Why This OG Quant Partnered with TradeSmith
Listen to the audio version of this article (generated by AI).
Michael’s note: Back in December, I sat down with Marc Chaikin – the 60-year Wall Street veteran behind Chaikin Analytics – right as we were finalizing our partnership.
That partnership became the Chaikin Flash Portfolio, which launched Jan. 5 and has since gone on to produce a return of 71% as of Thursday’s close.
Now we’re launching a second strategy, designed for greater diversification and lower risk, in anticipation of a new stretch of volatility in stocks.
With those updates live, this felt like the right moment to bring this conversation back.
If you missed it the first time, here’s the best introduction to who Marc is, how he built the Power Gauge, and why we built something with him.
And if you’d like to learn the finer details of what we built with Marc for our subscribers, click here.
Michael Salvatore: Marc, thanks for joining me. You’ve had a long career on Wall Street – trader, analyst, indicator inventor… You’ve managed money for Paul Tudor Jones, Steve Cohen, and George Soros. But your career goes back to the 1960s. Take me back. What was it like starting out then, and how did that shape you?
Marc Chaikin: I started at 14 Wall Street, right across from the New York Stock Exchange, in 1966. I got my license as a stockbroker on Oct. 7 of that year – the day a bear market ended. I was with a firm called Shearson, Hammill, one of the premier research firms on Wall Street.
Back then, our branch manager wouldn’t allow charts on your desk. They were walking institutional clients through the office and wanted everyone sticking to the firm’s research, not technicals. It was a fundamentally driven market. Technical analysis was just starting to emerge.
Michael Salvatore: When did that change for you?
Marc Chaikin: In 1969, during the first bear market I experienced as a broker. I watched analysts fall in love with stocks – the kind of thing you’d see with a stock like Palantir today. They’d get more excited about it as it dropped from 100 to 80. By 60, they’d downgrade it to a hold. By 40, they’d throw in the towel completely.
I realized that wasn’t a way to run a portfolio or a business. So I got serious about technical analysis – new highs and lows, advance-decline lines, volume. Without it, I didn’t think I had a career or a way to manage my own money.
Michael Salvatore: You went on to invent some of the most widely used indicators in the business – the Chaikin Oscillator, the Money Flow Indicator. How did those come about?
Marc Chaikin: It started with a book on relative strength I picked up near the Exchange. That’s still true 60 years later: Relative strength drives the market. The strong get stronger, the weak get weaker.
But volume was the missing piece. You can have a big trend, but without the volume behind it, the engine runs out of gas. That became the Chaikin Money Flow, introduced in 1982. It’s been used by traders for more than 40 years now – it’s built into pretty much every online brokerage platform today.
Michael Salvatore: In 2024, you made a call that stood out. You said the S&P 500 would rise more than 20% for the year, when the Street’s median forecast was around 3%. It closed up nearly 25%. What did you see that most of Wall Street missed?
Marc Chaikin: Relative strength and money flow were both strong. But I also look at cycles – specifically, four-year presidential cycle research that goes back 100 years. That cycle pointed to a strong finish for the year. I don’t like locking myself into one system alone, but when the technicals and the cycle work agreed, that gave me the conviction to stay bullish.
Michael Salvatore: Let’s talk about the Power Gauge. It’s a 20-factor model rating stocks from very bearish to very bullish. Where did that come from?
Marc Chaikin: I always believed fundamentals drive the market, but technicals measure its extremes. Combining the two was the key to making money on Wall Street. I got early access to one of the only quantitative databases around, back at Drexel Burnham Lambert in the early 1980s, which let me start blending technicals with fundamental data like earnings estimate revisions.
But the real turning point came in 2008. My wife Sandy had her retirement savings with a financial advisor. Her account was down 52% that fall. She couldn’t get her broker to return her calls. I’d been retired for years by then, but it made me angry – I realized the whole crisis could have been avoided.
So we moved her money to an index fund, and I set out to build the model I’d always wanted: fundamentals and technicals combined into one quantitative score. I distilled 200 factors down to 20 over an 18-month research effort. That became the Power Gauge.
It wasn’t built for institutions – I’d already built those tools. It was built for people like Sandy: self-directed investors who wanted the same edge the professionals had.
Michael Salvatore: Markets move a lot faster now than when you started. Does that change how you think about volatility?
Marc Chaikin: In some ways, less than you’d think. The information is the same – earnings estimates, relative strength – it just arrives instantly now instead of through a printed research note. That speed is exactly what creates the volatility.
Here’s an example. We had a stock on our buy list that announced a name change, dropping “solar” for something broader tied to energy. The market didn’t like it. The stock dropped nearly 18% overnight. But our tools didn’t move. The Power Gauge stayed bullish. Money flow stayed bullish. That let us treat the drop as a buying opportunity instead of a reason to panic.
That’s the whole case for a system: It keeps you from getting shaken out by the noise the algorithms create.
Michael Salvatore: That’s really the throughline of why we partnered with you. What made this the right moment to bring the Power Gauge together with TradeSmith?
Marc Chaikin: You need a system and a game plan, and you need to run it every day – that’s what separated the money managers I worked with who succeeded. The Power Gauge has always been our stoplight: red or green. TradeSmith has built real strength in risk management and AI. I’ve believed in AI since the late 1980s, when my son was studying neural networks in college. Combining the Power Gauge with TradeSmith’s risk tools was a natural next step.
Michael Salvatore: Any final word for TradeSmith Daily readers?
Marc Chaikin: Have a plan, and stick to it. Turn down the volume on CNBC. Don’t let headlines knock you off your game plan. You’ve got good tools – use them, and don’t let the talking heads pull you around. They’re not on your side.
To building wealth beyond measure,
Michael Salvatore
Editor, TradeSmith Daily
P.S. Marc and TradeSmith CEO Keith Kaplan just teamed up again.
This time, they’ve built a second strategy designed for more diversification and less risk, timed for a stretch of the calendar that’s historically been rough on stocks. As part of the rollout, TradeSmith is also debuting its first-ever sell signal, built specifically to help you get ahead of the kind of fast, whiplash selloffs we’ve seen before – instead of getting caught flat-footed by them.
Marc and Keith are also revealing the one stock they’d buy and the one they’d sell before Sept. 1 – both confirmed by their respective systems. Click here for details on the new strategy, the sell signal, and those two stock picks.