The TML Talk | March 5th, 2025

Market Overview

• Indexes and General Market Trend:
  • The NASDAQ 100 shook out below its 200-day SMA yesterday, closing above it on robust volume—a Day 1 reversal; today’s Day 2 pushed higher, but waiting for the decisive 1.75%+ follow-through day on increased volume needed after Day 4 (with Days 4-7 strongest), signaling a bottoming attempt still in flux.
  • The S&P 500 filled a gap to its 200-day SMA this week, holding steadier than the NASDAQ—rallied off that low with encouraging action, but broader confirmation via volume and leadership strength remains critical over the next few days to cement this bounce.
  • Small caps via $IWM lag as the weakest link, offering little spark—mirroring a flatter Dow, both stuck in a range with no breakout gusto, ultimately weaker and slightly dissimilar from the broader indexes’ wrestle with support amid choppy, uncertain conditions.
• Current Market Status:
  • The market’s shedding last week’s defensive crouch—traditional growth sectors like tech, software, and biotech are broadening impressively, flashing healthier setups with surprising resilience as indexes test the 200-day, hinting at a shift from safety to opportunity.
  • China’s blazing ahead—stocks packing massive volume and relative strength new highs dominate the tape, though extended after sharp climbs; focus stays on leaders with tight risk controls to manage their volatile, gap-prone nature.
  • Big, stable blue chips are fading into the background—smaller, liquid growth stocks steal the show, sporting relative strength new highs before price, suggesting upside potential if this rally matures beyond a fleeting bounce into a sustained uptrend.
  • Volatility’s dialing back after yesterday’s shakeout and today’s push—a bottoming effort’s underway, conviction stays cautious; leadership breadth holds the reins.

Key Lessons & Quotes

• “Two weeks ago, leadership had us buzzing—broad, robust, poised to ignite a rally. Then it flipped fast, plunging to the 200-day. Now, we’re stunned at how setups shine despite the drop. Bottoms aren’t guessed; we wait for leaders to fan out and confirm it’s legit, not a head fake.”
• “China’s a powerhouse—volume and strength slap you awake. ADRs aren’t top picks, but the power’s too loud to overlook on lighter pullbacks. Tight stops are essential—chasing 80% moves without a plan courts a shakeout that bites hard.”
• “Bill’s reversal days steer us—yesterday’s shakeout marked Day 1, today’s climb was Day 2, but it’s not the 1.75%+ follow-through we need, preferably sometime in-between Days 4-7. No undercut, no distribution yet—it’s leadership’s health, not just stats, that signals if this bounce has legs.”
• “Personality’s our lens—whippy stocks drain us, tight ones with support fuel us. Missed the early ride? No panic. Model books prove top leaders can breakout 15 weeks post-bottom—we’d rather bide time for a clear shot than leap into chop and regret it.”

Actionable Takeaways

• Gauge Leadership’s Pulse: Track the broadening of sectors like tech and China—more stocks flashing strength and relative strength new highs signal a bottom’s near; that’s the tape’s loudest clue.
• Hold for the Follow-Through Signal: Wait for that single 1.75%+ day on increased volume, ideally within Days 4-7 post-reversal—no undercut of the Day 1 low or distribution day prior to FT—to green-light bigger bets.
• Target Resilient Averages: Hunt stocks clinging to key levels like the 50 SMA or 23-day EMA amid weakness—they’re the tough ones poised to lead if the market flips, offering early entry edges.
• Test China’s Heat Smartly: Eye extended China leaders for small tests on light pullbacks—volume’s the trigger—but lock in tight stops at support to dodge gaps and keep losses lean.
• Play Personality, Not Hype: Favor tight, liquid setups over whippy risks—use relative strength new highs before price to spot winners; patience trumps forcing trades in this uncertainty.

