Chris Ciovacco

About the Author Chris Ciovacco

Chris Ciovacco is the founder and CEO of Ciovacco Capital Management (CCM), an independent money management firm serving individual investors nationwide. The thoroughly researched and backtested CCM Market Model answers these important questions: (1) How much should we allocate to risk assets?, (2) How much should we allocate to conservative assets?, (3) What are the most attractive risk assets?, and (4) What are the most attractive conservative assets? Chris is an expert in identifying the best ETFs from a wide variety of asset classes, including stocks, bonds, commodities, and precious metals. The CCM Market Model compares over 130 different ETFs to identify the most attractive risk-reward opportunities. Chris graduated summa cum laude from The Georgia Institute of Technology with a co-operative degree in Industrial and Systems Engineering. Prior to founding Ciovacco Capital Management in 1999, Mr. Ciovacco worked as a Financial Advisor for Morgan Stanley in Atlanta for five years earning a strong reputation for his independent research and high integrity. While at Georgia Tech, he gained valuable experience working as a co-op for IBM (1985-1990). During his time with Morgan Stanley, Chris received extensive training which included extended stays in NYC at the World Trade Center. His areas of expertise include technical analysis and market model development. CCM’s popular weekly technical analysis videos on YouTube have been viewed over 700,000 times. Chris’ years of experience and research led to the creation of the thoroughly backtested CCM Market Model, which serves as the foundation for the management of separate accounts for individuals and businesses.

Are The Strongest S&P Sectors Favoring The Bulls?

‘Everything Is Not Rolling Over’

You may have heard the argument that the stock market looks better than many believe, based on the fact that several key sectors have not rolled over yet. For example, while the slope of the S&P 500’s 200-day moving average is clearly negative, using the same gauge several market sectors look a bit better. The charts below show the 200-day moving averages for healthcare, consumer discretionary, technology, and consumer staples.

Adding Price Into Equation

While the 200-days in isolation shown above look better than the S&P 500’s 200-day, if we add price back into the mix, things start to look more concerning. Consumer discretionary stocks have managed to reclaim their 200-day, which is a positive development. However, the 200-day remains very close by and the slope of the 200-day shows a very indecisive long-term trend (read vulnerable).

Tech stocks rallied back to their 200-day and thus far have failed to recapture the “long-term trend” demarcation line. It is not uncommon for markets to rally back to their 200-day during a correction or bear market, and then fail. Bulls want QQQ to recapture and hold above the 200-day, which may happen, but it has not yet.

Consumer staples have a similar “bounce” look. Price is below a downward-sloping (bearish) 200-day moving average. Can it improve in the coming days? Sure it can, but we need to see it.

The song remains the same with healthcare. A sharp plunge below the 200-day followed by a bounce back to the 200-day. The chart below in its present form is not an encouraging look for stock market bulls.

How Do The “Leaders” Look From A Weekly Perspective?

Regular followers know we use a set of weekly moving averages to monitor the general state of trends. How do the S&P 500’s strongest sectors look from this perspective? The answer is not good.

While there is nothing magical about the 200-day or the weekly moving averages used above, they can help us better understand an ETF’s risk/reward profile as described in this video clip using the S&P 500 in a bearish period (2008) and a bullish period (2009).

How Can We Use All This?

Under our approach, we need to see evidence of relevant improvement, which differs from a normal bounce or countertrend within the context of an ongoing downtrend. It is difficult to look at the weekly charts of the S&P 500’s strongest sectors and say “that looks like it is improving”. Ugly markets and ugly charts can begin to improve meaningfully at anytime. Therefore, we remain open to all outcomes, including bullish outcomes. The markets will guide us if we are willing to listen with a flexible, unbiased, and open mind.