This Hidden Signal Has a 40-Year Trader Paying Attention
BY MICHAEL SALVATORE, EDITOR, TRADESMITH DAILY
In This Digest:
- Why junk bonds may prove to be the canary in the coal mine
- A 40-year options trading veteran is ready to launch the most ambitious challenge of his career
- Our AI-powered Signals system flagged a critical-element trade ahead of a record copper run
Another Sunday, another “almost-deal” with Iran…
Iran submitted its formal response to the latest U.S. peace proposal yesterday afternoon. Last night, President Trump rejected it… calling it “totally unacceptable.”
As I write, traders are mostly shrugging at the news. The S&P 500 and tech-heavy Nasdaq-100 are unchanged heading into the week. Brent crude oil, the international benchmark, is above $104 a barrel – well off last week’s lows around $96.
If you’ve been following this saga, you’re probably shrugging, too. We’ve seen peace deals unravel repeatedly for months now. The flat open suggests the same confusion we’ve been dealing with the whole time.
And good luck if you’re trying to trade stocks based on Iran war headlines. It’s like running on a treadmill – you’re putting in a whole lot of effort not to go anywhere.
But one trader stopped running on the news treadmill four decades ago.
And right now, he’s watching one key warning signaling the end of the miraculous recovery rally.
It comes from 40-year trading veteran Jeff Clark…
Jeff Clark first cut his teeth as an options trader in the early 1980s.
By 23, he was managing money for some of the wealthiest families in Northern California.
By 42, he had built and sold his own brokerage firm and “retired”… Not from trading, but from the client meetings and strategy sessions that bored him to tears.
He started sharing his ideas with a small group of like-minded traders. And not long after, he started running The Short Report as one of the most popular analysts at Stansberry Research.
Over the past decade, Jeff’s started up his own outfit under the Jeff Clark Trader banner. And last year, he joined us here at TradeSmith.
We brought Jeff on not just for his expertise in the options markets and his technical know-how, but because he knows how to spot the early signs of a shifting trend.
Take Jeff’s recent look at the high-yield corporate bond market – better known as junk bonds. These are bonds issued by companies with weaker credit ratings, so they pay higher interest to compensate investors for the extra risk.
Jeff has been pointing his subscribers to one specific junk bond ETF for the past two weeks: the iShares iBoxx High Yield Corporate Bond ETF (HYG).
Here’s what he told his readers in a recent issue of Market Minute, his free morning column:
High-yield corporate bonds enjoyed a fantastic rally in April. The iShares iBoxx High Yield Corporate Bond ETF (HYG) gained 3% from its bottom in late March to its mid-April high. That’s a phenomenal move for a bond fund.
[The] action in high-yield bonds leads the action in the stock market by anywhere from two days to two weeks. That’s because junk bonds show us investors’ appetite for risk.
In a “risk-on” environment – where investors are willing to chase prices higher – high-yield bonds rally first. When the environment shifts to “risk off” and investors start pulling money out of the markets, junk bonds are among the first assets to get sold.
Jeff goes on to point out HYG has been declining for the past two weeks. The short-term trend has now turned bearish – with the average price of HYG over the past couple of weeks now lower than it was a few weeks back.
Meanwhile, the S&P 500 keeps hitting new highs.
Jeff has seen this divergence before. The last time it showed up was in mid-February, when HYG started rolling over while the S&P held near its top. That was the early warning for the March stock market decline.
According to Jeff, junk bonds are giving us that warning once more.
That doesn’t mean Jeff is heading for the exits.
Quite the opposite – this is exactly the kind of market he’s spent 40 years learning to trade.
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Jeff’s “12 Trades to $1 Million Challenge” goes live Thursday…
By his own admission, Jeff is a conservative, low-risk options trader.
That means he likes to use options to generate income and make small, controlled speculations. He also likes to take profits off the table rather than let them ride.
That approach has kept him in the game for over 40 years.
But Jeff’s noticed something about the current market that has him willing to attempt something he’s never tried before.
He calls it a “market disruption window.”
These are rare stretches when the normal rules of the market temporarily break down. Stocks move 20% or 30% in a single session. Sectors reprice overnight. Companies that should be steady become volatile. Companies that should be punished start ripping higher.
We’ve been living inside one of these windows for months. The early 2026 selloff. The April rip higher. The Iran headlines whipping markets in both directions. The AI repricing that’s wiped hundreds of billions off software stocks in single sessions.
These windows are awful times to be a buy-and-hold investor – especially if you own the unlucky stocks that get caught in the crossfire. Even if you’ve got the stomach to hold through such a bout of volatility, it’s not comfortable.
But Jeff thrives in disruption windows like this.
