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.

Fed And BOJ On This Week’s Docket: Three Charts To Assist

Three key charts are trying to hold onto “breakout followed by a retest” looks as described on September 14. Given the market is bracing for a double-dose of central banks this week (Fed and Bank Of Japan), the charts below should provide some insight into the market’s risk-reward profile over the coming days and weeks. From Reuters:

The U.S. dollar fell from Friday’s more than two-week high against a basket of major currencies on Monday on expectations that any Bank of Japan action this week would not weaken the yen and the Federal Reserve would refrain from raising rates. The BOJ is due to conduct a comprehensive review of its policy framework, which combines negative interest rates with a massive asset-buying program. The BOJ and Fed meet on Sept. 20-21.

Economically-Sensitive High Beta

The High Beta ETF (SPHB) has higher weightings in materials (XLB), energy (XLE), and financials (XLF) relative to the S&P 500’s weightings (SPY). As shown in the chart below, this economically-sensitive investment is trying to hold the recent break above an area that has acted as resistance for a year. As recently as June 28 (point C below), SPHB looked to be on the ropes.

Is Recent Volatility Waving Red Flags?

This week’s stock market video provides insight into recent market volatility via historical examples. How much volatility can occur after a bullish breakout and within the context of a bullish trend? Why is capital preservation important?

After you click play, use the button in the lower-right corner of the video player to view in full-screen mode. Hit Esc to exit full-screen mode.Video

S&P 500 Weekly

The weekly S&P 500 chart below is an updated version of the chart described on September 13. If the current weekly retest ends with the S&P 500 remaining above the long-term consolidation box, bullish probabilities would improve relative to bearish probabilities looking out weeks, months, and years.

Broad NYSE Composite

It comes as no surprise the broad stock market is hovering near a key level prior to announcements from two central banks. In October 2015, sellers thought 10,513 was relevant on the NYSE Composite. Sellers surfaced again near 10,511 in April 2016. Last Friday, the NYSE Composite closed in the same basic area at 10,532 (see chart below).

Is A Surprise Rate Hike Possible?

During the trading session Monday, the markets were pricing in an 85% probability the Fed does nothing with interest rates this week. Given the market’s near obsession with central bank liquidity, it is prudent to remain open to any and all market reactions this week. From MarketWatch:

Economists said they could not rule out a surprise rate hike this week, particularly since Yellen said “the case for an increase in the federal funds rate has strengthened in recent months.” …That said, Paul Ashworth, chief U.S. economist at Capital Economics, says that a surprise hike “just doesn’t fit Chair Yellen’s style.”

Charts And The Market’s Reaction

The longer high beta stocks, S&P 500, and NYSE Composite can stay above the levels outlined above, the better for the bullish case. Conversely, a sustained break below the key levels would increase bearish odds. We will learn something either way.