Keith Kaplan Opens Up the Mailbag

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When to “Run for the Hills”

Here’s a great letter addressed to Keith from Pat and her husband, Jeff:

Hi Keith,

My husband and I enjoy reading your TradeSmith Daily letters and combining what we learn from you and TradeSmith team members about the analytics provided by your AI system.

After nearly one year with TradeSmith, I find that Jason Bodner has produced the strongest returns in equities recommendations. Jason’s “follow the Big Money Index” system combined with fundamentals and technicals are superior. Best of the Billionaires recommendations are good, but not quite as strong.

Each morning, I check my TradeSmith Portfolio positions to identify stocks that may be nearing their VQ Stop Loss and act accordingly. When necessary, I run new and existing stock picks through all the widgets found on the TradeSmithDashboard, BQS, Jason’s QS, Predictive Alpha and we also like the newest addition, Harmonic Trade Cycles Signals.

By the way, the next time you see a clear “run for the hills” signal, please broadcast that loud and clear to us. Because that is the very reason we took back our retirement stock investment decisions into our own hands after a local investment broker allowed our beautiful $500,000 retirement portfolio to grind into the dust with a -46% loss during the stock market crash in February-March 2020.

That’s the motivating force behind our move. But, we look forward, not backward. We joined Louis Navellier as a Platinum Omnia member on July 16, 2020, and then joined TradeSmith on June 27, 2023, upon Louis’ recommendations of your services. All things considered, we made back over $650,000.00 since July 16, 2020. We call the pandemic crash and portfolio disaster a blessing in disguise.

Thank you for all you and your TradeSmith Team offer to the independent investor. Joining TradeSmith has been among the financially best decisions in our lives. We have paid off all our debts, added to our real estate holdings from the profits to build generational wealth, and teach our adult children about investing while still keeping a reasonable amount of assets working in the market to generate a secure retirement nest egg.

Wishing you all the best!

Pat and Jeff, Platinum members

Keith: Pat and Jeff, I’m so happy to hear that you’re happy with your Platinum membership and were able to recover from the pandemic crash. That was an extremely difficult time for many investors… and your experience at your broker just goes to show how so many professional Wall Streeters are really just flying blind out there.

TradeSmith is all about empowering individuals to beat the market with world-class tools, especially on their own terms. You two are a testament to that.

We’ll keep working hard to meet your expectations of quality.

And yes, Pat and Jeff: We will scream from the rooftops when we get a major bear or bull signal for the indexes we track.

I remember we alerted about the COVID crash on Feb. 27, well before anyone saw that coming.

At that time, the S&P 500 was only about 6% off the top, and we got a lot of hate mail. Believe it or not, we were called fearmongers for that call! Honestly, we just trust the data, especially when it helps us avoid the herd mentality that can get investors into trouble. So, the fact that we did get hate mail told us we were right.

We did it again in May 2022. And we’ll keep shouting from the rooftops for all of you!

And by the way – we’re glad to hear you’re liking the Harmonic Trade Cycles Signals. That’s one of the newest TradeSmith features, and we’re starting to study the signals’ performance. If you’ve made any successful trades using those signals, don’t be shy and be sure to let us know!

Learning to Trust the Numbers

Here’s an email from another Platinum member, Mike…

Keith,

Reading your note today reminding us of the system design for TradeSmithwas great.

The oncoming COVID issues are a great example. Instead of counting on emotion, I’ve been learning to trust the numbers. Never sure what will happen next, but the algorithms sure help – I’ve used my stops and all the great analysis of Justice, Mike, and Jason very successfully.

Most importantly, I am so glad I signed up for Platinum a few years ago! I started with TradeStops since Steve Sjuggerud recommended it with True Wealth Systems.

The innovation you have continued to bring is so worth that up-front investment! Unlike some services that spin off new ideas to maximize profit – you just keep on adding value to your Platinum Members, and that is so appreciated. Especially as the technology and impact of AI continues to be a growing part of investment decision-making.

Keep up the good work, tool integration, and value creation!

