You Might Not Own the 21st Century’s Biggest Winner By Michael Salvatore, Editor, TradeSmith Daily In This Digest: - Nowhere to hide (except the best-performing asset of the 21st century)…
- The other big gold catch-up trade…
- Why a big Nasdaq 100 face-melter is a bad sign…
- The latest Quantum Edge Hotlist shows a love for shiny yellow metal…
- How Predictive Alpha made money in the recent sell-off…
At first glance, there’s nowhere to run in this market… From the start of April through the day I write, April 11, all the major benchmarks are down. Large caps, tech, industrials, mid-caps, small caps. Take your pick… all down. Not only that, every single S&P 500 sector is down. And not only that, but bonds – the traditional risk-off counterweight to stocks – are down. OK, you say… That’s the U.S. Surely the big momentum trades in markets outside the U.S., which all started this year, have been a safe hideout. Not so. China, Brazil, Japan, India, Europe, Argentina – all down. But don’t be dismayed. There is one place that’s acting as a true risk-off hedge. It’s at new highs while everything else is plunging. | Recommended Link | | | | Imagine foreseeing a 30% stock jump – to the day – weeks before it happens. Introducing a new way to predict the biggest stock jumps in today’s volatile market, to the day, with 83% backtested accuracy. Click here to learn more. |  | | And that place is gold… Gold is surging through new highs as I write, with the latest price at $3,235 per ounce: 
If you were looking for where all that capital is flying to as it exits risk assets, here you go. Gold is up 6.6% so far this week, the highest one-week rate of change since March 2023 – which was just before it broke out to new highs for the first time since… The pandemic, which was the biggest one-week positive change in gold since… 2008. If you’re sensing a theme of gold catching a major bid during periods of crisis, you’re correct. March 2023 saw the collapse of Silicon Valley Bank, which stoked fears of the Federal Deposit Insurance Commission going broke amid a bank run contagion. March 2020 was the largest disruption to world trade of all time (until now). And 2008 saw the collapse of Lehman Brothers which brought the scale of the Great Financial Crisis into full view. But what might surprise you is that gold doesn’t just work when the world’s on fire. In fact, going back to the turn of the century, we can see that gold has outperformed both stocks and bonds… and by a lot: 
Gold is up more than 1,000% from January 2000. The next best bets were mid-caps (SP400), then small caps (SP600), with short- and long-term bonds providing the worst returns. And as you can see, it’s only rarely lagged stocks, and most of that lag was during the past 10 years. Thus far, gold wins the 21st century. The bitcoiners are about to start sending angry emails, so let’s just address that. Adding bitcoin to this chart makes all the other returns pitifully tiny. But we have to account for the fact that bitcoin didn’t exist until 2009, so it’s not a great “21st century” comparison. We can also fairly say that nobody but the top 0.1% of mega-nerds were buying bitcoin anywhere close to 2009. It was still very niche in 2015, and one could argue it’s pretty niche now. For those reasons, we won’t count bitcoin here. But let me be clear: I love bitcoin, and I own it and probably always will. Nevertheless, gold is working right now just as it has for the last 25 years. And while the momentum is highly extended to the upside – as we’ve noted while mostly unsuccessfully calling for a cooldown – that’s to be expected when it’s the main thing working. Thing is, gold isn’t all that popular. One study from Gold IRA showed that just 2.3 million of a sample of 30 million retirement portfolios had any allocation to gold whatsoever. That’s less than 10%. So, there’s a good chance you don’t own the best-performing investment of the 21st century… There’s something to chew on for the week ahead. Gold miners finally closed the gap… Some time ago we speculated that gold miners might “close the gap” with the gold price. It was unusual to see gold prices keep running higher while gold miners kept struggling, especially as gold miners are traditionally leveraged to gold itself. Gold miners have closed that gap. GDX is up about 35% since we highlighted the gap back in December. And now, GDX is outperforming gold from the start of 2024. So, it’s time to look for the next big gold catch-up trade. And I’d throw my hat in the ring for silver: 
Silver is another one of those leveraged gold plays. When gold takes the stage, silver tends to put on a great backup dancer performance. But it’s been a laggard lately. Where gold is up 58% from the start of 2024, silver has only climbed 31.5%. You could argue silver is the next big catch-up trade for a few reasons. For one, silver has a great many more practical uses than gold. Gold is primarily used as bullion or jewelry, with an increasingly smaller amount of it used in things like semiconductors. Silver, though, is used in key technologies like solar panels, electric vehicles, and batteries, as well as things like water purification and medical devices. For two, there’s roughly 20 ounces of silver in the ground for every 1 ounce of gold. Setting all other factors aside, you might presume silver should cost 1/20th an ounce of gold. But the ratio is much steeper than that at about 100:1. The gold/silver ratio chart is also at one of its highest levels in quite some time, and quite extended above its 200-week moving average: 
