Samwise Quick Reference Handbook
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Sam–
“Today is the exact reason why we wanted to reduce our position in the QQQ.”
Had things played out as planned, we would have reduced position before this pullback so we could have gotten back in and lowered the cost basis, is that right?
Was regretting selling my position yesterday in TQQQ yesterday when I saw the session end and AH pump but feeling good about it this morning.
That’s the idea. But it carries risks in both directions. Especially when you reach overbought conditions because that could easily signal a lot more upside ahead. So it’s really tricky with overbought.
With Tesla it was so deeply overbought, that I think it became pretty clear-cut.
What’s the status on the possibility of going for a second leg lower after getting to 500-505? Do we still expect there to possibly be a second leg that goes lower than 470 on the QQQ?
Yes. That possibility is very much in play. though I think a second leg lower will be a lot faster, resolve a lot faster and lead to a rebound fairly quickly. The correction overall is already very very long. So not sure how much longer we’re going to see bearish sentiment pervade short of the market entering a bear market.
Correction are short lived due to a shift in sentiment. Everything gets priced in and eventually we turn the corner. That’s what the correction tables are all about. They give you a sense of how long these things last.
I think we’re at around 27 days now which puts us up there among the longest corrections. Notice that only 5 corrections lasted longer than 33-days. That should give you a sense of how far long this correction likley is. So a second leg lower I think probably wouldn’t take the QQQ much lower than its previous lows and we’d probably see a bottom fairly quickly.
Hey Sam, the Trade 17: TSLA on Baratheon said PLTR instead of TSLA.
Thanks for the heads up. The numbers were all correction. Just forget to change the trade legs. It mirrored the previous trade. Formatting issue. It’s fixed. Thanks again.
So based on your write up above, we’re expecting a 2nd rally after today’s pullback up to 500+ level… then a lower leg down, correct?
Yes. Gap-fill and then rebound. we filled the gap today down to $480 and now the market is currently rebounding.
Hi Sam, right now as we are witnessing a correction, what possibilities to consider for, if any, to know if this is a beginning for Bear Market?
I think this has been answered before when this correction started, but the bear market should still follow the same overbought and oversold markers, and the 50% retracement before another leg down.
We won’t know if we are in a bear market however, but I suspect selling covered calls deep OTM during overbought cycles will help soften further downside for our LT portfolios. Ultimately, our strongest hedge is the 2-year time frame outlined in the investing basics.
I’m not sure if we have bear strategies for our ST portfolios however. Might need a crystal ball for that.
Wouldn’t a complex W bottom playing out imply that NVDA is not going to see a sharp ~10 pt rebound imminently?
No. Two entirely different time-frame. We’re talking huge difference in time here. Nvidia is up for a near immediate rebound. Like within the next week.
The w-bottom could take a few weeks to play out. Nvidia rebound should really happen fairly soon. Probably less than a week. The stock is oversold on the hourly. In MOST cases that means within a few days tops.
Thank you. I assume a NVDA rally would also align with a market rally over the next week or so in this case
Thank you for the updates. Can you share generally how you know ‘the-bottom-is-in’ on a specific day or hour. Is it usually the the nature of the rebound? Or, is it…just be prepared for a jelly fish as you wade back into the water?
So it’s not always possible to know the bottom is in. However, when certain very clear and objective indicators trigger, then we know.
$NYMO pushing -100
RSI pushing well under 30
$VIX skyrocketing
Market gapping way down on a Monday (after a weekend of negative sentiment allowed to fester).
Often we need capitulation to know that a bottom is in. We don’t always get capitulation. What we get is what we have here is the market reached a 30-RSI and the 30-RSI table becomes a guide of what the likely time and price-range is for a low.
For example, we reached a 30-RSI when the QQQ hit $480, it bottomed at $465 a few days later consistent with the 30-RSI table.
But unless it’s capitulation, we don’t often know where the bottom is going to be in a correction.
Most corrections do undergo capitulation. This correction just happened to be low fear, low volatility grind lower. The $VIX never really moved higher. The $NYMO never reached oversold. The $NYMO measures the number of stocks moving lower versus the number of stocks moving higher. When that turns deeply negative, then it’s often a signal of a bottom.
Thank you. Very helpful.
Our luck to be going through a correction that just goes against all the odds and throws a curveball every other day right when we started the Targaryen challenge.. „sigh“
Hello Sam
With W-Shaped Bottom Possibility, NVIDIA Can go lower than 110$ to go maybe to 90$-100$ ?
Doubt it. There’s too much support between $100-$110 a share as we’ve seen in all previous sell-offs in the market.
I’m a little lost regarding the situation. I was expecting Nvidia to rebound to $124-130 this week, then to start declining next week and following with the April 2nd announcement. Ultimately, this is a reversal where the market is catching everyone off guard. I also have companies like Evolution AB and Frontline in my portfolio, which are suffering despite very good financial results and a positive environment. In short, the current market has been really misleading since around October 2024, and it’s becoming complicated to navigate… Thank you for your insights and your wonderful work. Karl
“…nearly ALL corrections go no further than 28-trading days total. We’ve only seen 5 corrections that have lasted longer than 28-sessions And almost all of those were 3,4 or 5 legged.”
Maybe this is going to be the sixth 3, 4, 5 legged correction.
The outlier case is always possible of course. Or there’d be no outliers.
Hi Sam, after today’s session what are the odds now, a 2nd leg vs W bottom playing out?
It’s not just 1 session. You have to look at it from the perspective of overall time. The reason we outlined the possibility of a w-bottom recovery — which not uncommon at all — is because the correction has already lasted 27 days now as of today. If you look at the correction table, there are only 5 corrections that lasted longer than 28-days. So we’re getting long in the tooth as the time element is concerned. Rebound also hasn’t gone far enough based on any trend. The more time that elapses, the less likely we see another leg lower or that if we do, it won’t go far below the previous lows