Buy This Lazy ETF… Or Make Money

January 27, 2025

Buy This Lazy ETF… Or Make Money

By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

As we said, we now have new highs in January…
Did you “short the buck,” as this ace trader called it?
Why gold is due for a short-term pullback…
The latest Big Money buys…
This “lazy” ETF shouldn’t impress any TradeStops user…

The last two weeks have been spot-on…

Allow me to set humility aside for just a moment.

If you’ve been reading TradeSmith Daily and following our guidance, it really can’t be overstated how well you’re doing.

Let’s rewind…

The first half of January made it far too easy to get bearish on the year ahead. The Santa Claus rally stalled out. The first five days were a bust. The air was tinged with anxiety about 2025.

It looked like we would face a year of disappointment. In the worst interpretations, a recession and a bear market.

We were undeterred.

We saw what others didn’t: two good reasons to think stocks bottomed out on Jan. 14.

To recap, those reasons were:

Large speculators (hedge funds and the like) were getting foaming-at-the-mouth bullish on the dollar.
The chart of SPY was making a great technical argument to fade the pain.

We found that day “a pretty strong case that stocks have found their short-term bottom.” They did. The S&P 500 is up 4.5% since then and just charted a new all-time high, exactly as we suggested it might.

Not only that, the dollar index collapsed right on cue. DXY is down about 2% since we noted how obscenely bullish the speculators were getting.

I can’t take all the credit…

I learned from one of the best traders in the world how to spot divergences between emotions and data.

That trader is Jeff Clark. And he, just like me, got bearish on the dollar last week. He just found his argument in a different place.

Recommended Link

TICKER: REDACTED – Buy Now!

This one stock has been responsible for gains of 85% in 14 days, 176% in 5 weeks, 41% in two weeks, 120% in 3 months, 138% in 8 days, 186% in 8 days, 222% in 8 days, and many more… Now, millionaire trader Jeff Clark is revealing his strategy for trading this stock PLUS the full name and ticker symbol for FREE. Simply click here right now to watch.

Jeff is a master of price action. Using advanced technical indicators, Jeff can see when buying pressure fades at the top of rallies, or builds at the bottom of powerful declines.

He does all this for free in his e-letter, Market Minute. And just this morning, a new idea hit my inbox:

Each week, the CFTC Commitment of Traders (COT) report shows the positions (long and short) of the largest commercial gold traders.

The short position in gold is almost always a positive number – meaning that commercial traders are usually short gold futures contracts. That makes sense since most commercial short positions are hedges against a future decline in price.

When gold is at a relatively low level and commercial traders expect it to be higher in the near future, the COT short interest often drops to less than 200,000 contracts.

The CFTC report published last Friday – which reports positions as of Jan. 14 – showed the smart money is net-short over 302,000 gold contracts.

Here again, this is a condition that often occurs closer to a top in the gold market than to a bottom.

Regular readers will note we used the same CFTC report to identify a buy opportunity in gold back at the start of December. Back then, the smart money was net short just 272,000 contracts. Since then, the short interest has been rising.

And wouldn’t you know it, gold just touched and then retreated from the all-time high set in October…

If more-bullish commercial traders were a reason to get bullish gold in December, they’re just as good a reason to bet against the shiny yellow metal now.

By the way – Jeff just released a free presentation all about using his unique method of trading during the first 100 days of the Trump administration.

The first handful of days have already been highly consequential, both in markets and in policy. And Jeff’s personal take, that we’re set to see more volatility ahead in 2025 that will make for great trading, is essential to understand right now.

Go right here to watch his new presentation before it goes offline later this week.

Let’s check in on the latest Power Factor stocks…

With the market hitting fresh highs and investor optimism screaming higher, that’s a strong cue to look to high-growth areas of the market.

There’s no better place to find those than the chart below of Jason’s top-ranked Power Factor stocks (followed by the absolute lowest):

Regular readers know we consider Power Factor stocks those that have excellent revenue and earnings growth rates, along with the institutional buy volumes to back them up.

The higher the score, the better a stock checks these Fundamental and Technical boxes.

