On Monday, the Nasdaq Composite bounced off its 200-day moving average and today is considered Day 1 of a rally attempt. From here, I would like to see minimal to no distribution over the next few days and a follow through day (FTD) later this week or next week. My instincts are telling me that today is a tradeable low because it’s not the news that matters but the market’s reaction to the news that’s more important. The news is obviously miserable but, as I’ve been saying for a while now, the price action in many growth stocks is still strong. The only problem is they have been very volatile and will continue to be volatile until we see more consistent buying from the big institutions. Also, by tradeable low, I mean this could be a rally over the near-term, but I am still expecting more volatility and possibly a lower low this summer. Of course, we’ll take this one day at a time and not get too ahead of ourselves.

A few additional notes:
1) Please keep in mind that we still need to see confirmation. For example, last Wednesday (March 4) was also an early rally attempt, but was met with immediate selling on Thursday and Friday. In other words, please be patient until we see a FTD. If the Nasdaq takes out Monday’s low, then the FTD count would reset.

2) Many people say, “Don’t predict. Let the market prove itself first.” While this is somewhat true, I’m not trying to predict. I’m simply trying to anticipate and give members a heads up of a potential FTD coming up. Remember, winners anticipate and losers react. Just be ready and don’t get too bearish, especially with GTC (Nvidia’s premier AI Conference) coming up next week.

3) Here are a few stocks near buyable ranges: PL, BKSY, WWD, TSM, SMH (the Semiconductor ETF). You can use the 21-day or 50-day as your guide depending on your time frame. Also, I suggest keeping new positions light until we get more confirmation. As always, do what works for you.

4) The optical stocks showed incredible strength today, even before the market started to rally. Here’s a research note from BAML that came out today pre-market.

COHR LITE MRVL MTSI CRDO SMTC
BAML Deep Dive into Photonics/Optical
AI data center networking trends are accelerating towards higher bandwidth and data rate speeds (doubling every two years), low latency, dense clusters (100Ks of XPUs) for training and inference, longer distances (10m to 10km), and complex architectures for scale-out and scale-up domains. We believe these challenges put the optical communications industry in a strong position to benefit, especially as optics increasingly penetrates domains dominated by copper (e.g. scale-up) evidenced by multi-year supply deals between NVDA and LITE/COHR in the multiple billions of revenue each. Ongoing and new growth drivers can fuel a $14bn optics market in CY25 to grow at a 39% CAGR to $73bn by CY30E which is 39% of the $245bn AI networking TAM. We highlight the various technologies, vendors and major trends across the landscape as immense demand is leading to supply shortages and transforming supplier business models. What’s new and proprietary is our bottoms-up AI networking and connectivity model which sizes key categories in switches, optical components and systems and copper.
Optical transceivers have been an interconnect mainstay due to their pluggable form factor and practicality, flexible configuration, and strong performance at higher data speeds and distances. While concerns over compounding power consumption at scale is leading to questions about the module roadmap, we believe a vast majority of optical ports, especially in scale-out will be served by transceivers with the 800G cycle going strong into CY28 and 1.6T still at the cusp of a major inflection which can propel the market from $13bn in CY25 to $45bn CY30 (29% CAGR) led by SiPho/EML modules.
We expect co-packaged optics (CPO) to gain traction beginning in CY27 scaling to an entirely new $15bn TAM by CY30E for core components. NT traction will be in scale-out, but we believe the critical opportunity will be in scale-up which could take off in CY28 and grow to a $9bn market as the copper dominated-network transitions into optical. Optical circuit switches (OCS) are another incremental driver as legacy switching infra replacement, concerns about redundancy, and the need for scale-up (i.e. TPUs) drive adoption. We think OCS grows from $1bn today to $4bn by CY30E.
We estimate the LPO/LRO TAM (exhibit 15) will scale from next to $0 in CY25 to over $5bn in CY30 with an adoption skew towards LRO solutions (~63% of TAM by CY30E). While both are intermediary solutions that can substitute CPO for scale-out applications especially at 1.6T (800G sees less adoption) where the efficiency/performance tradeoff is optimal (at 200G/lane) and standardization might be possible, we note this is a niche market representing at most 8% of the optical TAM from CY25-30E. Beyond 400G/lane, LPO/LRO are likely not viable technologies and CPO is the clear solution. Key vendors include MTSI (LPO/LRO 100G/200G lane chipsets), TIA/drivers), CRDO (LRO modules), and Semtech (LPO/LRO modules).