How One Odd Analyst Called the Top of the Roaring ‘20s VIEW IN BROWSER By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - How a data-obsessed economist called the 1929 crash
- A similar warning is flashing again today
- These stocks could be the biggest losers in an AI bust
- Why we launched our new “flash portfolio”
- Catch the replay of Tuesday’s Tipping Point 2026 event
More cracks in the AI rally were on display yesterday… The tech-packed Nasdaq 100 dropped nearly 2%. And AI bellwether Nvidia (NVDA) dropped almost twice as much. The Nasdaq 100 is still up 17% for the year – a phenomenal return. But it’s down 5.6% from the late-October peak. Nvidia is up 36% year to date. But it peaked about the same time as the Nasdaq 100 did. And it’s down 17.4% since. Could Marc Chaikin’s bearish 2026 prediction already be coming true? We’ll get into that shortly. First, a name from history that should be on your radar… Too few investors know the name Roger Babson… But forgotten as he may be now, his warning from the Roaring ‘20s echoes loudly now, since that is what we at TradeSmith call a “Mega Melt-Up” today. Babson was an economist, statistician, and entrepreneur. He made a name for himself by predicting a “terrific” crash just six days before the stock market peaked… and just over a month before the infamous Black Monday crash of 1929. Babson pointed to the trend of mom-and-pop investors borrowing money to buy stocks – one of the telltale signs of a Mega Melt-Up. He pleaded with indebted investors to pay off their stock market debts and not take on any more. What did Babson see that millions of other investors missed? From Babson’s data, while 40 of the 1,200 stocks on the New York Stock Exchange had risen an average of 42% since the start of 1929… half of the remaining stocks had dropped. Just six trading days later, on Sept. 16, 1929, the S&P 500 peaked. The on Oct. 28, Black Monday hit, and the stock market plunged nearly 12% in a day. In the three years that followed, the market would fall 86% from the highs – the worst crash of all time. It would take 25 years to revisit those prior highs. Babson pioneered a type of analysis we take for granted today… He counted the number of stocks making new highs versus the ones that weren’t and created a simple ratio. If the ratio started to favor these bearish moves, it was a signal to get out. It’s hard to overstate how rare this was. In Babson’s time, the only respected way to analyze the stock market was to look at company fundamentals like earnings, revenue, cash, and debt. Instead, Babson used what we now call “technical analysis.” And anyone who acted on his warning would have sidestepped the worst market crash in modern history. Here he is three years after the 1929 crash, showcasing one of the earliest pieces of technical analysis on record: 
Babson’s technical flex, three years after the great crash | Source: Bettman Archive Some of the other principles Babson made popular also resonate… - His work centered on mean reversion analysis – the idea that when markets move too far above their historical averages, they inevitably move back toward those averages.
- He warned against borrowing on margin to trade stocks – something that accompanies every Mega Melt-Up.
- He was skeptical of the idea that technological progress can override business cycles – an idea we always hear near the peaks of bubbles.
At TradeSmith, we have tools that help you carry out fundamental analysis on stocks. Jason Bodner’s growth stock rating system, the Quantum Score, includes company financials along with money flows. Plus, our own fundamentals-driven Business Quality Score. But our technical analysis work has been a priority during this market melt-up. Let’s focus just on Babson’s observation about the number of stocks trading with bullish momentum in 1929. We follow a similar metric – our Health Distribution. Take a look at this chart of the tech-heavy Nasdaq 100 from our market monitoring dashboard, part of our Trade360 analytics suite… Along with the price chart (blue), TradeSmith shows the number of stocks in the Nasdaq trading in bullish (green), neutral (yellow), or bearish (red) technical patterns: 
That’s what TradeSmith veterans know as our Health indicator. The top left shows the current distribution. And the distribution over time runs along the bottom. Note what we’ve seen since late August. At that point, 14.3% of stocks were trading in the red. Today, that figure has more than doubled to 31.6%. And the share of stocks trading higher has fallen from 77.5% to 57.4%… even as the Nasdaq has climbed over 7%. Also by our measure, only a little over a third in the Nasdaq 100 are trading in an uptrend. Another third are sideways… and another third are falling. Just like Babson warned ahead of the Great Depression, the number of stocks in the tech index trading in bullish conditions is falling… and the number of bearish stocks is rising. And that’s just one reason we’ve been sounding a note of caution here at the Daily. We can’t say whether we’re headed for an economic depression – the stock market is our beat here in the Daily. But what we can say is the stocks that make up the market are out of whack with the broader advance. That’s a recipe for the index to potentially get “back in whack” in a volatile way. Then there’s Marc Chaikin’s bearish call for 2026… Marc has more experience than Wall Street than anyone I know.