Stock Mentions and Commentary

Communication Services – Internet Content & Information:

• $ASTS: Hit the 50-day, rallied with a bullish engulfing—huge volume followed through today; tight across timeframes, close to actionable.
• $BILI: Chinese ADR—gappy but strong, decent earnings; group’s hot, watch for a tighter setup to harness its momentum.
• $NFLX: Shook to the 50 SMA, held with a hammer—liquid with steady earnings; a breakout above the 10-day could spark momentum.
• $SE: Chinese tech titan at new highs, big earnings loom—top-tier strength, but extended; wait for a pullback to manage risk.
• $SPOT: Above the 21-day, relative strength new highs stack up—stable channel, liquid; a focus list must-have.
• $TTWO: Own bull market vibe—relative strength new highs abound; actionable above prior highs if volume kicks in strong.

Consumer Discretionary – Automobiles, Household Durables, Specialty Retail:

• $BABA: China’s heavyweight—light pullback met massive volume, RSNHBP shines; Stage 2 breakout screams power, tight stops fit its volatility.
• $BROS: Below the 23-day, held yesterday’s low—restaurants wobble; stop at prior high or today’s low keeps risk in check for now.
• $JD: Chinese retail rallied into tomorrow’s earnings—monthly above IPO lows; strong close today, watch post-report for direction.
• $LRN: Education gem—tight above the 23-day, RSNHBP as markets sank; group’s humming, a standout in this tape.
• $LTH: Gym stock shook below the 23-day, bounced with volume—RSNHBP shines; needs market juice to stretch its legs.
• $YUMC: Chinese restaurant, long base near highs—liquid with resistance ahead; group strength fuels its steady climb.

Financials – Credit Services & Real Estate:

• $FUTU: Chinese financial—outside day, gapped up; liquid, relative strength creeping higher, riding the group’s hot streak.
• $GSHD: Insurance growth—thin at 200k shares/day, but tight; small sizes viable, watch volume spikes to confirm moves.
• $LMND: Insurance off the bottom—wide, loose, but liquid; needs a Launchpad to coil tighter for a real shot.
• $QFIN: Chinese financial—held the 65-day, RSNHBP; earnings March 7 loom, group’s firing on all fronts.

Health Care – Biotechnology & Pharmaceuticals:

• $ALKS: Biotech breakout—held the 23-day, surged post-earnings with RSNHBP; monthly base cleared, rare profit-maker in the space.
• $AXSM: Volume off the bottom—monthly base holds firm; not a top pick, but carries breakout potential for the patient.

Industrials – Machinery & Energy Equipment:

• $GDS: Chinese data center—wide, loose off averages; liquid, Launchpad brewing, but whippy risk demands caution.

Information Technology – Software & Semiconductors:

• $CWAN: Held above the pivot—earnings gap holds; young, liquid, tight weekly closes hint at breakout potential soon.
• $NET: Shook to the 50 SMA, rallied—constructive; group’s alive, personality shift makes it a sleeper to watch.
• $NTNX: Breakout shook out, now above the 50-day—whippy but strong; market-tied, showing grit in this tape.
• $OKTA: New watchlist add—broke prior highs on volume; extended, wait for a tighter setup to engage.
• $PRCH: Broke out at $7—liquid, 2M shares/day; monthly resistance gone, needs volume to fuel the next leg.
• $SAP: ADR strength—RSNHBP, all timeframes solid; stable tech, tricky to trade but a steady contender.

Ross’ Watchlist

• Communication Services: ASTS* BILI NFLX SE SPOT TTWO
• Consumer Discretionary: BABA* BROS JD* LRN LTH YUMC
• Financials: FUTU GSHD* LMND QFIN
• Health Care: ALKS AXSM BSX* DOCS EXEL GRAL HIMS TGTX* ZLAB*
• Industrials: GDS INOD
• Information Technology: CHKP CWAN FTNT KD NET PLTR SAP
• Materials: AEM* GLD*
• Real Estate: BEKE ZG