Mike, Platinum Member

Thanks for your email, Mike, and thank you for being a Platinum member. It sounds like your journey with us has been a long one, and we’re so grateful that you’ve been following us from the beginning with TradeStops.

Continually enhancing your Platinum membership has always been a priority for us. We’re glad to hear you’re making good use of it.

Keeping Tabs on Market Direction

Moving along, here’s another email from Sathish…

Hi,

In today’s article by Keith Kaplan there is an extensive narration that you have tools service that helps a subscriber like me to get timely alerts on the above.

I am a subscriber to some of your services. Unfortunately I have not come across any such service. I am not an expert who can create charts and read them (even with your coaching). Neither do I have spare time to pursue that route.

If you have a service that sends a daily newsletter to the subscriber spelling out the direction of the market (S&P 500 and Nasdaq 100 in particular) in the short, medium, and long term, it would be most welcome. You have so many tools/indexes at your disposal which you can use and give the subscriber this insight. It is up to you to use whatever tools/indexes you feel relevant.

Call it spoon-feeding, but this is something subscribers like me need. A daily newsletter giving the direction of the market (with some explanation, charts/tools used to reach that conclusion). If you have anything like this amongst your various services, I will be happy to subscribe to it.

Regards,

Sathish

P.S. If you currently do not have a service meeting the above requirements, how about starting one? I am sure there are many individual investors like me who will subscribe to it.

Hi Sathish, thank you for writing in.

To answer your first question, the Bull and Bear Market Alerts are part of Ideas by TradeSmith.

If you’re subscribed to that and want to access the current status of all the world markets we track, go to the top of your TradeSmith Finance dashboard and click the “Markets” tab. There you’ll find all the world markets with a card that looks like this:

That green “bullseye” is the bull or bear market signal, along with how long it’s had that status. If the market is bullish, it’ll be green like the above. If it’s a bear market, it’ll instead look like this:

We use these finely tuned algorithms to determine whether we’re in a bull or bear market, and we’re continually improving them to stay ahead of what could be coming.

As for your daily newsletter idea, that’s not something we currently offer in precisely the way you describe it. We’ll consider it.

But we do offer plenty of ways to forecast the future direction of markets as well as individual stocks.

• As an Ideas by TradeSmith (or Trade360) subscriber, you can check an entire market index’s Health status – which is made up of the number of that index’s stocks that are trading in our Green Zone. Taking it a step further, you can do the same on individual stocks.
• You could also use Predictive Alpha to get a good idea of short-term direction on stocks and markets – specifically the next 21 trading days.
• And you could use the Trade Cycles algorithms to see if your stock or a market index is in a short-term Peak or Valley area, using its own unique trading data.

For the time being, we reserve these signals for our paid-up subscribers to each of those services. But I’d encourage you to stay tuned to TradeSmith Daily, where our editor Michael Salvatore shares the most interesting opportunities he finds using these tools and a lot more.

We’re also working on something behind the scenes that should bring to the surface even more actionable opportunities from our algorithms that we can easily share in the near future.

Stay tuned for more on that, and keep up with TradeSmith Daily in the meantime.

TradeSmith’s Ratings vs. Jason Bodner’s Quantum Score

Here’s another note, from John…

I am curious, with your close association with Jason Bodner… how close does your grader track with his grading, and does he actually share with you his grade on all the stocks you show?

Thank you… and I’m really glad I decided to “bite the bullet” and subscribe to Platinum… I almost did not.

Thank you,

John, Platinum Member

Hi John, thank you for writing in, and thank you very much for “biting the bullet” and becoming a Platinum member!

Here at TradeSmith, we don’t believe there’s a single perfect way to analyze the markets. Different analysts have different ideas, methods, and priorities… leading them to different conclusions.

And to be clear, we think that’s a great thing. More methods mean more valuable insights for you and our other readers.

Jason’s Quantum Edge system is the perfect example. It’s less a Swiss army knife – with an answer to every single problem – and more like a specialized metal detector.

This system is heavily tuned for finding growth stock opportunities in the small- and mid-cap sectors that are likely being targeted by institutional investors.

