click it and go to a new tab
Tried that for hours. Spend a long time on trying to develop that. It’s actually very tricky. I wanted to create a zoom-in effect for the entire app. Not just images, but on text as well.
So we developed the app through a platform than directly from scratch — which would have taken forever. Instead, we use a really strong platform that allows users to develop apps for wordpress specially.
The problem with the platform is there are limitations on what we can do and to do those things, it requires a deeper diver into the code.
So the clicking of the image thing is a bandaid. It was a huge hangup and we delayed launching the app just to make sure that feature can be added.
At the moment, I’ve paused development altogether until we’re out of the correction. once the correction ends and the market enters a more boring environment, then we’ll focus on development again.
We’ll go through and improve what we can. On the list is zooming in period. Not just on the image but on everything.
This is my first correction following your trades, Sam, and I must say, this is tiring work lol. I completely underestimated the mental grit one needs to stay confident with the data for longer than two weeks. I have a month more before I take a vacation where I may miss opportunities to buy/reduce the targaryen/baratheon portfolios.
Crossing my fingers that we will be out of the woods before then so I can leave the trading portfolios alone for a full week. ????
This has been an eye-opening experience at the way time slows down when watching and trading the market during a correction. I could have sworn we’ve been trading the correction for a full month. Then I look at the data and realize we only closed our AMZN, META, and PLTR trades this monday. That felt… so long ago.
It’s totally true. Time massively slows down. the good news is that the options expiration remain the same. It’s still May 16 which is TWO MONTHS+ out from now. The QQQ could easily be trading at $570 by then.
Hello Sam,
Thanks for your analysis on QQQ !
What about NVIDIA ? Rallye on Monday to 130 ?
Best
Karl
Well it looks like the rally started an hour ago.
So Nvidia & QQQ are tied together right now. when the bottoms & rallies, Nvidia will do EXACTLY the same thing but bigger.
Sam, similar line of question: do you think NVDA will go back to 150 or even 160 by year end? And do you think the long-term rally will continue after this month, despite news saying capital is fleeing to Europe/China? Thanks for your meticulous explanations in educating and re-assuring us. It’s much needed and appreciated.
Year end might as well be a century from now. Corrections have no impact at all on what happens in the long-term.
This correction will end and the impact of it will only be felt through April or May at the latest. After that, the entire market trend will be different.
Meaning, you can’t really look at what’s happening right now and make predictions about January. Nothing has really changed with regards to our long-term analysis at all.
Today’s correction really only concerns the next couple of months at most.
Now, obviously, if we enter a true bear market or something than everything shifts.
But as of right now, this is just a regular correction that has lasted 13 days.
What typically happens after corrections is the stock market recovers within 20 or 30 trading days after that.
If this ends up being just a regular correction like 95% of the time, the entire stock market will see all-time highs probably by May or June at the latest
I really have to put together a correction table over the weekend and then post it.
At the moment, we have zero concerns about any long-term investments at all. None whatsoever.
We are also mostly hedged across most of our positions. Those hedges will take care of any potential bear market.
But overall, the chances of a bear market are extremely slim. For every 20 or 30 corrections, we have we end up with one bear market. And we just ended a bear market only two years ago. The average length of bear markets is seven years.
the average length is 7 years??? for some reason I was under the impression it’s more like 12 months to 2 years. can you detail these assumptions a bit more to help? thanks!
just following up – did you maybe mean average length between bear markets is 7 years? I’ve read around 5 years for that. so assuming maybe this is your take.
Yes. Bull markets generally last 7-years and bear markets generally last 1-year.
The point I’m making here is that we just came out of bear market only 2-years ago. It’s too early to be talking bear market already. Normally we wouldn’t be do for a 2022-style bear market until 2029-2030.
Though based on how fast everything recovered, that could change. But it’s too early at this time.
sam – you ever look at avgo, even as a hedge against NVDA? I know they trade in tandem but also close competitors and interested to know if worth risk offset to hold like NVDA 75 / AVGO 25 in a long term allocation for semis?
I do like AVGO and there’s a good chance we’ll trade it eventually. I do think that as a portfolio is concerned, we’d be too allocated into the same narrow industry if we bought both. if we did buy both, we’d reduce our allocation to Nvidia to make room for AVGO.
The market started to rebound at Powell’s speech. Does it have something to do with it? Or is it just another short term enthusiasm?
I think it started. We simply reached a 30-RSi today on the dialy and the spread between the low points narrowed YET AGAIN. I think that’s it. I think a rally started and I think we rally next week. we’re 12 points off the lows right now. That’s another big reversal on a very narrow low point. There simply too many things pointing toward a rebound now and they’re all converging.
Coolio. I will add a position next week for ETFs and Nvidia maybe, since I can’t trade options and all that stuff. We don’t have “real” options here. Just some stupid option style warrants issued by bank. They can suspend trading at any time, adjust the spread to their favor. The bank always wins…. So I’m just here for the long term now ^^
According to ChatGPT, you could open an account in the USA at Interactive Brokers, Fidelity, or Charles Schwab, which have experience dealing with non-resident clients.
I don’t really want to deal with options. I’m here for the long term. Nvidia at a discount and an ETF at the end of a correction for the long term sounds about right for me.
Smart decision. The short term trading stuff that we’re doing is extremely tough to get right. And it requires a lot of disciplined thinking and allocation has to be right. so many things have to go exactly right.
