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

By Michael Salvatore, Editor, TradeSmith Daily

In This Digest:

Energy stocks are surging – our signals caught the move early
As we predicted, 2026 has seen a major momentum shift
The “ex-U.S.” trade is reversing fast

Oil prices have topped $100 a barrel…

Over the weekend, strikes on oil infrastructure across the Persian Gulf have pushed crude prices higher.

At the time of writing, Brent crude oil, the international benchmark, is trading at about $95 after reaching a high of $108 earlier in the day. And WTI crude oil, the U.S. benchmark, is trading at about $101 a barrel.

That’s a roughly 40% increase since Israel and the U.S. began their bombardment of Iran on Feb. 28.

It’s the first time in about four years that oil prices have passed the psychologically important $100 mark.

Americans are feeling it at the pump. The national average price of gasoline has jumped about 17% in just the past two weeks.

The last time gas prices rose this fast was March 2022, when Russia’s invasion of Ukraine a month earlier sent crude prices surging – a run-up that eventually pushed the national average to a record $5 a gallon by June of that year.

The problem isn’t just Iran’s attacks on oil infrastructure in Persian Gulf countries. Shipping traffic through the Strait of Hormuz – the narrow body of water off the southern coast of Iran that carries roughly one-fifth of the world’s oil supply – has fallen sharply.

There’s no shortage of speculation right now about what all of this means for inflation, interest rates, and the stock market here in the U.S.

But here at TradeSmith, we follow the data, not the headlines. And it’s telling us everything we need to know about the trades to make…

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We’ve been bullish on the energy trade for 9 months now…

Our Short-Term Health indicator has been flagging this going back to July. Take a look at the colored bar along the bottom of this chart of the S&P 500 Energy ETF (XLE). Whenever it’s Green, it’s a buy. Yellow is a caution zone. And Red is a sell:

This indicator doesn’t read the news or care about geopolitics. It measures how a stock’s short-term volatility is behaving versus its historical range – and tells you whether it’s in a healthy uptrend, a caution zone, or an unhealthy downtrend.

This shows us that XLE has been in its current Green Zone since Nov. 12, when the ETF traded just below $45. Since then, it’s up over $57.

Right now, energy stocks are dominating the Green Zone. Here are the 10 most recent Short-Term Health buy signals for energy stocks we track across the Dow, Nasdaq, S&P 500, as well as the small- and mid-cap indexes S&P 600 and S&P 400:

Look at how these stocks have moved over the past month…

SM Energy (SM), an oil and gas explorer with operations in the Permian Basin and South Texas, is up 23.2%.
Par Pacific (PARR), an energy company that provides renewable and conventional fuels in the United States, is up 12.9%.
Antero Resources (AR), one of the largest natural gas and natural gas liquids producers in Appalachia, is up nearly 13%.
Murphy Oil (MUR), an explorer and producer with offshore and onshore operations across North America, is up 8.7%.
EQT (EQT), one of the country’s biggest natural gas producers, is up 9.4%.

And our data flagged many of these before they ran. The most recent of these signals, in SM, fired two days before the U.S. started its attack against Iran.

As long as the conflict in Iran continues, energy stocks should be your primary focus. And these stocks are the most recent buy signals our system is flagging.

Amid broader volatility, energy is working. So keep stocks like this at the top of your watchlist.

We warned you that 2026 was shaping up to be the “Year of the Bear”…

If you’re a regular TradeSmith Daily reader, you’ll know that we warned you that 2026 could be the year a bear market struck.

It’s the reason we developed our Short-Term Health tool. It’s also why, for the first time since Keith Kaplan became TradeSmith’s CEO, he urged you not to lean on our Long-Term Health indicator for stops.

Long-Term Health is a powerful tool for long-term investors.

But it’s not designed for the kind of fast, reactive market Keith saw coming in 2026.

We’re not in a bear market yet, which is typically defined as a 20% or more drop from a peak.

But the S&P 500 is down about 1.7% since the start of the year. And the once high-flying Nasdaq 100 tech index is down by almost 3%. So if you haven’t already gotten familiar with how Short-Term Health can help you protect your downside risk as stocks fall, now is a great time to fix that.

Keith recently walked through how this indicator works and why it’s so vital to have on your side in 2026.

If you haven’t caught Keith’s presentation yet, now is the time. With the way 2026 has gone so far, this message may prove the most important wake-up call you hear all year.

The “ex-U.S.” trade just hit a wall…

For the first six weeks of 2026, international markets were the place to be. Brazil, South Korea, and others were outpacing the S&P 500.

Today, that trade is reversing fast. And it shows how disruptive the energy shock emanating from the Middle East has been.

China, India, and Japan are among the world’s largest importers of Middle Eastern oil and natural gas.

China imports roughly 11 million barrels of oil a day (or used to, anyway), a significant portion of which transits the Persian Gulf.
India imports close to 5 million barrels a day, with the Gulf accounting for more than half its supply.
South Korea gets roughly 70% of its oil from the Middle East.
Japan gets roughly 90% of its oil from the Middle East.

When oil supply tightens and prices spike, these economies get hit even harder than the U.S., which is the world’s largest oil producer.

And higher energy costs quickly flow through to manufacturing, transportation, and consumers.

Our Short-Term Health data is already reflecting this. Take a look at the most recent Red and Yellow signals on a group of country ETFs.

India’s iShares MSCI India ETF (INDA) has been in the Short-Term Health Red Zone for more than a month.

The iShares MSCI Indonesia ETF (EIDO) – another country reliant on Middle East oil – has been in a Red Zone for more than two weeks. It’s down more than 9% over the past week and nearly 8% over the past month.

And the iShares China Large-Cap ETF (FXI) entered a Red Zone last week, over which time it’s fallen nearly 4%.

The message this data is sending: The “buy everything outside the U.S.” trade that worked so well in January and February has hit a wall. Proceed with caution.

Finally, nuclear energy just became even more important…

Keith flagged something important on X this weekend that’s worth your attention – and it connects directly to everything we’ve covered today.

Nuclear energy was already emerging as a critical piece of the AI infrastructure story before the U.S. and Israel attacked Iran. Now, a scalable and clean energy source that isn’t tied to the Middle East is even more important.

AI data centers consume enormous amounts of power – one large facility uses as much electricity in a year as 100,000 American households. That’s why Microsoft (MSFT), Google parent Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META) have been racing to lock up reliable, carbon-free power sources to meet that demand for decades to come.

Nuclear checks every box. It runs around the clock regardless of weather, produces no carbon emissions, and can supply the kind of long-term contracted power that a hyperscale data center needs.

Now, factor in the war with Iran. The fossil fuel energy complex – oil, natural gas, the tankers that move it – is under pressure. The more volatile and unreliable those supply chains become, the more urgent a nuclear power alternative becomes.

That’s a new and powerful tailwind for nuclear operators that wasn’t there two weeks ago.

Keith shared this, along with one of his top ideas to trade the nuclear energy theme, on X over the weekend.

Follow him there at @KeithTradeSmith for insights like this in real time, direct from the CEO.

To building wealth beyond measure,

Michael Salvatore signature