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As independent money managers, we provide long-term wealth and estate preservation strategies and prudent investment advice in a challenging environment for investors. If you are looking for an asset manager or money manager who adjusts investment allocations to align with present market conditions, Ciovacco Capital Management may be a good fit for you.

CCM 80 Correction Index

Stock Market Blog - Investment Blog - Ciovacco Capital - Atlanta
The CCM 80-20 Correction Index
A Submodel Feeding Into Master Model


The master CCM Market Model uses input from five submodels to leverage the benefits of approach/method diversification. This page describes one of the submodels, the CCM 80-20 Correction Index.


The Ciovacco Capital Management (CCM) 80-20 Correction Index helps us better assess the health of an established bull market. Even sustainable bull markets, from a longer-term perspective, experience corrections from time-to-time. Stock market corrections can last for weeks or even several months. The CCM 80-20 Correction Index uses probability distributions to help us identify market conditions where the risks of market correction are elevated.

We studied fifty-six instances (1981-2013) where, with the benefit of hindsight, you would have wished you reduced your exposure to risk prior to, or during the early stages of, a relatively significant correction in stocks. The CCM 80-20 Correction Index allows us to assign a single numerical score to the present day market. We can compare that score to the historical scores present just prior to significant corrections in stocks.

The "80" in the 80-20 Correction Index refers to the hypothetical 80% portion of a client's portfolio that would remain invested as long as the bull market appears to be healthy from a longer-term perspective. The "20" in the 80-20 Correction Index refers to the hypothetical 20% portion of a client's portfolio that would be used to reduce risk, raise cash, or even hedge in some cases. The CCM 80-20 Correction Index can help us more effectively manage risk. The 20% and 80%, may, or may not, be appropriate for all clients based on their individual goals and risk tolerance. However, the basic concept of attempting to identify periods of elevated risk can be helpful to all CCM clients.

The logic flow of the chart below is from top to bottom.

Stock Market Risk-Reward Analysis - 80-20 Correction Index

The 80-20 Correction Index (described above) is used in conjunction with the CCM Market Risk Model and CCM Bull Market Sustainability Index.

Additional comments can be found in Short Takes.

Chris Ciovacco
Ciovacco Capital Management

 Chris Ciovacco of Ciovacco Capital

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

Terms of Use. The charts and comments are only the author's view of market activity and aren?t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren't predictive of any future market action rather they only demonstrate the author?s opinion as to a range of possibilities going forward. All material presented herein is believed to be reliable but we cannot attest to its accuracy. The information contained herein (including historical prices or values) has been obtained from sources that Ciovacco Capital Management (CCM) considers to be reliable; however, CCM makes no representation as to, or accepts any responsibility or liability for, the accuracy or completeness of the information contained herein or any decision made or action taken by you or any third party in reliance upon the data. Some results are derived using historical estimations from available data. Investment recommendations may change and readers are urged to check with tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.