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...
Please login to view this page.
What now? Where do we go from here? Are we done with the segmented analysis? This uptrend has been going for some time now
The return rate is way too low to be a segment.
For example, the QQQ has rallied 3.89% over 10 days now. That’s less than half of what we see in a segment.
While the duration is expanding, the rally really isn’t going anywhere
Yeah, the QQQ is up about $27 in two months. That’s really low compared to what it usually does in a typical rally.
For example in the typical segment the QQQ rallies $35-$50 in like 12-15 days.
I wouldn’t really call what we were seeing right now a segment. at least not yet
Not everything qualifies as a segment. That’s because you can’t get a 2 to 4% pull back on a mere 2 to 4% rally.
Just to get a sense if this were an actual segment, the QQQ would need to go to like 630. $588.50 to $630 = 7.05%. That would be a small end of the range segment Typical segment = 8-10%.
Late stage segment 7-8.5%.
So if the QQQ makes it to 630, then we have a segment and would be due for w 2,5-4% pullback down to around $605 a share.
NVDA ATH!
QQQ nlod
VIX +75 nhod
QQQ fading
$612 AH
Hi Sam, I little concerned that we may not see correction this month or next. The reason being, every day bullish news on AI stocks. Even if we see correction it might be small. Tudor comments if you followed, said that market doubled before dot com bubble burst. Any chance we are headed to 700? Or 650$ on QQQ. With potential 2 more cuts, we could be headed to lot more upside. It seems like a never before melt up.
At the same time as this, we’re seeing the “AI bubble” sentiment growing, and concerns around a lot of this positive AI news being a circular trade (same few companies just investing in each other). The sentiment I’m seeing right now is actually making me feel better about the idea that a correction could take place any day now. This doesn’t feel bullish at all
Early in this rally when you had positive news like the China “trade deal”, I seem to remember the market up like 4% in a single session and crazy stuff like thagt. As Sam’s alluded to, it’s taken us like 2 months to see those level of gains now. It’s grinding up but this is by no means explosive imo
Agree but with folks like Eric Trump saying we will have great November for crypto and all makes me feel, all this old data and technicals are being ignored. Also, rug pulls happen suddenly. Now, looks like there is lot of hedges placed by all and it makes it hard for a drop. I could be wrong. It’s most unusual time to be honest.
The AI Infinite Money Glitch: Silicon Valley’s Cheat Code
It all started with a joke.
A tech analyst, Dylan Patel, tweeted a few days ago:
“Yo, I heard if you do Up, Up, Down, Down, Left, Right, Left, Right, B, A in San Francisco, you trigger an infinite money glitch.”
Below, Elon Musk replied:
“The big question is whether the infinite money problem will persist until the infinite money AI genius arrives…”
???? Translation: Silicon Valley is reinventing the cheat code to wealth.
???? The new golden triangle: OpenAI, Nvidia, Oracle (and friends)
Behind the joke, there’s a dizzying financial mechanism. Three years after ChatGPT, OpenAI has become the most powerful capital magnet on the planet.
And its partners are exchanging hundreds of billions… continuously.
➡️ Nvidia is investing up to $100 billion in OpenAI—which, in return, is massively purchasing its GPUs and infrastructure systems.
➡️ Oracle signs a five-year, $300 billion deal to host the future mega-data centers of the Stargate project.
➡️ AMD is supplying its chips and offering OpenAI a warrant to acquire 10% of its capital at… 1 cent per share.
➡️ Microsoft, a long-standing partner, has already injected $13 billion, in exchange for privileged access to the technology and a share of the profits.
➡️ Even Google is getting in on the act, via a discreet agreement to provide its computing power (Google Cloud).
Result:
???? Money is turning over, valuations are rising, and everyone becomes an investor, customer, and supplier to the other.
A loop where no one wants to be the first to stop dancing.
The circular economy… AI version
This setup has all the hallmarks of a self-sustaining ecosystem:
OpenAI needs chips → Nvidia invests.
Nvidia needs to sell more chips → OpenAI buys.
OpenAI needs servers → Oracle builds.
Oracle wants customers → OpenAI signs on.
Both need funding → Microsoft and AMD participate.
We’re no longer in a traditional economy: we’re in a system of financial feedback where each player fuels the artificial growth of the other.
The Gamble (and the Dizzying Thrill)
OpenAI plans to spend $115 billion in cash by 2029, with no positive cash flow before the end of the decade.
The goal: to secure 250 gigawatts of power by 2033—an infrastructure equivalent to 250 nuclear power plants.
But for analysts, the question is no longer technical, it’s existential:
???? How far can a company that finances itself through its suppliers and customers go?
???? What if this dizzying spiral heralds the biggest speculative bubble since the dot-coms?
“OpenAI embodies the risk of the AI bubble. If it fails, its partners will go down with it.” »
— Xiadong Bao, Edmond de Rothschild AM
What you need to understand
AI is no longer a sector: it has become a parallel economic system, a financial and energy abundance machine, built on the assumption that demand will be infinite.
