Kaufman’sMost Popular Books (available on Amazon)
Trading Systems and Methods, 6th Edition. The complete guide to trading systems, with more than 250 programs and spreadsheets. The most important book for a system developer.
Kaufman Constructs Trading Systems. A step-by-step manual on how to develop, test, and trade an algorithmic system.
Learn To Trade. Written for both serious beginners and practiced traders, this book includes chart formations, trends, indicators, trading rules, risk, and portfolio management. You can find it in color on Amazon.
You can also find these books on our website, www.kaufmansignals.com.
Blogs and Recent Publications
Find Mr. Kaufman’s other recent publications and seminars at the end of this report. We post new interviews, seminars, and reference new articles by Mr. Kaufman each month.
DECEMBER Performance in Brief
Small losses, small gains in most portfolios, but finishing the year with overall profits, some better than 20%. Our “Close=Up” this month reviews both stock and futures markets, focusing on risk.
Major Equity ETFs
Finishing with a wimper, not a rally, but a good 2025 performance. All equity index markets were up and down less than 1% in December, netting results from 14% to nearly 20% for the year. However, the market is showing some stress, with high volatility in AI stocks and semiconductors. Although not shown, the metal markets in futures is both volatile and toppy. It all argues for lower exposure, even while the pundits are saying a bull market is coming in 2026. Perhaps they have a conflict of interest.
CLOSE-UP: An Odd Year and Not Likely to Change
This could have been a great year if you knew, in advance, what was going to happen! But investors made money anyway. Just not as much as silver or platinum. I’m sure there are traders that were in those markets, either by skill or by chance, but that’s not the way systems work – or most investors.
So, the analysts talk about the metals rally that most of us just watched on the sidelines.
Metals
I’ve spent some time trying to figure out how this metals rally started. To me, it seemed that gold started its rise first, then silver, then platinum, and now copper. Figure 1 shows the rise over the last six months of 2025. It may be that gold, silver, and platinum all tracked together, but I was just watching gold. Silver has never been a particularly good market to trade
Figure 1. Comparison of metals performance over the last 6 months of 2025.
Figure 2 shows just gold and Bitcoin. My thought was that traders ran from Bitcoin into gold. It is still possible. But that doesn’t explain silver, platinum, and copper. Perhaps investors are looking for anything of tangible value.
Figure 2. Gold and Bitcoin futures, last 6 months of 2025.
But I can’t figure out copper. Figure 3 shows a full year of copper futures. The plunge in the middle of the year was when the administration put a 50% tariff on copper. I don’t understand the market reaction. Does that make copper less desirable (a drop of 20%) or is there a bigger demand for what is available? The subsequent rally could be a change of investor attitude or tariffs that never occurred.
Figure 3. Copper futures for 2025. (Source: Yahoo finance)
My only answer to the metals rally is “fear.” Gold normally rallies with a declining US dollar. Figure 4 shows that the dollar was stable for the past 6 months. Of course, if you look only at the last quarter, the dollar has weakened by 2%. Is that enough to drive gold and silver to new highs? Not really. Again, my conclusion is that investors are worried.
Figure 4. EUR/USD currency for the past 6 months shows little change.
That makes the rally in the metals very fragile, much like Bitcoin. In the past few days it has also seen wild volatility. Maybe there is more to go on the upside, but it will be with a high degree of risk and probably not worth it.
I forgot to say that the CME is raising margins, which affects all traders. They have done this from time to time to break the market, although the published intent is to protect themselves against traders defaulting when prices collapse. This worked in 1980 when silver ran to $50.
Stocks
If we only knew which stocks to buy, life would have been easier.
Maybe all years are all odd, but this year had situations that we have never seen before (at least in combination): semiconductors and artificial intelligence stocks driving the market, interest rates stuck between higher inflation and lower employment, tariffs on-again off-again, relationship with China on-again off-again, and a congress not willing to do anything. Not a good scenario for trading.
Yet the market rallied. One article said, “if you did nothing in your portfolio, you did well.” But I don’t think that’s true. It was a small segment of the market that rallied, driving the index markets higher. If you weren’t in those stocks, it’s unlikely you did as well as the index markets.
