Don’t Go It Alone in a 2026 Bear Market VIEW IN BROWSER By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - The exponential cost of AI is getting lenders hot under the collar
- This morning, 9,897 people tuned in to our Tipping Point 2026 event
- Introducing our new “flash portfolio”
- This unusual cycle says next year could be rough for investors
- If you own this high-performing stock, it’s time to get out
What’s so dangerous about AI? The price tag. Big Tech firms are increasingly tapping external investors to fund the mounting costs of the AI infrastructure buildout. According to investment bank UBS, AI data center and project financing deals surged to $125 billion through November this year, from $15 billion in the same period last year. This is part of the trouble we’ve recently seen in Oracle. Its five-year credit default swap spread – a measure of risk on a company’s debt – recently spiked to levels last seen during the 2008 Great Financial Crisis. Lenders are getting nervous. And investors are, too. “Going forward, there is a reasonable probability that we will soon find ourselves in a bubble,” Bridgewater’s Co-Chief Investment Officer Greg Jensen wrote in a note. And the cracks are beginning to show. Web titan Alphabet (GOOGL) is 5% off its all-time high. Early OpenAI investor Microsoft (MSFT) has dropped more than 12% from its October high. And chip bellwether Nvidia (NVDA) has fallen more than 15%. I’m not saying the AI boom is going to end tomorrow. But even if it lasts another year, two years, or more, you need a plan in place to protect yourself when the inevitable collapse comes. If history has taught us anything, it’s that stock market booms sparked by a transformative new technology eventually come crashing back to Earth without much warning – even when the technology in question is the real deal. We saw this with the bursting of the dot-com bubble at the turn of the millennium. We also saw it with the 1929 Crash, after a decade of stock market gains based on the transformative promise of radio, electrification, and mass production. In each case, the technologies in question did transform the world. And in each case, a dramatic melt-up in stocks was followed by an even more dramatic meltdown. | Recommended Link | | | | If you missed Bitcoin in 2011, Tesla in 2012, or NVIDIA in 2016, you know the sting of regret…Now the master trader Jeff Clark has uncovered a new opportunity. He calls it “Crossfire” – and it could hand you gains of as much as 1,285% in as little as two days. Don’t let this become another “what-if” moment. Watch his free briefing now. |  | | This event marked a collaboration between TradeSmith and another leading investment technology platform, Chaikin Analytics. This morning, 9,897 people joined to watch TradeSmith CEO Keith Kaplan and Chaikin Analytics founder Marc Chaikin join forces to launch our new Flash signals. The Flash signals tool builds on TradeSmith’s classic TradeStops alerts. These flagship trade signals, which we debuted 20 years ago, take a long view on a stock’s historical volatility. And they work quite well at catching long-term shifts in trend. But with the market moving faster than ever, we knew we had to create something tuned more for the short term. Enter our Flash signals. This new system looks at the past six months of trading to map a stock’s “healthy” short-term range. It treats anything that falls outside that range as a red flag. Once it sees that red flag, it flashes a warning the moment a stock shows abnormal weakness, often weeks or months before a major drop. In our backtests, it flashed the following warnings on: - Freshpet (FRPT) before a 74% crash
- Lifetime Brands (LCUT) before a 77% crash
- Bloomin’ Brands (BLMN) before a 72% crash
- Funko (FNKO) before an 86% crash
- Rocky Brands (RCKY) before a 75% crash
To be clear, this isn’t the kind of system you want to use on your “forever” stocks – the stocks you intend on holding through bull and bear markets for decades. Having a portion of your portfolio in long-term holdings you never touch is still a great way to compound your wealth over time. But it’s a great “early-warning system” to have in place on stocks you’re holding for shorter periods… especially if you’re worried about seeing gains you’ve made vanish in a sudden selloff. And that’s not all Keith and Marc covered in today’s event… They also launched a new “flash portfolio”… It’s called the Chaikin Flash Portfolio. It’s a new strategy designed to own only the five best buying opportunities in the market each month – based on our new Flash signals and critical components of Marc’s award-winning Power Gauge. If you aren’t familiar, the Power Gauge is a factor-based stock rating model that evaluates thousands of U.S. stocks daily and rates them from Very Bearish to Very Bullish. The goal is to gauge a stock’s intermediate-term performance, typically over the next three to six months. And because Keith and Marc expect to see a surge in volatility in 2026, this new portfolio doesn’t update every year, or even every quarter, but every month. It’s also harnesses the power of compounding. When you follow this strategy, you take the proceeds of the stocks you sell each month and use them to buy the next set of stocks. In the backtest we ran over a six-year period from September 2019 to September 2025, it turned a $10,000 starting stake into more than $130,000. That’s a 1,200% compounded return in just six years. Compare that to the gains you would have made by buying and holding the white-hot Nasdaq 100 tech index. Over that same timeframe, it rose 221%, turning a $10,000 stake into $32,000. Here’s more on how the Chaikin Flash Portfolio works… It starts with a pool of constantly updating stocks. To enter the pool, they must tick two boxes: - Their most recent Flash signal – TradeSmith’s newest short-term indicator – must be a Flash Buy.