He started as a broker in 1966, back when trades still came through on ticker tape and before electronic quote systems, phone-based retail trading, or anything resembling online brokerages. Over time, he’s worked as a stockbroker, analyst, and head of the options department for a major brokerage firm. He’s been through 10 bear markets and survived them all. These days, Marc heads up Chaikin Analytics, a fintech platform and publisher that helps regular investors navigate the market using Wall Street-level analytics. If that’s sounds familiar, it’s because we’re cut from the same cloth. Chaikin Analytics and TradeSmith share the mission to break Wall Street’s grip on elite investment technology and put it in the hands of regular investors. That’s why when Marc spoke at this year’s Stansberry Investment Conference in Las Vegas in and called 2026 the Year of the Bear, our ears perked up. 
TradeSmith is built on a foundation of risk management. TradeStops, our first software innovation, helps over 134,000 users around the world protect their downside risk (and maximize their gains) on over $29 billion in portfolio assets. Marc’s outlook isn’t rooted in stretched valuations… technical patterns… or comparisons to earlier tech manias. He’s basing it on a four-year political cycle that’s been remarkably consistent over more than a century of data. Here’s the basic idea… In the lead-up to an election, Washington usually steps on the gas – stimulus, spending, and anything that keeps voters upbeat. Markets often surge on the back of that support. But once an administration has secured the vote, the incentives flip. The policy sugar high fades, and the market begins to show its cracks. Weakness tends to appear first in the post-election year – which for this cycle is 2025. But the real trouble, historically, hits in the midterm year. In this case, 2026. Look back across the last 14 election cycles and a pattern jumps out. Bear markets either started or were already underway in nine of those 14 midterm years – roughly 65% of the time. Four years ago, we got the 2022 bear market. The S&P 500 fell 20%. In 2018, the previous midterm cycle, stocks ended the year down 6.6% after falling as much as 11%. And in 2002, stocks continued a brutal bear market following the dot-com bubble burst, ending the year down 23% and falling as much as 34%. If the cycle holds this time, we’ll see something similar in 2026. We’re already seeing cracks in the AI rally… But in our new Flash signals system, plenty of the household names tech stocks saw warning signs weeks ago. One of the bigger so-called hyperscalers, Oracle (ORCL), triggered a new Flash Sell signal on Nov. 21. Since then, the stock is down 8.8%. Former semiconductor favorite Super Micro Computer (SMCI) saw a Flash Sell signal on Nov. 14. Since then, it’s down 17.3%. Recently listed chip player ARM Holdings (ARM) is down 12.8% since its Flash Sell signal on Nov. 26. There are plenty of AI stocks out there that haven’t flashed “sell” yet. But they are in our yellow warning zone. We can count AI chip bellwether Nvidia (NVDA), ecommerce titan Amazon (AMZN), and rival chipmaker Advanced Micro Devices (AMD) among these. They’ve all moved into the yellow Hold zone in the last week. How do you trade in a market like this? Selectively… and quickly. As Marc and TradeSmith CEO Keith Kaplan went into detail in their Tipping Point 2026 event on Tuesday, today’s is faster and more volatile than it’s ever been. Crashes are unfolding in weeks, days, and even hours… not months or years like they did before. That’s why Keith and Marc also launched a new “flash portfolio” designed exactly for the kind of high volatility market on the cards in 2026. We call it the Chaikin Flash Portfolio. It combines the fundamental and money flow analysis from the Chaikin Power Gauge with our new Flash Buy and Sell signals. Only the top five stocks that tick both boxes get added. You then compound your returns into a new set of five top-ranked stocks. In a backtest over the past six years, it turned a stake of $10,000 into more than $130,000. Going back to 2017, following the strategy returned 36% a year with a peak drawdown of 32%. It’s the perfect synthesis of everything we’ve been doing at TradeSmith this past year. Our machine learning model, powered by AI, selects the stocks. But not before our Flash signals and Marc Chaikin’s Power Gauge qualifies them. To learn all about it, and everything else we’re releasing to prepare our readers for a potential bear market next year, make sure you don’t miss the replay of our Tipping Point 2026 summit. Whether you decide to join us and subscribe our new toolset and strategy or not, I guarantee you’ll get a ton of useful information from watching – including one top stock that’s flashing green across both TradeSmith’s and Chaikin’s systems… and one that’s flashing red and destined for the dump. To building wealth beyond measure, 
Michael Salvatore
Editor, TradeSmith Daily | 
0 التعليقات:
إرسال تعليق