The total market cap for stocks is $50 Trillion. The 5 top companies (all tech) have 18.5 T or 37%. Yoiks! If we use the equally-weighted S&P (Invesco RSP, Figure 5) we get a return of 8.8% for 2025. The full S&P (SPY) gave 16.6%. So anyone that did better than 8.8% did well.
Figure 5. Equally-weighted S&P (RSP) for 2025 gained 8.8%. (Source: Yahoo Finance)
Our Performance
Our programs did fine in 2025. Not great, but well-above our 10% goal. A few portfolios did not reach that level and some did much better. Stock programs were good, futures a bit erratic, but that’s typical of futures – some very good years, and some that are flat. But then you would have to have had all your assets in gold and silver, but not bitcoin. Easier to say afterwards!
Christmas shopping seems to have turned out well. Most shoppers looked for bargains, and the high-end kept spending. Our recommendations of retail stocks, Macy’s and Walmart did well but are now coming off as expected. Airlines are doing fine. But then a rally lifts all boats. Well, maybe not Microsoft and Target.
2026 Is Starting with High Risk
Whether you are in stocks or futures, the market risk is exceptionally high. Figure 6 shows the 20-day silver volatility as of today. It is rare that a market can maintain this level for more than a few days.
Figure 6. Silver futures volatility.
And while overall futures (SPY) volatility is low (at about 12%), individual stocks are high. The latest focus is now on Micron (MU). Figure 7 shows the 20-day Micron volatility over that past 6 months. It peaked at 80%, a difficult level to maintain, it has dropped to under 70%. Still high.
Figure 7. Micron volatility over the past 6 months.
Stock Picking
Our portfolios try to find the right stocks and futures. At the same time, they do their best to equally-weight each selection, a technique that we find reduces risk. In addition, when we select a stock, it cannot exceed our maximum volatility filter. As a trend-follower we exit when the market turns down – we don’t “hope” that it will turn back up.
I know people who have large gains in silver and I hope they know when to get out. It always looks good when you’re making money, not so good afterwards.
A Standing Note on Short Sales
Note that the “All Signals” reports show short sales in stocks and ETFs, even though short positions are not executed in the equity portfolios. Our work over the years shows that downturns in the stock market are most often short-lived and it is difficult to capture with a longer-term trend. The upwards bias also works against shorter-term systems unless using futures, which allows leverage. Our decision has been to take only long positions in equities and control the risk by exiting many of the portfolios when there is extreme volatility and/or an indication of a severe downturn.
PORTFOLIO METHODOLOGY IN BRIEF
Both equity and futures programs use the same basic portfolio technology. They all exploit the persistence of performance, that is, they seek those markets with good long-term and short-term returns on the specific system, rank them, then choose the best, subject to liquidity, an existing current signal, with limitations on how many can be chosen from each sector. If there are not enough stocks or futures markets that satisfy all the conditions, then the portfolio holds fewer assets. In general, these portfolios are high beta, showing higher returns and higher risk, but have had a history of consistently outperforming the broad market index in all traditional measures.
PERFORMANCE BY GROUP
NOTE that the charts show below represent performance “tracking,” that is, the oldest results since are simulated but the returns from 2013 are the systematic daily performance added day by day. Any changes to the strategies do not affect the past performance, unless noted. The system assumes 100% investment and stocks are executed on the open, futures on the close of the trading day following the signals. From time to time we make logic changes to the strategies and show how the new model performs.
Groups DE1 and WE1: Daily and Weekly Trend Program for Stocks, including Income Focus, DowHedge, Sector Rotation, and the New High-Risk Portfolio
The Trend program seeks long-term directional changes in markets and the portfolios choose stocks that have realized profitable performance over many years combined with good short-term returns. It will hold fewer stocks when they do not meet our condition and exit the entire portfolio when there is extreme risk or a significant downturn.
Equity Trend
Fractional gains and losses in the Daily Trend program, but nice gains in the Weekly Program. Given time, they tend to catch up to one another. Sometimes it’s better to switch quickly, other times to hold a position. The Weekly Program has had two big months, to end up with a 20% gain in the 10-stock portfolio.
