Marc Chaikin is one of Wall Street’s greatest living legends – with a career spanning more than 50 years.
He’s probably most famous for being the inventor of the Chaikin Money Flow Oscillator – one of Wall Street’s most popular indicators which appears on most investing and trading platforms across the world.
He’s probably most famous for being the inventor of the Chaikin Money Flow Oscillator – one of Wall Street’s most popular indicators which appears on most investing and trading platforms across the world.
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NewsTranscript
00:00 [MUSIC PLAYING]
00:05 Mark Chaikin, founder of Chaikin Analytics, and of course,
00:09 has seen many of the Santa Claus rally and January effects
00:13 come into play, Mark.
00:14 So what do you see going into seasonality?
00:18 Do you kind of play into this?
00:20 What are you seeing, Mark?
00:22 Well, the seasonality trade is over, basically.
00:25 It started the end of November, and we're
00:29 witnessing the rewards from being a bull.
00:33 The last two days, to me, are meaningless.
00:36 What's important is what's going to happen in January,
00:39 because Yale-Hirsch's biggest call back in the '70s
00:46 was whatever the market does in January
00:50 is a roadmap for the rest of the year.
00:52 So first five days are up.
00:54 That means that 25% of the year is
00:56 going to be up in the beginning and so forth.
00:58 So I think January is really important,
01:00 and I'm very bullish on January because of the earnings season
01:05 announcements that are due to come.
01:09 That's truly interesting.
01:10 Of course, we'll be watching the first quarter
01:12 as normally presidential cycles in the first quarter
01:15 see a little bit of a slowdown, especially on election year.
01:19 And I don't know.
01:20 I mean, with this rosy market environment,
01:23 are we going to see a little bit of a slowdown?
01:25 It seems like stocks just want to keep running.
01:28 Do you feel like the strength can just
01:30 continue into next year, Mark?
01:32 Oh, yeah.
01:32 I have a year on target or a goal
01:36 that I'll share at the end of the broadcast,
01:38 but it's numbers that you haven't been speaking,
01:42 unless you're Jeremy Siegel, 10 years ago.
01:46 But basically, there are so many people like you and Dennis
01:52 out there saying, be cautious, don't jump on the bull,
01:55 wait for a pullback.
01:57 I think the most you're going to-- not most,
01:59 but the likely pullback in the S&P is 1.5% to 3%.
02:03 I'll say that almost any time we're in an uptrend.
02:07 The 21-day average, which is typically
02:09 support in an uptrend, is 46.75%.
02:13 It's quite a bit away.
02:16 But that equates to around a 3% pullback.
02:19 But I think you did key in on one important thing.
02:21 RSP, not SPY.
02:25 The RSP went from being down 5% on October 30th
02:29 to being up 12% on the year.
02:32 So that's a 17% swing since October 30th
02:35 in the average stock in the S&P at the same time,
02:38 as you point out.
02:39 There's been a little bit of profit-taking
02:41 in the magnificent seven.
02:43 So I think, rather than looking at the Dow, I agree with Dennis.
02:47 It's too constrained, although the Dow
02:50 did make a new high ahead of the S&P, the cap-weighted S&P.
02:55 So the rally is broadening out.
02:59 And then the question is what sectors
03:00 are going to do well in 2024 in an election year
03:04 after a big rate cut--
03:07 not rate cut, but cut back in rate cycle.
03:11 And I've got some thoughts there, too.
03:13 So shoot.
03:15 Fire away.
03:17 What about-- so what I've been talking about
03:19 is the leaders becoming laggards and the laggards becoming
03:22 leaders for 2024.
03:23 What we saw in 2023 was a complete reversal
03:27 of what was happening in 2022, where January, the calendar
03:31 changed, and they could not stop buying tech stocks,
03:33 and they bought them all year.
03:35 To Hirsch's point, the first five days of January,
03:37 I believe, were very strong.
03:39 And that did continue the entire year.
03:41 I mean, it's been a big move here
03:43 for some of the small caps, but they have massively
03:45 underperformed over the last couple of years here.
03:48 I've been saying I think that's where
03:50 I'm looking to buy pullbacks is more in these value needs,
03:53 as opposed to if we get a little dip in a 32
03:56 multiple Microsoft.
03:57 I'm not sure I'm jumping in and chasing.
03:59 I believe the AI story is real.
04:01 I believe those stocks are still going to do fine.
04:03 I'm kind of with you in that I think
04:06 there's this potential for some of these other stocks, which
04:10 are trading--
04:11 and we were talking about this back in October.
