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 Facts Reflecting An Improving Climate For Stocks?


Biggest Jump In Wages In Seventeen Months

Nothing is ever cut-and-dried on Wall Street. While Friday’s employment figure easily exceeded expectations, the wage figures increase the odds of the Fed stepping in sooner rather than later. From Bloomberg:

The 321,000 advance in payrolls exceeded the most optimistic projection in a Bloomberg survey of economists and followed a 243,000 gain in October that was stronger than previously reported, figures from the Labor Department showed today in Washington. The jobless rate held at a six-year low of 5.8 percent. Average hourly earnings rose 0.4 percent, the most since June of last year.

Negative Slope Says Higher Risk

With the “growth vs. Fed tug-of-war” going on, we can use trends to get a better handle on the market’s net aggregate stance. Trends help us filter out the day-to-day noise in the equity markets. Moving averages are one of many ways to monitor market trends. Professional traders and managers often use the 50-day moving average to monitor intermediate-term trends in stock prices. In the chart below, the Dow’s (NYSEARCA:DIA) 50-day moving average rolled over two times, once in late 2007 and again in mid-2008, warning investors of increasing downside risks (see orange arrows). Note stocks lost an additional 39% after the 50-day rolled over in June 2008, meaning observable warnings came before the big plunge.

How Does The Dow Look Now?

With investors trying to balance an improving economy with the increasing odds of a Fed rate hike, stocks had an indecisive look between mid-summer and early fall 2014 (see orange arrow). The conviction of market participants has improved since the October low. Notice how the slope of the Dow’s 50-day has turned up in a bullish manner (green arrow).

The chart above does not predict the future, but it can help us assess the probability of good things happening relative to the probability of bad things happening. The current profile continues to favor “good things happening” for stocks.

Investment Implications – The Weight of The Evidence

As of Thursday’s close, our market model was still calling for an equity-heavy allocation (NYSEARCA:SPY). Could fear of a Fed rate hike turn the tide for risk assets? Sure it could, but rather than anticipating when a turn may come, our approach requires observable evidence of a bearish shift, something we have not seen yet.

Market Forecasts Similar To A Coin Flip

As college football heads into championship weekend, this timely video clip compares handicapping the outcome of a football game to attempting to forecast where the stock market is headed. After you see the comparison, it is not difficult to understand why “paying attention to facts and making adjustments” has numerous advantages over attempting to invest based on market forecasts.

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