Income Focus and Sector Rotation
Going nowhere as long as rates stay high. The Daily program had fraction losses to end the year down more than 3%, which the Weekly program had small gains and ended higher for 2025. We will need to wait for lower interest rates before this program can be profitable.
Weekly Sector Rotation
It doesn’t look as bad on the chart below, but the Sector Rotation program finished in the bottom tier, off by more than 6% this year. It points to the switching between energy and Utilities (with some materials and staples). Energy when the market looks as though it might rally, and utilities when it doesn’t. In most cases it seems to work as a hedge with the S&P.
DowHedge Programs
The Daily DowHedge program outran the Weekly version, gaining 19% in 2025 while the Weekly captured only 3.5%. In this case, switching quickly was better, as shown in the charts below.
High-Risk Portfolios
A bit of up and down in 2025, but finishing better by 22% and 23%. It seems that hi-tech and semis were not desirable for a while, until the were! Now artificial intelligence is driving them and analyst are saying that they will continue to do so. Luckily, a system doesn’t listen to the analysts!
Group DE2: Divergence Program for Stocks
The Divergence program looks for patterns where price and momentum diverge, then takes a position in anticipation of the pattern resolving itself in a predictable direction, often the way prices had moved before the period of uncertainty.
A good year for the Equity Divergence program, capturing short-term trades within a trend. Small gains in December ended with these portfolios up by 25% and 21%.
Group DE3: Timing Program for Stocks
The Timing program is a relative-value arbitrage, taking advantage of undervalued stocks relative to its index. It first finds the index that correlates best with a stock, then waits for an oversold indicator within an upwards trend. It exits when the stock price normalizes relative to the index, or the trend turns down. These portfolios are long-only because the upwards bias in stocks and that they are most often used in retirement accounts.
Small losses again in December but a reasonable returns of 11% and 6% for the year, with the chart below looking positive. This program has been showing decent returns with a low drawdown.
Futures Programs
Groups DF1: Daily Trend Programs for Futures
Futures allow both high leverage and true diversification. The larger portfolios, such as $1million, are diversified into both commodities and world index and interest rate markets, in addition to foreign exchange. Its performance is not expected to track the U.S. stock market and is a hedge in every sense because it is uncorrelated. As the portfolio becomes more diversified its returns are more stable.
The leverage available in futures markets allows us to manage the risk in the portfolio, something not possible to the same degree with stocks. This portfolio targets 14% volatility. Investors interested in lower leverage can simply scale down all positions equally in proportion to their volatility preference. Note that these portfolios do not trade Asian futures, which we believe are more difficult for U.S. investors to execute. The “US 250K” portfolio trades only U.S. futures.
The $500K portfolio seems to be running away with the profits! It is higher by 17% while the next portfolio is only at 7% and the $1M slightly about 3%. Given the rounding and the leverage in assigning futures positions, it can cause noticeable differences. The U.S. only account lags behind with a loss of 2.5% showing the need to trader European markets.
Group DF2: Divergence Portfolio for Futures
We’re convinced of the underlying strategy in this program, even if it looks terrible. This month it did well, but not enough to bring it positive for the year. The $500K account continues to be the best, gaining 4% in December, while the other two portfolios lost fractionally. However, a look at the chart shows a possible bottom.
Blogs and Recent Publications
Perry’s books are all available on Amazon or through our website, www.kaufmansignals.com.
December 2025
The January issue of Technical Analysis of Stocks & Commodities has Perry’s latest article, “Smoothing the Data.” He looks at a wide variety of smoothing techniques and finds that the moving average is not the best!
October 2025
An article in Technical Analysis of Stocks & Commodities (the November issue) on “Low-Priced Stocks: A Golden Opportunity or an Unreasonable Risk.” You can take a guess or read the article!
As mentioned in the Close-Up, this was a follow-up on the article published in Seeking Alpha on October 25th, “How To Hedge the U.S. Dollar: Gold, Bitcoin, or Whatever?” This version included some portfolio allocations, which should help.
