99.9% Have No Idea if the Market Is Healthy VIEW IN BROWSER  | BY KEITH KAPLAN
CEO, TRADESMITH |
Hundreds of millions of people around the world use Google every single day. Of those hundreds of millions of people, a lot of them are investors who are involved enough to check stock prices daily. And most of them think of the S&P 500 as the primary stock market benchmark. Therefore, we can assume that at least once per day (probably more), a large number of investors find themselves Googling “S&P 500,” then staring down an image that looks something like this: 
I ask you: For this being one of the most frequently viewed stock charts in the world… Is this the best we can do? It tells you the S&P 500 is up 3.22 points, or 0.05%. It tells you the previous close. It tells you the high and low of the past year… and day. And you can pop around to different time frames. That’s about it. Satisfied? I’m not. I think you should have a chart that quickly shows: - The real reason why the market is up or down…
- Which stocks in the market are contributing to the overall move…
- The underlying health of those stocks…
- And a reasonable idea of whether an extreme price move is a garden-variety pullback… or the start of something much worse.
TradeSmith is a software and data analytics company. We provide solutions to big financial problems just like this one. And if you ask me, Google’s extremely basic view of the most important group of financial assets in the world is plain not good enough. No investor can make a rational decision about their financial life with this speck of information. Don’t get me wrong. I understand most investors don’t want or need to get in the weeds about this stuff. I’m not proposing a new, overcomplicated standard for stock charts. But as a young investor 25 years ago… viewing charts like the one I showed you from Google Finance just drove me crazy. I knew investors deserved better. I knew I could build a better chart. So when I joined TradeSmith in 2017, doing just that was my top priority. I haven’t Googled “S&P 500” in years. I don’t look at Yahoo Finance. I know better! I go straight to our members-only platform, TradeSmith Finance, and click the “Markets” tab instead. And today, I’d like to show you what happens when I get there. I’ll show you how I analyze TradeSmith’s chart for one of the most-owned stock benchmarks in the world. You’ll see how, with the same amount of effort, I can glean a far more useful understanding about where the market is headed… where it’s been… and the precise level at which I know I need to bail out or buy in. Then, I’ll share some details about the next evolution of our software… available to our subscribers very soon. The Only Market Health Indicator I Follow When you click the “Markets” tab at the top of TradeSmith Finance, you immediately get a read on the health and volatility of every financial market that matters. Large caps, mid caps, small caps. Stocks listed in the U.K., China, Australia, Japan, and more. Today, though, we’ll stick with the most important market for most of our readers – the S&P 500. When you scroll down from that broad view, you get a chart. Our chart looks a bit different from Google’s. In addition to the price change and previous close, it shows you: - The percentage of S&P 500 stocks trading in the Green Zone – our proprietary measure of positive momentum – as well as the Yellow Zone and Red Zone.
- Which zone the S&P is in overall and how far down the index would need to drop to move to the Yellow Zone (or Red Zone).
- The past and current “bullseye” and “bearseye” signals – extremely powerful market cycle indicators I’ll explain in a moment.
It’s all in this chart. Then at the top right, you can even see how many S&P stocks get an overall “Strong Bullish” rating from TradeSmith… and how many are in an uptrend according to our Smart Moving Average. Conservative investors can use that to sell stocks on a pullback: 
Immediately, you can see the specific levels that you need to watch and understand as a long-term investor who wants to make the most of every upcycle and downcycle. That’s much more useful than just seeing the price rise and fall over time. For example, take a look back at April on the chart above. The red crosshairs icon represents our “bearseye” signal. In the past, this signal flashed before major pullbacks and prolonged bear markets – like the dot-com bust (December 2000) and the Great Financial Crisis (August 2007), as well as the 2022 bear market. Following the bearseye in May 2022 would have meant dodging the deeper lows investors sustained later that year… and locking in great prices most would wish they took advantage of. Luckily, this one wasn’t so bad. But if you’d started reducing your risk on April 4, 2025, when we got the bearseye, it’d have saved you a lot of grief over the next couple of weeks as things went from bad to worse. Our proprietary indicators, just like this one, monitor the gyrations of the market and its internal trends. And these indicators focus on the individual stocks that make up each index. They measure the health and trends of these stocks, then determine if we are trending in a healthy or unhealthy way. It should make sense that to get a bearseye signal, you need both a weak market and weakness in the stocks that make up the market. And our signals have a history of not only being right, but also nailing bearish and bullish calls before any 20% index drop (or rise) from the bottom – which is generally when market-watchers are willing to declare that we’re in a bear (or bull) market. That’s because TradeSmith charts reflect the big thing that I found was missing in traditional financial charts: People forget that indexes are groups of stocks. All the components matter. If the index is down, but the vast majority of stocks in it are not, we could very well see the index drop into the Red Zone while most of its stocks remain in the Green Zone. And it either means that the largest companies weighted in the index are facing headwinds… or all the stocks are facing a small amount of weakness. Neither is necessarily a reason to sell, but you have to be able to pick up on these nuances before you can see that. On the flipside, if an index isn’t shooting higher out of a bear market but the companies inside it are rapidly improving, then that’s a big reason to buy. That’s how our “bullseye” signal works – which triggered on May 12, 2025… and stocks have ripped 12.7% higher since then. We get these signals when the percentage of Red Zone stocks drops below 60% or if the underlying health of the index itself improves to Green or better. But Here’s the Great Thing About Our Charts… These bullseye and bearseye signals, powerful as they are, don’t come as huge surprises. Let’s bring that chart up again… you can see along the bottom how many stocks in an index are trading in the various zones. When index health is rapidly deteriorating, you can see it happening in real time. When it’s improving, you see that too:
This alone gives you such a massive edge on the scores of investors who fail to sell before a bear market deepens… or worse, sells at the bottom. Now, all this said, where do we stand today? Right now, there’s a strongly positive trend in the markets. The number of Red and Yellow Zone stocks in the S&P 500 is shrinking… and the number of Green Zone stocks is growing. That’s a sign that we’re moving in the right direction, even if there’s a pullback. We just hit a new record high. While we’re hitting a seasonal period of instability, that’s OK… our trend in our algorithms looks healthy. And if things go awry … our alerts go out. You see, depending on which indicators you’ve subscribed to, TradeSmith will automatically alert you when one of them triggers for your portfolio (or watchlist) stocks. For example, Trade360 subscribers get the Health Indicator signals I’ve shown you today, including Entry Signals when a stock crosses into the Green Zone. They can sign up for others, too. If they want market health alerts, they can select TradeSmith Baskets in their alert settings as well: 
The important thing is to set up the alerts that are most important to your investing strategy – and watch out for them! Now, tell me that isn’t a night and day difference. With our software, you don’t even need to check the chart every day if you don’t want to. You can simply follow our proven alerts and make the moves you need to. Right now, we’re in a Mega Melt-Up. For the past couple years, stocks have gone up so high, with so few interruptions, that the momentum reminds you of the mid-‘90s. Or, before that, the “Roaring ‘20s” from 100 years ago. But the other side of this coin is that, eventually, there will be an epic meltdown that could take a huge chunk out of your returns… possibly reversing most, if not all, of the melt-up move altogether. This could well prove to be both the biggest wealth creation and destruction event in a very long time. If you play it right, you could walk away with massive gains before TradeSmith alerts you to the next “bearseye.” I always write to you here in TradeSmith Daily whenever we get that extreme sell signal on the stock market. And to get those signals on the specific stocks you’re most interested in – go here. All the best, 
Keith Kaplan
CEO, TradeSmith | 
0 Response to "99.9% Have No Idea if the Market Is Healthy"
Post a Comment