04:13 I mean, we're just getting down to multiples on some stocks
04:15 where they haven't traded in years back in October,
04:18 where you got the IWM was, I think,
04:20 trading 13 or 14 times earnings.
04:22 I mean, just stocks is mainly getting too cheap
04:27 when we got back to October, which
04:28 is why we talked about in October of saying,
04:31 I think a recession is kind of priced in at this point
04:34 in time.
04:34 Now, I didn't anticipate this huge 20% up move
04:39 in a lot of stocks and the IWM overall.
04:41 I mean, what are we up in the IWM from the October lows
04:44 160, 204?
04:46 Yeah, we're talking almost 20% move there as well.
04:49 I do think you could get a pullback.
04:52 I would be a buyer of that pullback.
04:54 So I know we talk cautiously to our investors,
04:57 but we started talking more bullish back in October.
05:00 So to your point here, Mark, do you
05:03 think this leader to laggard, laggard to leader trade
05:08 could have weight in 2024?
05:10 Oh, very definitely.
05:11 I think tech will do OK.
05:13 Not the biggest names, but the companies
05:15 that are going to use AI to improve
05:18 the productivity of their software stocks
05:21 like ServiceNow and Synopsys.
05:25 So I think I've been saying all along that the big--
05:30 what we used to call the generals, NVIDIA, Microsoft,
05:33 that's not where you're going to make your big money in AI.
05:37 There's a productivity cycle going on
05:39 where profit margins are going up because companies
05:43 are using things like AI.
05:45 So I think those--
05:47 let's call them secondary tech stocks.
05:49 Arison Networks, another example of that, CrowdStrike,
05:55 are going to do pretty well.
05:56 But I think the real areas to watch are clearly financials.
06:03 So I'd like to step back and just--
06:06 I could quote 10 different patterns and events that
06:10 have happened that tell me this market's
06:12 going 5,800 to 6,000 in a best case scenario next year.
06:17 And that's you had a very steep drop in rates
06:23 in a very short period of time.
06:25 So as we've always talked about and you guys have talked about,
06:28 it's the rate of change of interest rates that's really
06:30 the driver in the stock market, not the level.
06:33 So from 5% down to 3.8% in a month and a half or two months,
06:37 that's amazing.
06:38 And Goldman Sachs has something called the Financial Conditions
06:41 Index.
06:43 And that has had a precipitous drop,
06:45 which means that there's easing in the marketplace,
06:49 not by the Fed because they're still selling bonds,
06:52 but by the market participants.
06:55 12 months later, the market's up every time that's
06:57 happened where you've had such a steep drop in interest
07:01 rates and other conditions that they measure.
07:03 The second thing is that chart you showed of the IWM,
07:06 you recycled from a new 52-week low to a new 52-week high
07:13 in an amazingly short period of time.
07:15 Unreal.
07:16 And that typically has led to 100% up gains seven out
07:24 of seven times that that's happened 6 to 12 months out.
07:27 So the longer-term picture--
07:29 and by that, I mean 6 to 12 months--
07:31 is fabulous for the market.
07:33 And then you had a point-in-figure breakout
07:35 at 4,600.
07:37 Not many people look at point-in-figure charts anymore.
07:39 But so 3,500 low to 4,600 high gives you a 5,700 target.
07:45 And that's just coming off a machine.
07:48 If you look at any point-in-figure software,
07:50 whether it's StockCharts.com or what have you,
07:53 there's the count right there.
07:55 In fact, the count is $58.99.
07:57 I don't know.
07:57 But it's based on a breakout of a double top on November 20.
08:03 So we're set up.
08:04 Where do you look?
08:05 Financials, big beneficiary, industrials,
08:10 consumer, discretionary, for sure.
08:14 And I think you avoid energy.
08:17 And I think you sort of underweight mega cap tech.
08:21 And you're overweight specialty tech.
08:25 And that's where you--
08:26 Let's talk about specialty tech.
08:28 Which stocks?
08:28 Give us a couple of picks here.
08:29 Well, the ones that I mentioned, they look high right now.
08:32 ServiceNow, Synopsys, Pure Storage, PSTG.
08:37 They have a deal with NVIDIA.
08:38 They're a big beneficiary of the need for flash storage.
08:44 So a company like Procore, which we've mentioned here before,
08:48 PCOR, they're the only competitor
08:51 to Autodesk out there.
08:52 And they're starting to integrate AI
08:54 into their software for construction management,
08:58 construction project management.