September 2025
No articles in September, although Perry has committed to being the Keynote Speaker at the Society of Technical Analysts (STA) when it hosts the IFTA conference in October 2026 (not this year!)
August 2025
The September issue of Technical Analysis of Stocks & Commodities has Perry’s article “Using the Elusive Volume Confirmation.” While volume has been an important component of price movement, Perry takes a look at how useful it has been.
July 2025
This month (the August issue) there is an article on “Explaining FX Carry (In Detail).” The Carry program has had years of profits followed by years of losses, yet it is a very important part of institutional trading. This article shows how it is actually done.
Perry has been asked to be the Keynote speaker at the IFTA Conference in London in 2026 (not this year!). Of course he will accept. Plan to be there!
June 2025
Yes, another article! “There is Money To Be Made On The Weekends – But You Need to Know The Market,” appeared in the June issue of Technical Analysis of Stocks & Commodities.
Perry gave a Webinar to “Trading Heads” in Mumbai, India on June 5 at 9:30 AM New York time. Discussed “Not the Usual Diversification.” With any luck, it was taped.
May 2025
You’ll find Perry’s article “Trading the Channel” more interesting than usual. Published in the May issue of Technical Analysis of Stocks & Commodities, it looks at various ways of construction a channel, and one very profitable one.
Perry also addressed a Spanish class where they are building algorithmic strategies. Called ROBOTRADER, it in ETSIT-UPM (Escuela Técnica Superior Ingenieros Telecomunicación- Universidad Politécnica Madrid). The presentation is about Diversfication (in English) and available on youtube.
April 2025
Perry did a studio interview with Jeff Baccaccio (“Rfactory”) in London in March. It is a fine production and a good interview. He has put it on youtube. I hope you enjoy it.
YouTube: https://youtu.be/jmR359jHYBQ?si=IHQ5bVLijGFM19qF
Another article in Technical Analysis of Stocks & Commodities for April, “Do Stops Really Work?” The conclusion even fooled Perry.
March 2025
Perry looks at an old standard in “Revisiting the 3-Day Trade,” which appeared in Technical Analysis of Stocks & Commodities in the March issue.
February 2025
Another article, “Chasing the Market” appeared in the February issue of Technical Analysis of Stocks & Commodities. It answers the question, “Can you make money entering the market after a big move?”
Perry enjoyed the “Fireside Chat” at the Society of Technical Analysts (STA) in London on Tuesday, February 11. It should be available for viewing on their website. He also taped another interview and we’ll let you know how to see it when it’s released.
He also posted “If you think the market will tank, here’s a plan” on SeekingAlpha. It has received lots of view and good comments, although it is advising deleveraging.
Older Items of Interest
Perry did a studio interview with Jeff Baccaccio (“Rfactory”) in London in March 2025. It is a fine production and a good interview. He has put it on youtube. I hope you enjoy it.
YouTube: https://youtu.be/jmR359jHYBQ?si=IHQ5bVLijGFM19qF
Perry was interviewed on June 27, 2024 by Simon Mansell and Richard Brennan at QuantiveAlpha (Queensland, Australia), a website heavy into technical trading. It appears on their website.
On April 18th, 2023, Perry gave a webinar to the Society of Technical Analysts (London) on how to develop and test a successful trading system. Check their website for more details, https://www.technicalanalysts.com..
Perry’s webinar on risk, given to the U.K. Society of Technical Analysts, can be seen using the following link: https://vimeo.com/708691362/04c8fb70ea
For older articles please scan the websites for Technical Analysis of Stocks & Commodities, Modern Trader, Seeking Alpha, ProActive Advisor Magazine, and Forbes. You will also find recorded presentations given by Mr. Kaufman at BetterSystemTrader.com, TalkingTrading.com, FXCM.com, systemtrade.pl, the website for Alex Gerchik, Michael Covel’s website, TrendFollowing.com, and Talking Trading.com.
You will also find up to six months of back copies of our “Close-Up” reports on our website, www.kaufmansignals.com. You can address any questions to perry@kaufmansignalsdaily.com.
© December 2025, Etna Publishing, LLC. All Rights Reserved.