In all honesty, I think what trading does most in terms of value added is that it gets people away from making poor decisions with their core investment capital.
As our newsletter is concerned, we got very close to making long-term investments today.
When NVDA got down to 108 today, that is about where we felt like the stock may ultimately be at a low point from a long-term point of view.
We are getting very close to an ultimate correction bottom.
I’m hoping for now that we end up having a second leg down and that’s when we will buy for Frey and Stark.
Once we buy for Frey and Stark that pretty much tells you where we believe the stock market has bottoms
Sam, QQQ hourly RSI is getting close to 50. Would you consider trimming even if it doesn’t reach your 505-514 sell zone?
No, at this point that doesn’t make a difference at all. At this point, we are more focused on the 50% retracement.
The QQQ is due for a 3 to 5 session rally at a bare minimum. Right now we’re in this for the rally.
And there are a lot of different indicators, pointing in that direction now.
That being said, we would definitely trim at a 70 RSI. So in a correction if you see the QQQ get to a 70 RSI, it’s generally not great news.
That is often a hard topping point. The flipside of course is that if the market bottoms then it’s going to go deeply overbought.
So you have to really be careful on trimming during even a 70 RSI on the hourly.
Really I think the most controlling thing at the moment is that we’re due for a 3 to 5 session day rebound that takes the QQQ up to $510 minimum.
Check out Wednesday and Thursday’s daily briefing on how the QQQ rally should look like on the daily chart specifically.
I have never seen NVDA trade hourly this low since last August.
Thank you Sam for this week. Let’s hope a strong rebounce and rally next week.
We’ve got this.
Good Morning, Sam –
Back in November, when you introduced the 5K to 1Mil portfolio, you built the strategy loosely on the assertion of 2 major corrections a year. along the way, you observed we’ve not yet had a major correction yet in the intervening 4 months. would you characterize this particular correction as a big one? sure seems like it to me…
Yes. this is a big correction becuase we’ve eclipsed 10%.
QQQ Correction Table: very useful. Would it be useful to have a column with the number of down legs?
So I actually did include that table initially. I may re-insert it and then link it to a second table that breaks through corrections down. So the final table may very well include it. I think this is a two table project. One table that outlines all of the different corrections and another that outlines the various legs within each correction.
Then we just have to make sure to post both together. What we’ve seen so far is that 11% down for one single leg is actually fairly rare and it does highly suggest that we’ll see a second leg lower.
The corrections that seem to go beyond 10-11-12%+ seem to be two-legged. What’s more, the rebounds are very very robust. In those big corrections you see in the table they’re all multilegged with massive rebounds.
As yet one more potential column, could the steepness of the correction (i.e. Avg % Loss per day) give us some clues as to how many legs down we can expect this time around?
Or to be more precise, the Avg % Loss per day for ONLY the FIRST leg down leading into how many more legs down (if any)? Or what about the Avg Absolute / $ loss per day?
Just from a visual perspective when looking at the charts going back a few years, this current correction seems to unfold in a unusually steep down curve – at least if looking at absolute values.
Manual data. Using the chart and doing it by hand. It took a few hours just to do what you see above. But what I’m going to do to go further back beyond 2020 is get ChatGPT involved. Though not sure it will work.
What I’ll need to do is prompt with all of the high/low/open/close/dates data going back to 2005 and then maybe just ask it to find the high low within certain date parameters.
What takes 90% of the time is losing the precise high and low date and then doing the math. If ChatGBT can go through the data, I might be able to do it faster.
There’s a second table I’d like to do which will touch on NeverGonnaLetYouDown’s comment above^. We’re going to look at individual legs. That will also take a lot of time because it’s even more data points.
—
For number 2, I’ve decided for now to keep my personal life private. That may change once the newsletter becomes more established.
Thanks for adding the correction table. I’ve noticed that the press, media, YouTube, and some friends started discussing buying the dip after Friday. When even your Uber driver or hairstylist starts talking about buying stocks, it’s usually already too late—LOL. We’ll see on Monday.
why after retracement, there a 2nd leg lower or at least a retest of low?
I mean the market psychology behind this event?
Because it is rarely a single event with just one leg historically. There is a 50/50 chance that it could be just a single leg, like last year in March. But why take this risk?
Hello Sam,
Do you wait AVGO and NVIDIA droping also next week before rally ?
Also thanks for correction table. So it sounds it’s a big correction ?
Semiconductors: the giant TSMC will build a third factory in the United States… for a colossal amount Semiconductors: the giant TSMC will build a third factory in the United States… for a colossal amount American officials announced this Monday that the Taiwanese giant TSMC will build a third semiconductor factory in Arizona (west). In total, the company will increase its investments in the United States to 65 billion dollars. despite this NVIDIA, Broadcom and the semiconductors are falling why?
It’s because of the broad market. NVDA and AVGO got more than excellent earnings so they will rebound massively when correction is over. We just need to be patient.
WOW thank you????????
Awesome, monumental work. This, is the foundation of your style.
FMAN – February, May, August, November.. for some time now, I’ve been watching these months as pertains to the quarterly rebalancing of ETF’s late each month or early into the next adjacent month. This table shines a definitive light on those quarterly cycles in my judgment.
thank you for putting this together.. i need to rethink one of my spreadsheets..
who knew corrections could be so exciting. something to look forward to. Damn! a total and complete paradigm shift is rocking my world right now!