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.

Will Buyers Step Up Again?


Five Recent Misses

On September 30, we noted three examples of economic reports that came in below expectations. The disappointing theme also helped contribute to Wednesday’s selloff in equities. From The Wall Street Journal:

Traders said weaker-than-expected economic data in Europe and the U.S. contributed to the negative tone Wednesday. Trading was busy, with 8.1 billion shares changing hands, the fifth-highest for any session this year… Stocks started the session lower and the declines accelerated during the day, after reports on U.S. manufacturing and construction spending fell short of economists’ forecasts.

We Will Learn Something Soon

The chart below shows the S&P 500’s 100-day moving average has attracted buyers during recent bouts of weakness in stocks (see A & B). The action of buyers near points A and B speaks to their economic confidence. Will the recent string of disappointing economic reports prevent buyers from stepping up this time? One way to see if their buying conviction is waning is by watching Wednesday’s low in stocks. In the examples near A and B, the intraday low made near the 100-day held in the following sessions. We will see what happens over the next few days. The S&P 500 level to watch is 1941.

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Market Warnings

Has the observable evidence been helpful recently? Yes, as noted in the September 22 tweet below, the market has been waving yellow flags for some time.

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A September 26 video also showed numerous concerns pointing to increasing odds of ongoing weakness in stocks.

Support Did Not Hold

On September 30, we showed the left version of the NYSE Composite Index below. The same chart as of October 1 (below right) shows buyers did not provide support for stocks as they had previously (see green and red arrows). Therefore, we reduced our equity exposure (NYSEARCA:SPY) and added to a now sizable stake in cash. If weakness continues, we may add to our more-conservative holdings before the end of the week. Our bond position (NYSEARCA:TLT) has gained 2.18% so far this week.

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Investment Implications – The Weight Of The Evidence

Using the weight of the evidence involves taking numerous inputs into consideration. Therefore, it is not the end of the free world as we know it if the S&P 500 takes out Wednesday’s low and fails to hold near its 100-day; it simply means the probability of further weakness will have increased a bit more.

Asia Weak

Around 7:30 pm ET Wednesday, the trend of economic/Fed concerns and equity weakness seemed to be ongoing. From Bloomberg:

Asian index futures slid with U.S. stocks as the yen and Treasuries rallied amid concern over weakness in the euro-area economy and the end of the Federal Reserve’s stimulatory bond-buying program. Futures on Japan’s Nikkei 225 Stock Average sank 1.4% in the Osaka pre-market.

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