July 21st, 2025: AI Advances, Solid Gains, and a Smarter Bear Market Strategy

"Performance is important, but Process is critical." - Mike Turner

AT THE BEGINNING OF THIS WEEK:

As you know, our management team spent the bulk of last week at the Las Vegas Money Show Masters Symposium. We had the distinct pleasure to see and meet with many of our clients and a number of new folk who may soon become clients. Thank you for your strong support and enthusiasm for our trend-based approach to growing and protecting client capital!

This morning, the market (S&P & Nasdaq, also known as our TMI... Total Market Index) is up a bit at this writing... just the way we like it! Especially following another up trending week in the market.

As of the close this past Friday, here are the the current trade results (unrealized gain) of our clients who have been in the trade from the beginning:

• Start Date: April 25, 2025

• Our 1x Client Accounts are up +16.57% with exit at +14%

• Our 2x Client Accounts are up +33.31% with exit at +29%

• Our 3x Client Accounts are up +53.10% with exit at +47%

• The S&P 500 is up +13.96% in that same timeframe for comparison

Note: We have exits now set at "Capital Preservation" levels. This means that if the market closes on this coming Friday at or below a level where the unrealized gain in a Strategy (1x, 2x, 3x) is at or below the "exit at" percents noted above, we will move that Strategy to cash in order to protect unrealized gains.

The next decision point will be this coming Friday.

R&D Update...

I know, with the stock market on a very solid uptrend for the past few months, thinking about a bear market is not the highest level of your thought processes, but it is something that we have been testing rigorously in our R&D efforts.

I also know that a few weeks ago, I hinted at the fact that our back-testing was leaning toward opting out of future bear markets instead of invoking inverse index ETFs where we might simply sit on the sidelines with capital safely in higher-yielding money markets. The reason for this was simply due to the frequency and amplitude of whipsaws so typically prevalent in bear markets.

But thanks to some very interesting AI-driven analysis, it now appears that we can do a much better job of recognizing when a bear market has begun and when it has ended and in the process, capture a significant return via investments in inverse index ETFs. We are still testing and refining our rules for this analysis, but the early results are quite positive.

However, I have heard from several clients that they love the idea of sitting in higher-yielding money markets in bear markets and simply avoiding the risk of dangerous whipsaws entirely. They were delighted that we might not be using inverse index ETFs in future bear market trends. I also heard from several clients who were more than mildly disappointed that we might not be using inverse index ETFs (especially 2x and 3x) in future bear markets.

The good news... We have a solution for both approaches. If you want your account managed so that it never goes into inverse index ETFs, just let us know and we will mark your account so that when we move into the next bear market trend, your account(s) will remain in money markets. If you, on the other hand, want to take advantage of down-trending markets via our moves into inverse index ETFs, you need do nothing and when that time comes, your account(s) will be managed accordingly.

THE NOISE:

Alex Goodwin, Vice President

The market put together another positive week as investor optimism continues to rise. The S&P 500 and Nasdaq 100 led the charge, once again closing at new all-time highs. Three out of the last four weeks have been marked with the “new all-time high” title as corporate earnings, tariff de-escalation, and easing inflation worries have begun to create an encouraging combination for bullish sentiment.

Corporate earnings season was kicked off with some very encouraging reports. Below is a brief summary of significant large cap earnings reports:

JPM: Reported adjusted EPS of $4.96 vs $4.48 expected, beating estimates.

MS: Reported EPS of $2.13 vs $1.96 expected, beating estimates.

NFLX: Reported EPS of $7.19 vs $7.09 expected, beating estimates. However, shares fell on company guidance

TSM: Posted a record Q2 profit, shares jumped more than 4%.

UAL: Reported $3.87 EPS vs $3.81 expected, shares climbed despite a decrease in its full year EPS forecast.

The reports above provided the market with a nice boost, and as is expected, investors are banking on this earnings trend continuing.

Trade tensions loomed over the markets as Trump’s 30% tariff on EU imports has not been met with a trade deal quite yet. Stocks have held their ground so far and it appears that investors are either 1) assuming that a deal will be made before the August 1 deadline, or 2) they are betting on Trump to walk back the arrangement in what is now known as a TACO trade.

An unchanged June inflation report was released last week, providing conflicting data regarding the success of the Trump tariff rollout. Some expected a more significant decrease in inflation but that was not the case, maybe the July report will bring more clarity.

Last week was a busy one for the market, and as earnings season continues to ramp up it is likely that the upcoming weeks will be just as noisy. The earnings you see above don’t matter, just like the tariffs don’t matter, just like inflation doesn’t matter, and just like your favorite analysts opinion… it doesn’t matter. What does matter is what is measurable, last week’s bullish move matters, and the 2 months of bullish move before it matters. So, while the rest of the world is counting on their guesses about the “noise” to be correct, we are rest assured that our decision-making process is well defined and ready to go when the time comes for us to exit.