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 Commodities Waving Red Flags For Stocks?


Worries Not In Short Supply

Are there things to be concerned about? Yes. Europe is weak economically and flirting with deflation, the Fed is on the verge of shifting policy, and recent U.S. economic data has been weaker than expected. Should stockholders add divergences between stocks and commodities to their list?

Recent Example

The 2014 charts below show that on a relative basis stocks have been stronger than copper. Many have cited weakness in commodities as a reason to run for the stock market emergency exits. Is it a real concern?

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18-Year Divergence

In general terms, divergences between commodities and stocks are not reliable “run for the equity exit” signals. For example, the CRB Index (NYSEARCA:DBC), a diversified basket of commodities, was weak between 1982 and 2000 (top of chart below). Over the same period, stocks did quite well (bottom).

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Investment Implications – The Weight of The Evidence

We outlined concerns about stock market vulnerabilities on September 26. Even with Thursday’s intraday rally, the S&P 500 (NYSEARCA:SPY) is still down 1.85% this week. Friday brings Wall Street’s greatest over-hyped report; monthly non-farm payrolls. The market remains vulnerable and in “prove it to us” mode. It is not Friday’s employment figures that are important, but rather the market’s reaction to them. If a bullish reaction allows the S&P 500 to recapture 1979, it would be a noteworthy reversal. Below 1979, it is much easier to remain patient with our cash.

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Longer-term forms of possible resistance on the S&P 500 come in between 1952 and 1991 (see chart below). We will enter Friday’s session with a flexible and open mind.

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