How To “Skip” the Worst of Any Bear Market

In February 2020, as I read about a handful of U.S. coronavirus cases popping up for the first time, I was gearing up for a week of multiple trips and a long time away from home.

Then, around 7 p.m. on Thursday, Feb. 27, I got this big, bearish alert from TradeSmith’s proprietary market-tracking algorithms.

It basically said, “Run for the hills and sell your stocks.” Every major market triggered a rare “bear market” signal.

I had no idea at the time that those few cases would go on to become the global pandemic COVID-19. Nor did I know that it would basically shut down the world.

And I certainly didn’t know markets would crash more than 30% in less than a month.

But I didn’t have to. Because I knew to trust our system.

So the very next day, I sold nearly all my stocks.

Over the weekend, a quick stop into Target with my family gave us an early glimpse into the world of panic buying and hoarding. We noticed a woman with a cart FULL of nothing but Clorox wipes.

Clearly, there was panic in the air, and we were just starting to see and feel it for the first time.

On Monday, I flew down to Florida to meet with a group of 50 of my peers where each of us would pitch our best and biggest investment ideas.

Person after person was pitching greedy parts of the market that they believed were ready to soar. My turn to present came Tuesday morning, March 3…

I got up on stage and said, “I sold almost all my stocks on Friday.”

I urged people to be safe with their investments and consider warning their subscribers that a bear market was rapidly approaching – likely the fastest in history.

I told them it would catch everyone by surprise and destroy years of wealth-building.

I showed them the alerts I received and then how accurate these alerts have been over the last 20 years.

And… they laughed at me. Not a single person in the room wanted to hear what I had to say. None of them heeded my warning.

That didn’t sway me. In fact, it only made me more confident I was right. Markets don’t crash when everyone’s expecting them to.

Plus, the alerts I showed you earlier are based on algorithms we created at TradeSmith years ago. We routinely test them against current market conditions and update them accordingly.

They’re based on momentum and short- and long-term trends. And all you have to see is the track record to understand why I was so confident in my call.

Here are the five drawdowns prior to the COVID-19 crash… along with the dates TradeSmith’s software would have warned of a bear market.

In 2020, my personal portfolio was saved a huge loss thanks to our alert system. Because I’d already cashed out on Feb. 28, I got to “skip” the bear market.

And, just a month later, our indicators did it again, alerting me to a bullish setup in the markets.

By this time, CNN’s Fear and Greed Index had plummeted to extreme fear and people were nervous. Heck, I was nervous! But again, I trusted the math and these signals, and I took action. I started gobbling up stocks that had big pullbacks and were noted “healthy” in our system.

Boy, was that the right decision!

Now, I want to be clear about something.

The sudden surge of volatility in February 2020 caused the bear market signal to come much faster than usual. You’ll notice that in the previous signals, it didn’t call the top of each market.

It’s not designed to. Tuning our algorithm to sell the top and buy the bottom would make it so sensitive, you’d be getting bear market and bull market signals constantly.

But what we did design it to do was save you from the worst periods of bear markets… and put you in good position to benefit from a sustained bull market.

Take this chart, for example, which shows you when our system gave an official bear market signal, then a bull market signal, back in 2022-2023.

Our algorithm threw a yellow “caution” signal in late February 2022, then again in early May, before giving the red “bear market” signal on May 9, 2022.

If you followed it, you would’ve avoided an additional 11% of losses before the bear market bottom later that year.

Then, the S&P 500 triggered our “bull market” signal eight months later on Jan. 6, 2023. From then until now, stocks have surged more than 36% higher.

If you followed these signals and sold everything when the S&P triggered its “bear market” signal, you skipped the depths of the bear… and bought back in when prices were 2% cheaper from where you sold.

That’s the power of TradeSmith – helping make your investing life simpler, safer, and more profitable.

Warm regards,

Keith Kaplan
CEO, TradeSmith

P.S. Since 2020, we’ve expanded TradeSmith’s tools tenfold. More than simply telling you when to get in or out of your stock holdings, our tools help you create stock screens using your preferred metrics; choose options contracts based on potential profit; study the seasonal cycles of assets; and project future prices.

Which TradeSmith tools are your go-to? What do you check first when you log in to TradeSmith Finance? I love to hear from our readers and subscribers. Send a message to [email protected] and let us know.

And thank you for being part of TradeSmith.