The TML Talk | January 22nd, 2025

Market Overview

• Indexes and General Market Trend:
  • The NASDAQ and S&P 500 exhibited shakeout-and-rally action, rebounding near highs after undercutting key moving averages.
  • The NASDAQ gained 1.5% on January 17th, with volume higher, indicating constructive action for the resumption of the uptrend.
  • The S&P 500 rallied on the same day but did not meet follow-through criteria for percentage or volume.
  • The Russell 2000 remains weaker, trading below its 50-day moving average but recovering after undercutting its 200-day.
• Current Market Status:
  • Leadership is broadening across key sectors, including semiconductors, software, nuclear energy, and IT services.
  • Earnings season begins next week with major reports from Apple, Netflix, and other large tech firms.
• Shakeout and Rally Pattern:
  • Both indexes showed shakeout patterns, undercutting the 50-day moving average before recovering.
  • Stocks like $TSLA and $ARM demonstrated similar patterns, signaling strength in leadership.

Key Lessons & Quotes

• “Leadership broadening is the key signal for a healthier market. Watch for strength in leading stocks and how they act within their groups—it’s a critical tell for where the market is headed.”
• “Earnings season defines the tone of the market. Within the first two to three weeks, 80% of S&P companies report, making it essential to focus on how stocks react to their numbers, not just the numbers themselves.”
• “The best setups often emerge after shakeouts. A stock undercutting key moving averages and reclaiming them with volume is a sign of accumulation, not weakness—pay attention to those upside reversals.”
• “Rotation is critical to maintaining market uptrends. It’s healthy to see one group take a breather while another steps up, as this keeps the rally sustainable.”
• “Always focus on risk management: Never enter a position without knowing your exit strategy for both gains and losses. Protecting capital is just as important as growing it.”

Actionable Takeaways

• Focus on Quality Leadership: Watch for continued setups in software, semiconductors, and energy-related stocks.
• Monitor Shakeout and Rally Patterns: Look for constructive pullbacks or shakeouts below moving averages followed by rallies.
• Earnings Season Preparation: Manage positions carefully into earnings. Ensure any positions held through earnings have enough cushion to handle implied volatility swings. Example: If the options market suggests a 10% implied move, ensure your profits exceed that level.
• Broadened Leadership is a Positive Sign: A more extensive list of stocks and groups is setting up compared to recent months. Look for strength in names like $ARM, $MRVL, and $SMTC.
• Be Patient, but Proactive: For stocks extended from buy points, wait for constructive pullbacks. Use watchlists and alerts to prepare for the next round of setups.

Stock Mentions and Commentary

Semiconductors:

• $ARM: Tightening action within a long base; potential leader if it builds further.
• $AVGO: Constructive base with tight action and strong weekly/monthly charts.
• $CRDO: Strong setup near all-time highs, showing tight action and accumulation.
• $NVDA: Reacted positively in recent trading sessions as semiconductors continue to drive the market. Still consolidating within a broader base, but remains the leader within the AI-driven semiconductor theme. Likely to provide a further catalyst for the sector when it breaks out of its consolidation.
• $MRVL: Tight action near key levels, solid relative strength within semiconductors.
• $SMTC: Excellent relative strength near highs; a clear leader with potential if the market strengthens.

Technology and Software

• $BILL: Similar to $TEAM, this software stock is showing improving relative strength. Tight weekly ranges indicate accumulation.
• $PLTR: Pulling back constructively to moving averages; needs more time to set up.
• $RBLX: Tight consolidation within the right side of a base; strong accumulation visible with potential for a breakout.
• $TEAM: Constructive action noted, showing tight price action as it works up the right side of a base. A strong name within the software group.
• $TWLO: Holding tight in a constructive base with solid relative strength.

Nuclear and Energy Stocks:

• $GEV: Breakout leader in the energy space with strong follow-through volume.
• $NNE: Developing a strong setup, supported by momentum in the nuclear theme. Shows potential for follow-through gains.
• $OKLO: Recently broke out and continues to act well, showing tight price action indicative of accumulation.
• $SMR: Building constructive action as nuclear names gain investor interest.

Other Key Stocks and ETFs:

• $ARKK: Breaking out of a Weinstein Stage 1 base and transitioning into Stage 2. Strong volume and momentum as growth and innovation themes regain traction.
• $NFLX: Posted strong results post-earnings, kicking off the big tech earnings season on a high note. Constructive follow-through action today reinforces its leadership.
• $TSLA: Constructive consolidation above key averages and reclaiming resistance; holds leadership potential.