Our New AI Trader Sees Setups No Human Would 

Listen to the audio version of this article (generated by AI).

 

In This Digest: 

• Claude’s new Mythos model is a game changer… and Washington knows it 

• Our newest AI trading software has found 30,000 “signals” across almost 2,500 stocks 

• Try out the beta version for free before tomorrow’s launch event 

Anthropic went from pariah to power player in six weeks… 

On Feb. 27, just a day before the start of the Iran war, Anthropic – the company behind the popular Claude AI model – drew a red line. 

It’s been licensing its latest models to the Pentagon since last July. But it drew the line at letting them be used for autonomous weapons or mass surveillance. 

In response, Defense Secretary Pete Hegseth designated Anthropic a “supply chain risk.” 

It was major setback for the AI company. Then it built something the government couldn’t ignore. 

Its new frontier model, Mythos Preview, discovered thousands of previously unknown security flaws in just about every major operating system and web browser on the planet – some dating back 27 years.  

And it didn’t just find the flaws. It also wrote code to exploit them, getting it right on the first try more than 83% of the time. As the company put it in a press release, the unreleased frontier model reveals a stark fact:  

AI models have reached a level of coding capability where they can surpass all but the most skilled humans at finding and exploiting software vulnerabilities. 

That got Washington’s attention. 

On April 8, Treasury Secretary Scott Bessent and Fed Chair Jerome Powell summoned the CEOs of Citigroup, Morgan Stanley, Bank of America, Wells Fargo, and Goldman Sachs to an urgent meeting at Treasury headquarters in D.C. The topic: what Mythos means for the security of the U.S. financial system. 

Then last Friday, Anthropic CEO Dario Amodei walked into the West Wing for a sit-down with Bessent and White House Chief of Staff Susie Wiles. 

The administration that blacklisted the company six weeks earlier called the talks “productive and constructive.” 

If you’ve been skeptical of AI, I get it. Most of the things we use AI chatbots for – like searching the web, writing resumes, and planning vacations – are impressive but hardly world changing.  

But as the Anthropic news confirms, AI is rewriting the rules at the highest levels of government and the financial system.  

And as I’ll show you today, it’s also a game changer for us as investors.  

Most of the market is now being driven by machines… 

About 70% of U.S. daily stock trading volume is done by algorithms. And a growing share of those are harnessing AI. 

That’s hard to wrap your head around. Humans are no longer doing most of the buying and selling on the New York Stock Exchange every day. It’s done by machines spotting patterns and acting on them faster than any person could. 

It’s a scary thought. The tools that move markets are getting exponentially smarter. If you’re still trading on gut feel and news headlines, it can feel like bringing a knife to a gunfight. 

That’s where TradeSmith comes in. 

We’re one of the world’s largest financial technology firms for self-directed investors. Our mission is to build hedge fund-level software tools and use them to help you level the playing field.  

And over the past year, we’ve invested more than $32 million to build something that does just that. 

It’s a new AI-powered trading system that detects tiny anomalies in stocks’ historical data. It then finds connections between them that have preceded big moves. 

We call them “signals.” And with the help of AI, we’ve found 30,000 of them (and counting) across almost 2,500 stocks. 

We’d like to invite you to see firsthand what we’ve built.  

Tomorrow, April 22 at 10 a.m. Eastern, our CEO, Keith Kaplan, is hosting our AI Signals Trading Event to walk you through how the system works – and the trades it’s flagging right now. 

If you haven’t already, I’d urge you to sign up right away. Because when you do, you’ll get access to a beta version of the software to try out for yourself – free of charge.  

You can look at the top five signal trades for each day, or type in any ticker to search for active signals on stocks you want to trade. 

Sign up for Wednesday’s event and get your free beta access here. 

These three setups look bearish, but our AI says otherwise… 

Our new signals trading software doesn’t look at balance sheets, read earnings reports, or follow news headlines.  