09:00 So you can find these names in both software.
09:03 I'd rather go to software than hardware here.
09:06 But if I had to pick a chip manufacturer,
09:08 it would be AMD, which is making new 52-week hires.
09:12 So there's plenty to choose from here.
09:15 I do think that you're going to get a pullback at some point.
09:18 I can't tell you when.
09:20 But you've had a magical run.
09:22 And that's not a reason to be bearish.
09:24 The McClellan oscillator has been in positive territory
09:27 for two months.
09:30 That only happens at the start of a new bull leg.
09:33 So you've got a lot of stuff going on.
09:36 Let me give you one anecdotal answer.
09:37 I like anecdotal if it translates to, OK,
09:41 you know something that someone doesn't know.
09:43 I was watching before I came on air.
09:46 I forgot that I hadn't reordered my Stock Traders' Almanac.
09:51 Two clicks on Amazon, and it's being delivered this afternoon.
09:57 That's unreal, eh?
09:58 So what does that mean?
10:01 It means I'm not using as much gas,
10:03 and I'm not putting as much mileage on my cars.
10:06 It's a productivity enhancer.
10:08 Bad for the conventional bricks and mortar, bad for energy,
10:14 but great for Amazon, great for anybody
10:17 who's looking to maximize the experience.
10:22 And that's what AI is all about.
10:25 All right, so of course, the chat here also
10:28 saying that they're feeling the bullishness, right?
10:32 What can throw a wrench in this story, Mark, next year?
10:35 Is it that the Fed maybe steps back a little bit
10:39 on their comments that just came out?
10:41 Or is there something that could break in the economy?
10:45 What are you seeing out there?
10:46 Well, there's always something that could happen.
10:48 But the problem is we never know what it is.
10:51 So if we knew what it is, the market discounts it.
10:54 That's the conundrum you always have.
10:56 So what could go wrong?
10:59 The war in the Middle East could escalate into World War III,
11:02 unlikely to happen.
11:03 But Iran's a bad actor, and they're getting frisky.
11:08 Earnings could get too strong.
11:10 I personally am not basing my forecasts
11:14 on what the Fed is like, how many rate cuts there are.
11:17 There may be none, who knows.
11:19 But markets pricing in, I don't know, six rate cuts now,
11:22 not three or four, based on--
11:24 It was all the Powell conversation.
11:26 That's where I said the same thing.
11:29 I'm like, you can't stay bearish if Powell is
11:31 going to get behind this market.
11:32 If he's going to start cutting rates
11:34 when the market's at our all-time highs,
11:36 it's very hard to be bearish here.
11:38 That's why we've been on a bullish train here,
11:40 just to correct you, Mark, because I know
11:41 you think we're all bearish here.
11:43 But it's not--
11:43 I get the trading rhythm, and I respect that.
11:47 I can't do that very well.
11:50 Yeah, but we're on the same side as you for 2024.
11:54 I said you cannot fight the Fed.
11:56 And that is why it's been successful to have
11:59 an underweight in equities, really, for the last two years.
12:01 We haven't gone nowhere in equities in two years,
12:03 because you were fighting the Fed as they were cutting rates.
12:06 Now, it would have been nice to all go bullish here
12:09 in October of last year, and we'd be right at the bottom.
12:13 But there was a significant sell-off in the Qs.
12:16 There was a significant sell-off in another slot.
12:18 All right, the explosion in the number of stocks
12:21 making new highs, the contraction
12:22 in the number of stocks making new lows down to three or four.
12:27 And what people don't realize is this
12:28 is a rolling 52-week number.
12:32 What happens in March when the lows that the bank stocks made
12:38 go off the board?
12:40 I mean, the odds of new lows picking up here--
12:43 I'd rather look at what's going to go right.
12:45 And you're going to have an explosion in all
12:47 these technical indicators.
12:49 First of all, the advanced decline line
12:51 made a new high ahead of the S&P.
12:53 That is the most bullish thing that can happen.
12:57 And you still haven't made a new closing high in the S&P.
13:00 The Dow leading the S&P is bullish.
13:02 So it's hard for me to zero in on what could go wrong.
13:07 I think you've got to zero in on what could go right.
13:09 We started doing that in November,
13:11 and it's really paid off for people who
13:15 believed in this bull market.
13:17 And I think this is a new leg of the bull market that's
13:19 just started.
13:20 Well, it might just be getting started,
13:22 because I just want to give perspective,
13:24 because everybody is still thinking,
13:25 like, this has just been an amazing run for stocks.