This week, we see a few new names enter the fray in Range Resources, Atlas Energy Solutions, and Carpenter Technology – indicating some appetite for industrial and mining stocks as the new Trump admin’s policy priorities get digested by the Street.

Just as important are the stocks ranked at the bottom, with the worst Fundamental and Technical Power Factors. These stocks you want to stay away from.

As always, the newest list of companies on the Big Money’s watchlist is dropping later today. Quantum Edge Pro subscribers – keep an eye out for that.

If you aren’t already one of them, click here to learn more about a subscription.

The financial engineers just dreamt up a new way to trade bitcoin…

One short-sighted but not incorrect critique of bitcoin is that, while the rides up can be incredibly profitable, the rides down are unbearably painful.

Since its launch, bitcoin has experienced multiple drawdowns of 50%, 80%, and even worse after its cycle peak.

Most folks don’t want to hold any asset through a downturn like that. And some might even give up some of the upside if it means they don’t have to.

That’s just what Calamos Investments is betting on with its suite of new bitcoin ETFs. Here’s how it describes the first ETF, the Calamos Bitcoin Structured Alt Protection ETF (CBOJ), on its website:

CBOJ will launch on Jan. 22, 2025, offering upside potential to bitcoin to a cap with 100% downside protection over a one-year outcome period. On Feb. 4, 2025, Calamos will list CBXJ and CBTJ, providing 90% and 80% downside protection levels, respectively, with correspondingly higher upside cap rates:

CBOJ with 100% downside protection and an estimated cap range of 10%-11.5%

CBXJ with 90% downside protection and an estimated cap range of 28%-31%

CBTJ with 80% downside protection and an estimated cap range of 50%-55%

So if you buy one of these ETFs, your profits will be limited at an upfront rate. The trade-off is you also have limited or zero risk (before the 0.69% expense ratio, naturally.)

How is this done? It’s simpler than it seems, but not without some risk.

Essentially, Calamos will put 96% of the ETFs’ funds into short-term Treasurys. The other 4% will go into trading options on bitcoin, which will be the vehicle for making the promised returns up to the cap.

Now… This may be a great vehicle for someone who wants exposure to bitcoin but is particularly neurotic about price declines. It’s what you might call a “lazy” way to trade bitcoin cycles.

But at TradeSmith, we have a way that’s a lot easier… and probably a bit cheaper too. It’s our longest-running software product, TradeStops.

Our software platform tracks stocks as well as cryptocurrencies. Because we have that data, we can run bitcoin through TradeStops and see the volatility-optimized time to sell it.

As I write, bitcoin’s Yellow Zone – a caution area – is down at $97,000. Crossing into that zone would be a warning sign, with the Red Zone down at $91,000 being a confirmation of that warning. I’ve marked each of these lines in the sand on my price chart below:

The Entry Signal – another feature of TradeStops – triggered back at $75,620. That means if we crossed into the Red Zone on bitcoin and you were following this signal, you would’ve booked about a 20% gain.

The best feature of TradeStops, though, is that these are trailing stops. As bitcoin continues to rise – as I believe it will, in fact it’s charting a new intraday high as I write – the stops will move up with them. You’ll secure more profit and fewer losses the higher it goes.

Now, this method is clearly less lazy than holding the Calamos ETFs. We don’t do the trading for you.

But with an asset like bitcoin, limiting yourself to as much as 50% profits, even at this point in the cycle, is a waste of potential.

Think of it like this…

Let’s assume you’re still following that entry signal. If bitcoin does rise another 50% from here to chart at around $160,000, the TradeStops Red Zone would sit at about $138,000. In this scenario, selling at the Red Zone means you’re not losing a dime. You’re actually making about 80%. And remember – hitting the Red Zone means the trade is over. It’s the “worst-case scenario.”

And all that without handing your money over to a little-known investment fund that wants to buy some Treasury bills and trade some bitcoin options with your money and promise a small risk-free return.

The numbers don’t personally stack up for me… And I don’t mind being a little less lazy because of it.

To your health and wealth,

Michael Salvatore signature