Instead, it evaluates 2.09 million potential trades every day across 2,467 stocks. It runs each one through hundreds of calculations, looking for the specific combinations of factors that have historically preceded moves in each stock. 

We do it this way because we know every stock behaves differently.  

A mega-retailer like Walmart (WMT) won’t react to any given market event the same way an oil company like Chevron (CVX) would.  

A biotech like Eli Lilly (LLY) will trade differently than a semiconductor firm like Advanced Micro Devices (AMD). 

Our system recognizes that and builds a unique behavioral profile of each one. That helps you find signals specific to that stock’s history.  

And the patterns it surfaces are often ones that look strange, even counterintuitive, to the human eye. 

Here’s what I mean. 

AI server maker Super Micro Computer (SMCI) just flashed a signal that looks bearish on the surface — but history says the opposite. 

For the signal to fire, two factors have to align. The stock’s Relative Strength Index, or RSI, has to be higher today than it was 26 days ago. And at the same time, the price has to be lower.

The RSI is a tool that measures buying and selling pressure. A high reading usually means a stock has been bid up too fast and is due for a pullback. 

So when the RSI is rising but the price is falling, it looks like a stock in trouble — lots of excitement, but no follow-through. 

Except the data tells a different story. 

Looking back at every time these factors have aligned for SMCI since March 2020 — 145 cases in all…  

• The stock went up 86.2% of the time… 

• The average gain was 6%… and ran as high as 39%. 

• And that gain happened in an average of just 12 days. 

Here’s a composite of that move from our new Signals trading software. It’s not a price prediction. It shows the average historical performance after these conditions have aligned in the past and a signal has fired. 

Or take another active signal, this time on drone stock Kratos Defense and Security (KTOS). It also looks like trouble. More than 13 of its daily price changes over the past 21 days were down.  

Check that out on the chart below. The blue bars are down days, and the white bars are up days.

Most human traders would see that and steer clear. After all, if a stock is falling most of the time, why buy it? 

Because the data says you should.  

Over the 268 times we’ve seen this pattern in KTOS:  

• It’s been up 75% of the time, 

• Leading to a gain of 4.1% on average – and as high as 22%  

• Over just the next 18 days. 

Here’s how that move looks in our new software tool… 

Then there’s a signal on energy technology company Nextpower (NXT). It makes the tracking systems that keep solar panels pointed at the sun. 

Our data shows that when this stock falls below its nine-day exponential moving average (EMA), it might look bearish… but it’s not at all.  

The EMA plots the average price over the past nine days but factors in the most recent price action more heavily. 

On the chart below, you can see that NXT has fallen below this key short-term trendline: 

We’ve seen this signal pop up on NXT 219 times over the past 10 years. On average, it’s led to: 

• A winning trade 84.5% of the time. 

• An average return of 5.3%, and as high as 26.6%. 

• And an average hold time of just 12 days. 

Here’s what that average historical performance looks like on a chart: 

All these signals fired after Monday’s market close and popped up on our software dashboard. And as I write Tuesday morning, every one of them is up on the day.  

So I don’t recommend taking these trades now – the time to do that was at this morning’s open. 

But I’m still highlighting them here because while most traders would look at these stocks and find a reason to sell or avoid them…  

Our new AI-powered system sees something entirely different – high-probability setups backed by years of data. 

That’s the edge that elite hedge funds use with their trading algorithms. And that’s what we’re bringing to our followers this week. 

So make sure you’ve secured your spot for tomorrow’s launch event and accessed the beta version of our new software. You can do that right here. 

There you’ll find five more of today’s top signals. And you’ll be able to search for any other active signals across thousands of stocks.  

And make sure you tune in to our launch event tomorrow at 10 a.m. ET.  There, Keith will give you the full story of our new AI Signals software and show you why our data is pointing to a significant market shift beginning before Wednesday’s market close. 

Click here to claim your spot. 

To building wealth beyond measure, 

Michael Salvatore  

Editor, TradeSmith Daily