A Five-Point Checklist for This Market

A Five-Point Checklist for This Market

By Keith Kaplan, CEO, TradeSmith 

When I warned you last December that 2026 would be a “tipping point”
year for the AI boom, I wasn’t thinking about a war in the Middle East.

I had no idea it was even in the cards.

In fact, I wasn’t thinking about the future at all. I was looking at the past.

The AI boom isn’t the first time stocks have soared on the promise of a transformative new general purpose technology.

The market boomed in the 1920s on the belief that electrification, automobiles, and mass production would create a New Era of prosperity.

In the 1960s, another New Era dawned with the rise of computing, electronics, and aerospace.

Then in the late 1990s came the fastest boom of the century, built on a new communication technology called the internet.

As I wrote:

Different decades. Different technologies. Different New Eras. But each ended the same way: with a “tipping point” nobody saw coming until it was too late. 

After a roaring bull market over the past three years, the tech-filled Nasdaq 100 is down 4% in 2026. And the Roundhill Magnificent Seven ETF (MAGS) – which tracks the seven mega-cap tech stocks that led the bull run – is down 7%.

That’s obviously not a crash. It’s hardly even a reason to panic. We’re nowhere near the kind of market where we’d recommend selling everything and moving to cash.

But it is a change in market character. And in my experience, those are worth paying attention to.

The good news is you don’t have to choose between protecting yourself and staying in the game. Because TradeSmith’s software lets you play defense and offense at the same time.

With our indicators and portfolio management tools, you can still profit on the upside if this bull market continues. And you’re protected if this year’s volatility turns into something worse.

Today, I’ll run through a five-point checklist you can follow to do just that.

Move No.1: Check Your Stops

Right now, the most important question to ask about every position you hold is: Do I have the right stop in place?

If you’re a TradeSmith subscriber, that means using our Long-Term Health stops for your long-term holdings. It’s calibrated to each stock’s normal range of movement, so you don’t get shaken out by routine dips in an otherwise healthy position.

For shorter-term positions – anything you’re holding for months, not years – you want a tighter leash. That’s where our Short-Term Health stops come in. They trigger earlier, and they’re calibrated for faster-moving conditions.

The distinction matters. Use a long-term stop on a short-term trade, and a small loss can become a large one before the signal fires. Use a short-term stop on a long-term holding, and normal volatility shakes you out of a great position prematurely.

Stop losses matter because when markets get choppy, emotions take over. Fear makes you sell too early. Hope makes you hold too long.

This simple risk management tool removes that decision entirely. You set it in advance, when you’re thinking clearly. If the market moves against you, and your stops are triggered, you get out without having to think about it.

And TradeSmith makes stops even better by tuning them to each of your positions.

Here’s a snapshot of the five most recent Long-Term Health sell signals across the S&P 500, Nasdaq 100, and Dow. If you own any of these stocks, it’s time to seriously consider selling them:

These are just five of 203 stocks showing the same sell signal across our system right now. So if you’re a TradeStops subscriber, log in and make sure nothing you own has the same flag.

Move No. 2: Rebalance Your Portfolio

A bull market is great for your account balance. It’s not so great for your position sizes.

When stocks run hard, your winners become a bigger slice of your portfolio. A stock that started as a 3% position and doubled is now 6%. One that tripled is nearly 10%.

It feels great on the way up… but it’s painful on the way down.

A great habit to get into is regular rebalancing – selling a slice of your biggest winners and spreading the proceeds across the rest of your portfolio.

It sounds counterintuitive. You’re trimming the stocks that are working. But it’s how disciplined investors keep risk evenly distributed, so that no single position can do serious damage to their overall wealth.

Move No. 3: Follow What’s Working

A tipping point doesn’t mean everything goes down. It means investors get more selective.

The rising tide stops lifting all boats… and the stocks with real, structural demand start to separate from the ones that were just riding the wave.

Right now, our data is pointing to three clear areas of strength – all tied to the AI boom, but one level deeper than the obvious plays.

• Power grid upgrades.

Big tech is spending more than $600 billion on AI infrastructure this year alone. All that compute power needs electricity – and America’s aging grid wasn’t built for it.

Companies repairing and upgrading that grid, like GE Vernova (GEV) and Powell Industries (POWL), are hitting new all-time highs while the broader market stumbles.

• Optical networking.

This the high-speed infrastructure that moves data between AI datacenters. Without it, the AI buildout stalls.

Firms like Lumentum (LITE) and Ciena (CIEN) are posting 25%-plus revenue growth and hitting new highs.

• Memory and data storage.
  AI is about data just as much as it is about energy and networking.

Training large AI models requires enormous amounts of memory. Running them does too.

 

Western Digital (WDC) and Seagate (STX) make the hard drives and solid-state storage that hold all that data. Marvell Technology (MRVL) designs the chips that move data around inside AI systems.

These companies all look boring… until you realize every AI application on the planet depends on what they make.

None of these themes requires predicting where the Nasdaq goes next. The demand is structural.

And our Short-Term Health indicator has been flagging buy signals across all three… some going back as long as 10 months. Take a look:

Also note how well these stocks have performed over the last month – the period where markets saw most of their decline from the Iran war shock.

Move No. 4: Shorten Your Time Horizons

Choppy markets like this one are great for surfacing short-term opportunities.

That’s because volatility moves stocks in both directions – often further and faster than the underlying business justifies.

For disciplined traders, that’s far more of an opportunity than a problem.

Our Predictive Alpha service uses an AI model to forecast price moves for thousands of stocks up to 21 trading days out.

Right now, it’s pointing to bullish setups across energy, biotech, and transportation – sectors that are holding up while the broader market struggles.

ConocoPhillips (COP) is among the top bullish signals in energy, with a forecast to rise 5.3% by May 4 with a 91.4% accuracy rating.

Kymera Therapeutics (KYMR), which develops treatments for cancer and inflammatory diseases like arthritis, stands out in biotech. That’s forecast to rise 8% by April 29, with an accuracy rating of 92.2%.

And our model is also flagging a bullish setup in Old Dominion Freight (ODFL), one of America’s largest freight carriers. Our model sees it rising 3.3% by April 30, accurate 89% of the time in the past.

If you’re a subscriber, log in and check the top 10 bullish Predictive Alpha forecasts for yourself – there’s far more to see than just these three.

Move No. 5: Think Differently From the Crowd

Finally, in a market like we’re in today, you want to think differently from the crowd.

That’s why I’m so excited about the revolutionary new software we’ve been working on. It builds a kind of “behavioral profile” of more than 2,000 stocks – and scans them every day for the specific patterns that have historically preceded big moves.

It’s a radical departure from how 99% of investors approach the markets.

The main two ways to analyze stocks are fundamental analysis and technical analysis (also known as chart analysis).

With fundamental analysis, you look at what a company is worth and whether the market is pricing it correctly. Warren Buffett made this method famous. It works. But it applies the same framework to every company, as if they all behave the same way.

With technical analysis, you look at how a stock is trading rather than what the business is doing. It also works. But like fundamental analysis, it also applies the same frameworks to thousands of different companies.

Then there’s a game-changing third approach that my team and I at TradeSmith have been working on.

Where fundamental analysis asks what a company is worth, and technical analysis asks how it’s trading, this new approach asks something different entirely. How does this specific stock behave – and when does that behavior signal a big move?

And it changes how you think about every trade you make.

I’ll be getting into all the details at the launch event for this breakthrough new trading tool later this month. So keep an eye out for more on that in these pages this week.

All the best,

Keith Kaplan

CEO, TradeSmith