Which is as fascinating as it is worrying.
And behind Elon Musk’s humor, a real question:
How long will the infinite money glitch last… before AI rewrites the rules of the game?
TL;DR
OpenAI powers a unique financial network with Nvidia, Oracle, AMD, and Microsoft.
Hundreds of billions circulate in a loop of cross-investments.
Some see it as a visionary strategy, others… a bubble on steroids.
Ok ChatGPT
I wonder if one issue with our assumptions and analysis thus far is that they’ve been rooted in the post dot-com bubble era. Whereas the current situation is starting to draw extreme similarities to the inflation of the dot com bubble.
The.com bubble only lasted 108 days. We’re already at 128 days. Covid lasted 114 days.
All the strongest rallies ended at around this time. There’s a duration component to this. Length of time has an impact.
We are already arguably in bubble status because we’re at 52% returns.
We have never been able to produce returns like that without the market sustaining a bear market within a year.
What year exactly after the Covid really we went into a bear market.
Same thing with dot-com. It didn’t all collapse at once, but it happened over a very long period of time.
so the transition didn’t happen in the middle of a cycle. It happened right off the start.
It’s not like in the past we went from the middle of a highball rally into a melt to.
When you look at the melt up rallies, the whole rally from the previous trough to the next peak it’s .19-.20%.
This rally overall is still way north of 0.4%. It’s just that the latter half of the rally or at least the last third of the rally has been melt up level returns.
Basically, since the QQQ reached 550 in early August, it has been in a melt up rally.
The returns we’ve seen from that point to now over the last 48 days is like a mini melt-up rally. Forget about the big pole back we’ve seen since then.
Like you don’t get no 4% pullbacks in melt up rallies
There are still significant differences to a melt-up rally. Most important is the volatility. Melt-ups have VIX hovering around 9-11, while we’re at 16-19. Then the geopolitical is much more volatile than during melt-ups, providing more opportunities for shocks.
Although the gain/day might be similar at the moment, I don’t think this is one. Nor one that is starting.
P.S. IMO the current market is characterized by FOMO investors buying. This is unhealthy and unsustainable, it will of course lead to exhaustion.
I already see it coming, just as our spreads expire this thing starts tanking, just like last April.. I’m never buying puts again!
The way to think about short-term training is like this. Any one event could go in either direction, even though the cumulative total of all trades within the set up results in a high rate. These types of trades only works in the cumulative and to succeed in the end, we have to put on the same trade every time when confronted with the same situation on the same types of allocations
Here’s what I mean by that. If over the next 10 years we’re confronted with 100 day rallies something like 6-8 times, and we put on this same spread trade, we are likely to win on 6 to 7 of those if not, all eight.
Like think about what it will ultimately take to derail our current trade. For the full 12% to be a loss think about what has to occur. The QQQ will have to set a new all-time record of 150+ day rally for that to happen.
The QQQ had to quite literally set an all-time record going back 26 years. If it doesn’t set an all-time record and the QQQ top at any point in the next three weeks, our November spreads alone will carry the whole trade.
Every time we’re confronted with a100 day rally the QQQ is not gonna go on to make a record. As we’ve shown, it has made two records in 25 years. 2003 2020 and 2026. So it’s rare to make a new record.
For example, let’s suppose we made the same exact trade back in the September rally. I think our first position was taken on the 90 day mark.
We get to 90-days and we put on our first trade.
The QQQ traded higher for another 21 or 4 weeks and then crashed from there. We will have probably gotten to the 9% mark.
Had me put on a 9% trade at that point, we would’ve likely produced a 30% portfolio return minimum probably more because the QQQ fell 25% and we only needed to fall 9% for the trade to work.
In fact, if we made the same trade when the QQQ reached 100 days at every single high volatility rally, we would’ve come away with gains under every single scenario.
There wouldn’t have been a single situation where we would’ve come away with loss . Not one.
We would’ve produced a minimum of 100% returns in every previous set up
So the way to approach that type of paradigm is to limit the size of the trade during each event so that when the fail does occur, it’s a minor loss largely offset by the significant returns, reproducing on our larger core positions.
It should have a minimal negative impact when it fails, but have a noticeable positive impact when it succeeds.
Of course this is a lot easier said than done, and it requires an enormous amount of discipline.
The whole concept of present day bias not only leads to people thinking this time is different, but it also leads people into thinking this time will be exactly the same and then they over bet on the present event. It’s easy to get too. Hyper focused on the very specific present trade instead of looking at the cumulative. Five months down the line from now the same trade produces 20-30% portfolio returns.
If you look at the Arryn portfolio for for example, the portfolio hasn’t really gone anywhere in the last 2 1/2 months. It has put on each one of these traits and yet the impact is barely noticeable in the portfolio.
It has traded from a 230,000 to 250,000 range.
The point is it’s unnoticeable as a trade, and it will have minimal impact on the portfolio
When all is said and done we’ll still be out around $240-$250k at the bottom of the next correction
Next time the QQQ is at 100 days we’re going to follow the same exact pattern and same set up.