Jason created it this way because he believes it’s how you can make the most money – and his historical backtest showing 7-to-1 outperformance over the S&P 500 since 1990 makes it hard to argue with.

Also noteworthy is the Quantum Edge Score’s ability to filter out any low-growth stocks with a lower rating… and keep you out of overheated stocks with a higher rating.

Sometimes our stock grading tools, like the Business Quality Score (BQS), will line up with Jason’s Quantum Edge Score. But sometimes, especially when looking at value-oriented blue chips that are decidedly not super-growers, they might not. And we can’t forget that Jason’s system is screening for the presence of big money – whereas the BQS is more about a business’s fundamental qualities.

That’s okay – we don’t think all of our tools need to show the same thing. Ideas are the lifeblood of any financial newsletter publisher, and we’re happy that our various systems help bring lots of different great investing ideas for you.

One thing I’d like to note for you is this … we have done a lot of work on what we call “conviction scoring.” When multiple analysts and systems saying the same thing, we get conviction.

When that conviction is high, we’ve proven that we get much better and more consistent returns. But usually, we get conviction on a more popular, large-cap stock. For example, those of you who are subscribed to Trade Cycles will probably find that bigger stocks tend to make the Top Bullish list from our new Harmonic Trade Cycles Signals feature, where seasonality, cycles, and the Relative Strength Index (RSI) are all signaling to buy a stock.

So please keep that in mind when studying our analysts and system data.

That said, we’re constantly refining these tools for the times we’re in, to ensure they keep showing you the best opportunities we can muster.

How to Make Sense of Mixed Signals

To wrap up today, here’s a note from Marty…

Thank you for your recent article, “How to Skip the Worst of Any Bear Market”.

The 2020 signals are very clear. Bear signals for 2020 you listed were TCMP-T, DJIA, IWB, MID, SPX, SML, and EWU.

But what about mixed signals?

Currently the HANG SENG INDEX, $HANGSEN signals a bear market. So my question is, “How do you view and react to mixed signals?” For example; if the $HANGSEN, EWU, TCMP-T, and IWB all signaled Bear, what would your approach be?

Thank you,

Marty, Platinum Member

Thank you for writing in, Marty. And thank you for being part of our Platinum membership.

I should emphasize again how unusual 2020 was. It was both the fastest bear market and fastest recovery in modern history. The whole world went “risk-off” in an instant… and then reversed course once the Federal Reserve stepped in.

Because of that, we shouldn’t necessarily expect every bear market to begin with a mass alert from our system on every single world market…

That brings me to your question on “mixed signals.” As you point out, the Hang Seng Index is currently flashing a bear signal according to our system. The troubles in China – slow growth, deflation, a crumbling real estate market, among others – reflect that, and they’re somewhat isolated from other world markets. That doesn’t mean there are no opportunities in China… it just means that broadly, the index is in a downtrend.

To us, it’s perfectly normal for a single country’s stock market to be in a bear while the rest of the world’s markets are not. We don’t really see it as a “mixed signal” so much as a very clear signal that that particular country is facing trouble.

Now, if we started to see more bear market signals pop up across the world? That might be a strong sign of something bigger going on.

If we did see additional bear market signals flash in the U.K. markets (EWU), Canada (TCMP-T), and large-cap U.S. stocks (IWB) as you suggest, then that would clearly not be a contained situation. In fact, such a broad bear trend would likely suggest to us that another COVID-like shock was coming… or at least a global economic slowdown.

The short answer is: It depends. It depends on what specific signals we see, how mixed they are, how close they happen to each other, and so on.

But should we see them, of course you’ll be the first to know. And you can look to our analysts for an action plan should we ever encounter such a situation.

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Michael here…

I want to thank everyone for writing in to our inbox ([email protected]) with your truly invaluable feedback and insights.

I should also note that I’ve seen your stock suggestions for Lucas Downey and me to review, and we’ll be looking at those in a brand-new video due out to you next week.

Until then, have a great weekend, and look for more from Keith, Lucas, and me in the week to come.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith