Samwise Quick Reference Handbook
To streamline our daily blogs and conserve space, we’ve organized key resources into a convenient, collapsible dropdown menu below. A sort of Quick Reference Handbook if you will -- as our friends in aviation might call it. By clicking the menu below, you’ll have qu...
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Do think this will be impacted by NVDA earnings on NOV 19th? I mean does market need earnings to pull back?
No. Not really.
An in terms segment duration, that would be an extremely long single segment. So earnings is unlikely to impact it one way or the other. Nvidia might be impacted, but not the entire market. When the market is ready to pull-back, it’ll do so.
Thanks for the all the insightful analysis this week, Sam. I think we’re all going to have to reconcile with the fact that this is indeed an outlier event and it has also unfolded in the way you would expect. It’s gone higher and longer than we could have reasonably thought but the way it’s done it is pretty much the way you would have theorized if asked “if it got to $630, how would it do it?”
It changes the analysis in terms of what’s possible from a rally size and length standpoint, but not necessarily the mechanics of how it unfolds. I hope this is something that’s clear to those that follow closely.
It really does start to look identical if you squeeze and stretch it. Both also involved major market crashes prior to their run.
Very interesting overview of the past 7 years and analysis, Sam, thank you. Does this change your calculations regarding a correction from 10%-12% to over 20-25%? Is the announcement of OpenAI’s IPO in January 2027 and the acceleration of the AI circle (OpenAI, NVIDIA, Oracle, Microsoft) likely to be the catalyst you mentioned for the crash?
Sam alluded to it in the context of Nvidia’s
correction size, but it would make a certain amount of sense that the “AI bubble” narrative could accelerate into a larger correction (especially since the last part of this rally seems almost ENTIRELY fuelled by AI hype and circular investment). The narrative is already so strong and prevelant it almost feels like the market is giving away what the correction narrative is going to be. Correction as usual begins > “AI bubble popped” narrative intensifies > investors start panic-selling to preserve huge built-in profits. Curious to hear Sam’s thoughts
Here’s hoping we do get that run up to $640 this week so we buy more puts. I’m personally looking at Nvidia and Tesla in addition to QQQ. Just like the AI optimism benefits Nvidia the most, an AI bubble narrative also feels like it will crush Nvidia the most.
If I’m interpreting the last graph correctly, the QQQ ran from $159 to $288 (an insane 81% rally) then sustained a 14% correction, which is similar to the situation we are now, but it ultimately ran to $398 before going through the closer-to-50% retracement in ‘22-‘23 down to $250
Are we expecting something similar this time as well? A 14% ish correction before heading up much higher and not expecting a more in line to a 50% retracement until maybe 1-2 years down the line?
That last chart simply shows as a visual illustration what we show in tables 4.0 and 4.1. 4.0 shows each and every single one of those little moves and each and every correction that follows in chronological order going all the way back to 1999. It shows every melt up and high volatility rally in sequence and the insurance corrections just like you seen the chart above but imagine going all the way back to 1999.
Table 4.1 shows only those rallies that are high volatility rallies that is rallies that produce an average return of 0.4% daily. There are two categories of rallies rallies that produce an average return of 0.2% per day on average. Those rallies are more shallow and slow develop developing and they’re more rare.
All other rallies typically fall in the 0.4% daily returns category.
The reason I posted this chart is to give people a visual representation of what this rally looks like compared to other previous rallies and corrections.
That 81% move you’re looking at it’s actually 84% and that is the Covid rally
The Covid rally lasted just shy of seven months and this one has lasted just shy of eight months
One of the points I was trying to show is that even though this rally lasted about another month longer than Covid did when looking at the grand scheme of things when I’m looking at the full forest, you could see that there isn’t really that big of a difference between Covid and this rally
The Covid rally produced bigger returns. This rally lasted about a month longer than Covid did.
In the grand scheme of things, it’s not gonna look on the chart at least to be anything out of the realm of imagination.
It will be an extremely rare event that happens once in every decade. The only other rally that looks like these two is the dot-com rally in 1999. So we have three event events one in 1999, one in 2020 and another in 2025.
The 1999 in 2020 events led to massive market sell-offs within a year.
It’s not obvious that we’re gonna see a 14% correction although I do think it is a much higher likelihood than in normal situations.
Generally, speaking after big rallies like this, we’ve seen a big selloffs
In fact, in the top three biggest rallies, a side of this one, the selloffs were enormous
40% immediately after the.com rally. The.com rally led to a 40 day 40% sell off. So that’s a 2-month long 40% collapse.
After Covid, the QQQ dropped 14%, rebounded and then 12% in a double correction.
In the fourth largest rally, the QQQ dropped 19%.
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The biggest difference between Covid and this rally is that this rally has seen no pullbacks and it’s unclear just yet how that’s going to impact things
Because think about it. When there has been no pullbacks, it means there has been no real profit taking.