Martin Pring, who turned 80 last year, founded Pring Research in 1978, when he started to sell his stock-research services to investment advisers and financial institutions. He has written more than 20 books on investing, including topics such as asset allocation and market psychology. His book “Technical Analysis Explained” was for a time required reading for the Chartered Market Technician’s (CMT) designation.
Chuck Jaffe: Today we brought in a master of technicals.
Martin Pring: I’m most happy to talk to you. So nice to be with you.
CJ: I don’t give many people credit for getting stock market forecasts right because they seldom are right. But you were last on the show in June and you were talking at the time about how we were in the early stages of a bull market in stocks, and you did a pretty good job of calling the rally, even though you had somewhat low expectations. So where are we now in the cycle and what are the indicators saying?
MP: That bounce we’ve had in the market since October, in many respects, looks like the beginning of a bull market. In other words, what happens at the beginning of a bull market is sometimes the press does very well and expands, which it’s done. And a lot of economic and other long-term indicators also started to turn up. That put us in what we call stage two of the business cycle, which is the most bullish stage, which is when our indicators are bullish for stocks and for bonds, and bearish [for] commodities. And that’s where we are now. And I’m very optimistic over the next 12 months because it looks like we’ve started, or just recently started a new bull market.
CJ: You clearly talked about being optimistic for the next 12 months. Is that, in part, because once we get through 12 months, we’re through the election, and election years tend to be pretty good, but post-election years tend to be when the trouble comes to roost?
MP: Yes, I think that’s true. Most election years are plus years, especially when an incumbent president is running. When it’s open, that’s when you tend to get a weak opening in the first quarter. But, generally speaking, election years are positive for stocks. And my indicators are in a position where they could be moving up. If they were to move up in a normal fashion, they’d be moving up for at least six months, probably as long as a year. But we have to, obviously, watch the data as it comes through because it looks like it has a lot of potential before it’s going to get overdone. It could turn around at any moment. So watch it on a continuous basis. But as it stands right now, it looks on a course through a bull market, notwithstanding maybe a correction in the opening part of this year. But I don’t focus on the short-term corrections. I focus more on the long-term work because that’s the trend that bails you out.
CJ: Do your indicators give you a level? I mean, if we’re having a bull market and it’s gonna last the year in spite of whatever we’ve got to go through on the short-term start to the year, is there a point you think we’re getting to? I mean, how high is up?
MP: I think that’s a very difficult thing to come up with as to how high the market’s gonna go. We can measure it with resistance levels and that sort of thing, but it’s very much a guess.
And if I were to guess, I would say something like 5,400 on the S&P 500. And I arrive at that number based on the fact that I think this bull market is a bull market under the guise of a big trading range in inflation-adjusted stocks. We had [this] between the 1960s, 1966 and 1974 or so. So I think we’re in one of those. And that’s why I would say something like 5,400. That’s purely a guess.
CJ: But 5,400 is up 15% from current levels. A lot of people would be pretty happy with that. Are you worried with your long-term indicators that we can’t hold that level, that the recession that everyone saw coming, the bear market that everyone has anticipated for so long, that at some point it has to arrive?
MP: Right now, the leading indicators I follow are in recovery phase. I look at it from not so much in the actual numbers, but in terms of momentum. And momentum has bottomed out and started to turn up. And as long as that continues to happen, I’m satisfied the market’s going to move higher. There have been very few occasions when it’s started to come out of the recessionary period that you’ve then rallied up for a few months and then started to turn down. That was a double dip of 1980 and 1981, 1982.
And even there, we got some advanced warning from some of these leading indicators, not very much, but enough to show to say that things have stopped progressing. And I don’t see that at this point in this cycle.
CJ: How much are you worried about just the Fed or inflation and things along those lines not going according to plan? Because obviously, the indicators are based on certain things. They’re also taking certain things into account as the whole market is. What if things just don’t run according to that plan? How dangerous is that for your forecast?
MP: When you look at the very long-term trend, what we call a secular trend, which lasts 15 to 20 years in terms of inflation-adjusted stocks, we’re in the beginning of a secular bear market, which begins with a long-term multi-year trading range. Like we were in the 1960s and early 1970s. And I think we’re in that kind of environment. So I’m kind of looking around behind my shoulder, for when this current bull market starts to turn down or when the leading indicators start to turn down. And that just hasn’t happened yet. So I’m staying bullish as long as those indicators remain bullish. They start to turn, I’ll turn with them.
Chuck Jaffe is a contributor at Equities and the host of “Money Life.”
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