13:28 And 2024, or 2023, absolutely has.
13:32 But what we did in 2023 was basically
13:34 get most of the losses back from 2022.
13:37 So when we really give perspective here,
13:39 in two years, in two years, QQQ is flat.
13:45 In two years, the S&P, I believe,
13:47 is just trying now to get back to all-time highs.
13:51 So I mean, it's taken two years.
13:53 So we've had a two-year bear market,
13:56 even though all losses were in one year.
13:58 It was the last year that got it back.
14:00 So I think Mark's got a point here.
14:02 Like, we've had the huge sell-off with the Fed,
14:04 with inflation, the Fed fighting inflation.
14:07 They brought inflation back up.
14:08 And now we've come full circle, and we've got--
14:10 and maybe we have clear skies here.
14:13 If the Fed is going to start lowering rates, I think,
14:15 you've got to now think that, hey, maybe the bear
14:19 run is officially over.
14:20 And maybe we're not going to retrace these lows,
14:22 if you're sitting on the bear camp.
14:24 So I think you're buying that.
14:25 Here's what could go wrong.
14:27 It's a good question, Mitch.
14:28 The March Fed meeting, they don't lower rates.
14:31 Now you're going to have some disappointment
14:33 in the bond market.
14:35 Bond market's been driving the bus.
14:37 I'm sure you guys have been talking
14:38 about that for the last month.
14:40 And so if the Fed does not cut interest rates
14:43 because the economy is stronger than expected in March,
14:47 then you'll get a sell-off.
14:48 And that makes sense.
14:51 The reason I think we sell off, if we sell off--
14:53 and I'm not saying that happens, but if you're giving the bearish
14:56 scenario, it's if inflation starts ticking higher again.
14:59 Because if inflation starts to tick higher again,
15:01 the Fed will back off on their commentary from before.
15:04 The market is very scared of inflation.
15:06 So that's kind of the boogeyman.
15:08 Inflation has to stay down.
15:10 If we start ticking higher again,
15:12 the bull thesis starts to get holes in it.
15:14 So here's what you watch for that.
15:16 That's a really good point.
15:17 If China's economy is in the crap for this rally you talked
15:21 about, it's just a short-covering year-end rally
15:24 because of the implosion in the Chinese real estate market.
15:28 So the growth in China actually drives the inflation rate.
15:34 It drives the stuff that supply chains depend on.
15:38 If China stays weak, there is virtually no chance
15:42 that inflation ticks up, virtually none.
15:45 And the PPI definitely follows the Chinese economy.
15:51 I mean, the correlation is unbelievable.
15:54 So if producer prices are going to come down,
15:56 the supply chain issues that COVID created finally abate,
16:02 which is what's happening here.
16:05 I just don't see an uptick in inflation.
16:07 And I'm not an economist, fortunately.
16:09 So I'm not stuck with some numbers that are archaic,
16:14 like yield curves and leading indicators.
16:17 So we've covered a lot of ground.
16:19 That's about three weeks' worth of my thinking.
16:23 We missed a week.
16:24 But I would like to wish you guys and all
16:27 of the loyal viewers who are in here every other week,
16:32 because hopefully I have something important to say.
16:35 I wish you a happy, healthy, peaceful New Year's.
16:38 And please vote, whatever your political leanings are.
16:42 Vote, vote, vote in 2024 so that your voice is heard.
16:48 Love it.
16:48 Love it, Mark.
16:49 And just from all of us here, and I'm
16:51 sure the audience would agree also,
16:53 thank you for joining us.
16:54 Like always, it's truly been an honor to have you on the show,
16:58 because as someone that studies markets--
17:00 Legendary investor, Mark Jakin.
17:02 Yeah, literally.
17:03 I mean, I can tell you, there's like at least five or 10 books
17:08 back there that have your name in it.
17:10 So I can tell you that I definitely
17:11 enjoy being able to speak with you throughout the year.
17:15 I know the chat loves it.
17:17 So a lot of love for you.
17:18 A lot of thanks in the chat.
17:19 Have a great year next year, Mark.
17:21 We expect great things from you in '24.
17:24 And I'll actually be on on January 4,
17:26 because we missed a beat.
17:27 Ooh, excited.
17:29 We'll see you back.
17:30 Right in the middle of the new year.
17:31 Right in the middle of this.
17:32 Yeah, that'll be great.
17:33 Enjoy, guys.
17:34 Have a great one.