In all honesty, this trait set up is probably not gonna be presented all that often because most rallies don’t really continue beyond day 80.
I think next time given the record on this rally what we’ll probably do is go 2% at day 80, 90, 100, 110 and 120, 130
We will simultaneously bye, and reduce a larger position in long-term puts
So we might buy a 2% position at day 80 while simultaneously buying a 15% position in some long duration puts
As the QQQ climbs, we will reduce that put position which won’t lose much value on the way up and use the sale proceeds to add future 2% positions.
I think this will work as a strategy because the problem that we’re going to face in the future is the market isn’t going to continue for much beyond day 80 in most case
And so if you only buy 2% position at day, 80, we end up with a tiny position ahead of each correction
So I think the key is to buy two positions so they we can capitalize on the downside.
Of course, this will all happen currently with us being along
The goal is never to be called away when we sell covered calls. It’s to remain long and collect the premium and then resell more covered calls afterwards.
For example of the QQQ had closed at 550 in September, we would have closed out the covered calls and then sold the October covered calls
The short side of the trade would be happening simultaneously with our core long positions.
——
The point however of this comment is that it’s important to think of the strategy in the cumulative. That means allocating small in each event to produce a total return that is net positive by leveraging the overall probability of the sample.
The odds that the cumulative total of all rallies will end at or below or around 100 days is significantly higher than any one event ending at or below or around 100 days. So the idea is to invest on the sample as a whole
Thanks for your reply. I get the strategy, I guess going 0/2 in the first two setups since we started this just sucks..
Agree 100% on the stats, but what remains unclear to me is this, why we are not cutting losses while we can with various positions, whereas in April/May we did and we ended up would’ve actually made money on the spreads then for example.
I think the strategy needs to be more well defined, we got out of a long NVDA spread that ended up deep in the money to try to get a better entry, yet we decided not to get out of the NVDA puts recently with the same objective.
I do think the entries were phased well this time and if it’s done that way every time one can simply choose to wait for extremes and then participate. To think we only are down 7-8% and perhaps 12% if all things fail is pretty good considering risk to reward. However my risk is a lot lower so if I were to take these trades it would be 1% entries in extremes like this. I do think the publication has done a really good job separating out the short term trades. Honestly there woudnt be anything to write about except a once a month post until the next correction and long trades.
personally I am convinced that SPX is to see 6900 before we get a correction that is a slow grind down for the next 6months after. I really want to see something like that so we can all see if the portfolios perform well is such scenarios.
Yeah, I do think all of this was done with particularly unfortunately circumstances: long consolidation period with a fake-out “small” correction, big crash in Feb -> April, followed by a record high volatility rally duration + high % return. I would wager more times than not we wouldn’t see these metrics, but we just so happen to be experiencing this the one time we ended up going short.
From what I gather, I think Sam’s strategy is to prefer low allocation + high reward rather than mid/high allocation + low/medium reward. So allocate smaller on potential big winners and if the trade doesn’t go in our favor then to accept the small loss via the allocation size. Go full-in with a small position, let it play out. If it ends up playing out as we expected then great, but if it doesn’t then it was a small allocation anyways. Where it gets dangerous and hairy is if you do medium allocation + medium/high reward because that’s a situation where you’re risking a lot more capital AND having to make hard decisions on whether to cut losses if the trade goes against you. Even if you do medium/high allocation + low reward you run into problems if the broad market goes against you (e.g. crash, bear market, etc.).
QQQ ramping into close
NVDA strong; NVDA $195 -> $200 seem inenvitable
Every dip on the QQQ gets bought up. i don’t see how a correction will take place anytime soon especially with Ai booming, more rate cuts and money pouring in. Nvidia also seems like it can’t ever be stopped! Analysts keep raising forecasts on it and funds & people keep buying it
I think this needs to be brought up… The “future hedges” are shorting. They might be future hedges someday, but for now they are shorting the market. Yes, it’s a right sized allocation, but I think people should be aware especially with the portfolio sitting all cash which means not providing on upside, that they are in fact shorting the market and it’s a very one sided trade.
I’m not saying the probability of them breaking even at minimum is low, but I think when they’re described as future hedges, people here may not be fully comprehending they are shorting the market. Until there’s something to hedge, you’re shorting the market. Period.
I’m saying it’s a bad buy either way, just remaining people a long put with nothing to hedge is not a hedge. It’s a short.
QQQ new ATH took out $613; day 130 here we are, market feels strong, no this isn’t going to go on forever, but it is clear this is an unusual event so we shouldn’t diminish that
Are we adding puts today?
TRADE WATCH?
Sam are we entering more 500 puts if we break 600 on QQQ to downside?
600 broken
Yikes i guess its difficult to buy when it sells so fast.. Now will come headlines for all sorts of reasons but I am pretty sure every correction starts just randomly like this.
Trump tweet. Wow. QQQ dropped to $595. not oversold on the hourly. Market might be too fragile to weather this.