A More Profitable Alternative to the Fog of War

BY KEITH KAPLAN
CEO, TRADESMITH

On the morning of Oct. 14, 1806, a 26-year-old Prussian officer named Carl von Clausewitz rode toward battle against Napoleon’s army.

He had every reason to expect a Prussian victory. Prussia was Europe’s premier military power, undefeated for half a century.

What he and his fellow officers didn’t understand was that Napoleon had reinvented the rules of warfare.

Napoleon didn’t move his whole army down one road. Instead, he split his forces into six independent corps spread across a 38-mile line. Each was large enough to fight on its own, and each moved along a separate route.

Prussia assumed one front. Napoleon gave them six.

The French hit the Prussian line from the front, flanks, and rear at once. Before the Prussian commanders realized they were surrounded, it was too late. Twenty-five thousand soldiers, Clausewitz among them, were prisoners of the French by that afternoon.

He spent the next two decades trying to understand what had happened. His conclusion: In war, you never have the full picture. Instead, you’re “wrapped in a fog of greater or lesser uncertainty.”

Today, investors are trying to peer through that fog to understand what to do with their money.

And I get that. The war with Iran has pushed the price of oil above $100. This is having knock-on effects across the economy… and the markets.

But here at TradeSmith, we take a different approach. Instead of obsessing over headlines, we look at what the market is telling us, through the lens of data.

And right now, it’s sending a message you need to hear. Key parts of this market have shifted from bullish to bearish – and most investors haven’t caught up yet.

But it’s not all bad news. As our proprietary AI trading model is showing, there are pockets of opportunity for short-term traders.

First, let’s check our Short-Term Health indicator… and the warning it’s sending.

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These Four Indexes Are in Red Zones

Like our flagship Long-Term Health indicator, Short-Term Health alerts you before stocks take a big dive. Only it’s tuned to shorter timeframes.

Here’s what I’m seeing now.

You’re looking at the Short-Term (on the left) and Long-Term (on the right) Health of major market indexes in the U.S. and overseas.

Of the U.S. indexes, the S&P 500, the Dow, and the tech-filled Nasdaq 100, have all triggered “flash sell” alerts. So has the Russell 1000. It tracks 1,000 of the largest publicly traded companies, representing roughly 93% of the U.S. stock market.

That’s not a reason to sell your long-term holdings – that’s what our Long-Term Health stops are for. Instead, it’s telling us that bullish momentum has broken down and has been replaced by bearish momentum.

But these indexes have also entered Long-Term Health Yellow Zones. That’s a sign that longer-term momentum is also starting to break down. And another reason to be cautious.

Is Our “Year of the Bear” Warning Coming True?

I began warning of a bearish 2026 late last year. I hope you paid attention.

In my Dec. 12 Daily, I called it the “bear market nobody is preparing for.”

And for the first time since becoming CEO of TradeSmith, I urged you to follow our Short-Term rather than Long-Term stops to keep you safe from the “volatility shocks, fast trend breaks, and tipping-point conditions” that I saw coming.

We’re not in a bear market yet. It’s defined as a 20% drop or more from a peak. But the Nasdaq 100 is now in a correction – a 10% drop from a peak.

So if you’re a TradeSmith subscriber with access to our Short-Term Health tool, make sure to use it. And keep an eye on those Long-Term Health stops, too.

If the S&P 500, Dow, and Nasdaq 100 enter Long-Term Health Red Zones, that’s a signal to reduce exposure – or exit entirely – and wait for a new Green Zone entry.

But it’s not all about protecting your downside risk. Another way to navigate this choppy market is to trade short-term moves. And that’s where our AI-powered trading model comes in.

What Predictive Alpha Is Seeing Now

Predictive Alpha is TradeSmith’s AI-powered forecasting tool. It analyzes historical patterns in more than 2,300 stocks and projects where each one is likely to trade over the next 21 trading days.

It also tells you how accurate that same pattern has been historically – so you know which forecasts to take seriously and which to treat as background noise.

Right now, the stocks it’s most bullish on fall into three distinct buckets.

1. Energy and Commodities

Equinor (EQNR) is a Norwegian oil-and-gas giant with significant liquefied natural gas (LNG) export capacity – the kind of company that benefits when Middle East supply gets disrupted and buyers scramble for alternatives.

ConocoPhillips (COP) is one of the largest independent oil producers in the world, with low-cost production assets spread across the U.S., Canada, and Norway.

These aren’t speculative bets. They’re companies that make more money when oil prices rise – and oil prices have been rising big time lately.

Adecoagro (AGRO) is the outlier here, but it fits the theme. It’s a South American agricultural company that produces food, ethanol, and sugar. When fertilizer costs spike and supply chains get squeezed, agricultural producers with their own land and low input costs tend to hold up better than most.

2. Clean Energy

Bloom Energy (BE) makes fuel cells – compact, power-generating units that convert natural gas directly into electricity, without burning it. Think of them as a cleaner, faster alternative to plugging into the power grid.

And the company has seen a surge in demand from AI data centers, with a 2.5x increase in product backlog over the past year.

Its fuel cells can be deployed in as little as 55 days – far faster than traditional utility substations can scale. In a world where AI data centers need power urgently, not eventually, that speed advantage is worth real money.

Enlight Renewable Energy (ENLT) is a global renewable energy developer with a heavy footprint in solar, wind, and energy storage. This is another obvious place for money to flow with fossil fuel supplies snagged up in the Persian Gulf.

3. Biotech

In January, I wrote to you about the opportunity in biotech. The Short-Term Health signals were just starting to turn. Since then, the sector has continued to strengthen – and Predictive Alpha is now flagging several names.

Kymera Therapeutics (KYMR), Erasca (ERAS), and AnaptysBio (ANAB) are all showing up on the bullish list.

These aren’t household names. But they share a common thread. They’re developing targeted therapies where AI is accelerating the drug discovery process – identifying candidates faster and killing off dead ends earlier.

If you’re looking for a way to play the AI megatrend, without buying mega-cap tech stocks like Nvidia (NVDA) and Alphabet (GOOGL), put these stocks on your shopping list.

The energy stocks on the list will benefit as the war drags on and energy supplies are trapped in the Gulf.

And biotech firms don’t need oil prices, interest rates, or geopolitics to go their way. When the fog of war is this thick, stocks that run on their own clock look a lot more attractive.

Even better, you don’t have to decipher confusing war news to know they’re a buy. You just have to follow the data.

All the best,

Keith Kaplan signature

Keith Kaplan
CEO, TradeSmith

P.S. I post my thoughts on X every day about bullish signals that are firing on the TradeSmith Finance platform – including more of my favorite energy and biotech stocks. Check out my recent posts about agentic AI, the K-shaped economy, and more.

A More Profitable Alternative to the Fog of War