Either gold starts dropping here, taking silver with it… or silver starts playing catch-up. With the flight to precious metals being a major theme lately, I’m inclined to think it’ll be the latter. Silver may prove to be the next big catch-up trade in the metals space. Consider allocating some funds to the iShares Silver ETF (SLV), or for a higher-risk play, the Global X Silver Miners ETF (SIL). So, what’s up with that big Nasdaq rip last week? If you thought a Nasdaq move of 10% higher in a single trading session was unusual, you’re right. Before last Wednesday, it has only happened seven times in the history of the Nasdaq 100 Index. That’s not a big sample size. But it is worth looking at the times we saw those big surges. Because in general, they weren’t what you’d call great times to be buying stocks. At least not for any sustainable period… All told, 21 days after the Nasdaq 100 surged 10% or more, it was higher 43% of the time. If you bought all those signals, your average result would be a loss of -4.5%. When you’re right, you make 7.6% on average. But when you’re wrong, you lose -13.68%. So, it’s kind of a toss-up when you look at the data. But it’s worth noting when we saw most of those signals: 
Only one of these trades were during a bull market – the very first in January-February 2000. The rest were all counter-trend, bear market rallies. Some of those rallies lasted quite a while. But most didn’t… And when they didn’t, the returns were really poor. It could pay to be suspicious of last week’s remarkable one-day surge. Gold stocks top the Quantum Edge Hotlist… The best part of any Monday comes around mid-afternoon, when Jason Bodner publishes the top- and bottom-ranked stocks in his Quantum Edge system. This list is always full of surprises. And it’s especially valuable during times of market volatility to get a sense of not just which stocks have the best fundamental health, but also the highest trading volumes amid bullish technical patterns. While we wait for the new list, let’s check out what was working last week. The list stands out for having three gold mining companies in the top 10… in addition to TradeWeb Markets (TW) making the top of the list once again: 
The bottom is marked with a ton of biopharma companies, a common theme in the list. Click here to learn more about Jason’s Quantum Edge Pro service, where subscribers just got a new recommended position as well as this weekly hotlist. Predictive Alpha had some great calls through the recent volatility… For any trading system to work over the past couple of weeks, it had to be really darn good. And our AI-powered Predictive Alpha system counts among them. If you read Friday’s Digest, you know we just released a brand-new update to Predictive Alpha that includes a new custom-fit algorithm that determines which day of a 21-day forward span has the most historically accurate forecast model. One great example is in the extremely popular tech name Palantir Technologies (PLTR). Back on March 12, weeks before Liberation Day took an axe to the tech market, Predictive Alpha forecasted that over the next 19 trading days, PLTR stock would drop by -6.79%. With the window closed on April 8, PLTR had indeed fallen -7.57%. The 19-day window was PLTR’s Prime projection – the model with the highest historical accuracy. Over the past two years, the Prime projection for PLTR has been accurate in the stock’s direction 75% of the time. And 89.84% of the time, the stock price hit the exact price forecast within the 19-day window. Now, imagine having a Prime projection not just on Palantir or other popular tech stocks, but on thousands more, and very likely most if not all the stocks you own in your portfolio. Bottom line, we’ve made big changes to our Predictive Alpha software, including a visual overhaul as well as an enhanced algorithm. Current subscribers will find a brand-new projection level based on each stock’s unique historical data – with the optimal number of days to trade that particular stock from here. With those projections, our analysts will point you to stocks with a high probability of delivering returns like 8%, 12%, or 16% in 30 days. This relentless market volatility is ideal for piling up these short-term winners… and compounding those gains… while we wait for buy-and-hold investments to work in our favor again. Not to mention – you’ll have two analysts holding charters as a CMT (Chartered Market Technician) who’ll point you to the best ones for the current climate. For a full demo from our CEO, Keith Kaplan, on this software breakthrough for Predictive Alpha Prime, click here to save your spot at his free AI Predictive Power webinar this Wednesday at 8 p.m. Eastern. And I’ll see you there. To your health and wealth, 
Michael Salvatore
Editor, TradeSmith Daily | 
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