In fact, Jeff identified just two prior windows in his trading record where conditions looked like this.
In both, he ran win streaks long enough that someone rolling a single $5,000 stake from one trade into the next would have ended up with seven figures.
The first was during the 2023 banking crisis. In just nine trades, following his guidance would’ve turned $5,000 into $1.3 million.
The second was during the AI repricing of 2025. Twelve trades would’ve turned $5,000 into $2.6 million.
Jeff thinks another one of those windows is set to start today. And the first warning out of the junk bonds sounds to him like the starting gun.
Now, Jeff will be the first to tell you that the odds of hitting the full $1 million target are low even in the best conditions, and any trading carries real risk of loss.
But the pattern is consistent enough – and the conditions in front of us close enough – that he wants to attempt the same thing again.
This time, on purpose, with readers alongside him.
He’s calling it the 12 Trades to $1 Million Challenge. The goal: Roll a small starting stake from one well-timed options trade into the next, no more than 12 trades total, in six months or less.
Jeff is going live with the full plan onThursday, May 14 at 10 a.m. ET. He’ll walk through the strategy, the two prior streaks trade by trade, and the specific setups he’s watching right now.
This is the only time he plans to walk through the full strategy publicly. After Thursday, the playbook stays inside the Challenge.
You can reserve your seat right here, free of charge.
I advise you to attend, and especially to sign up for our free VIP reminder service. Once you do, you’ll get access to Jeff’s free convergence and divergence tool as well as access to his exclusive Delta Direct blog until the day of the event, so don’t wait.
Our AI Signals system flagged a critical-element trade just before this run-up…
Now, while Jeff watches the bond market for warning signs, our AI-powered Signals system has been finding plenty of high-probability trades on the long side.
Just last Monday, May 4, we covered one of Signals’ top setups heading into the week: mining giant Freeport-McMoRan (FCX).
Quick refresher on how Signals works: Our AI-powered trading system doesn’t analyze balance sheets, read earnings reports, or follow news headlines. It scans stocks’ historical data for tiny anomalies – and finds statistical connections between them that no human analyst would catch.
Think of it like a thumbprint. Every great trade has one – a unique alignment of technical indicators, price patterns, and market conditions that has shown up before. When those factors line up again, the system flags a high-probability setup.
The signal that fired on FCX was a Sprint signal. It triggers when a stock pulls back briefly during an otherwise strong uptrend – the kind of dip that creates a lower-risk entry before the next leg higher. It exits automatically once the stock rises 6% or after 21 trading days, whichever comes first.
We highlighted the trade because the backdrop was unusually clean. Freeport is one of the world’s largest producers of copper, gold, and molybdenum – and molybdenum is a key catalyst in petroleum refining, used to remove sulfur from heavy crude oil.
Freeport is one of the few major Western producers of it – so when demand for refining heavy crude rises, demand for Freeport’s molybdenum tends to follow.
Earlier this spring, the U.S. capture of former Venezuelan president Nicolas Maduro reopened the door for Venezuelan oil exports. And Venezuelan crude – while first known for being vast in quantity – is also some of the heaviest, most sulfur-rich oil on the planet. That gives molybdenum demand a clear tailwind.
On top of that, copper itself was setting up for a record run.
Since the signal fired, FCX is up more than 11%. The trade hit its 6% target and is now considered closed.
That’s how the system is built to work: a precise entry, a defined exit, and a clean close when the target is hit.
But the broader story behind the trade is just getting started.
TradeSmith CEO: This copper move is “glacier-like”…
This weekend, TradeSmith CEO Keith Kaplan posted on X about the broader copper trade — and why he believes the move is far from over.
In his post, Keith pointed out that copper just broke to record highs as supply constraints in Chile collide with demand from AI buildout, power grid upgrades, electric vehicles, and renewable energy. The Global X Copper Miners ETF (COPX) is now up 51% since Keith first recommended it back in September.
His point is that critical resource markets like copper don’t move in short bursts. They move in multi-year megatrends. As Keith put it:
Critical resource markets trend big. Their moves often last 5+ years and produce hundreds of percent in gains because supply takes a decade or more to come online. You cannot code a copper mine into existence. This is a glacier-like megatrend.
Mining legend Robert Friedland says humanity will need to mine as much copper over the next 18 years as it has over the past 10,000 years to sustain even modest economic growth.
Stocks like Freeport-McMoRan (FCX), Southern Copper (SCCO), and Teck Resources (TECK) are all riding the same wave higher.
Keith posts insights like this regularly on X – unfiltered, ahead of the news cycle, direct from the CEO of one of the most data-driven investing platforms in the business.
Follow him at @KeithTradeSmith to see what he’s watching before it shows up anywhere else.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily
RJ Hamster 