- Their Power Gauge rating must be Bullish or Very Bullish.
Then TradeSmith’s proprietary machine learning algorithm automatically selects the best five-stock portfolio each month balanced for potential reward and downside risk. This combines all of TradeSmith’s and Chaikin Analytics’ best ideas into one model portfolio. And I can’t wait for new subscribers to get their hands on it when the first picks launch on Jan. 5, 2026. That means there’s still time to get involved, but not much. We’re closing the window to join the Chaikin Flash Portfolio early next week. To learn how to get access… along with our new Flash signals… catch the replay of Keith and Marc’s event here now. You’ll want to have this system on your side in 2026… That’s because of something we’re quite familiar with here at TradeSmith: seasonality. As Marc has been warning, next year is a midterm election year. And more than 100 years of data shows it tends to be a major potential tipping point for the stock market. In a nutshell, the U.S. stock market tends to boom in pre-election and election years, when incumbent governments lean hard on stimulus, growth, and giveaways. Once the votes are counted, that largesse fades… and reality sets in. And the worst year in the cycle is the midterm year – in this case, 2026. Across the last 14 election cycles, bear markets began or were in progress during nine of those midterm years. In other words, we saw a bear market about two-thirds of the time. That’s why we rolled out our new early-warning signal before the new year gets underway. We want as many folks to be prepared for volatility as possible. It’s not just about drops in the S&P 500, the Nasdaq 100, and the other big indexes. It’s about drops in individual stocks you may own. The last midterm year was 2022. It saw S&P 500 fall about 20%. But in the worst days of that bear market, the average investor was down 44%. And even if bear markets strike “only” two-thirds of the time in midterm years, is that a risk you want to take? That’s why here at the Daily, we’re watching our Flash signals like a hawk… Take this recent signal in O’Reilly Auto Parts (ORLY). This auto parts retail chain has been a market-beater for the past five years. It’s up 216% over the past five years – roughly double the gain of the Nasdaq 100. 
But if you own ORLY, you may want to consider taking profits now. On last Thursday’s close, we got a Flash Sell signal for ORLY, along with a Bearish rating on the Chaikin Power Gauge. Both systems confirmed this is a stock you want to avoid. And it’s one of 113 different stocks across the S&P 500, Dow, and Nasdaq 100 showing a similarly bearish short-term pattern right now. That’s why it’s so important to check out today’s Tipping Point 2026 event. There you’ll hear from TradeSmith CEO Keith Kaplan and Chaikin Analytics founder Marc Chaikin all about the volatility they see coming… and what we’ve built to help you sidestep it. The replay just went live, and you can watch it right here. To building wealth beyond measure, 
Michael Salvatore
Editor, TradeSmith Daily Disclosure: Michael Salvatore holds shares of Google (GOOGL) at the time of this writing. | 
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