Demographics Support Case For Major Upside Breakout

Chris Ciovacco profile picture
Chris Ciovacco


  • The average stock is hovering near an area of major support that has been 21 years in the making.
  • The stock-bond ratio is trying to nail down an 18-year shift.
  • If history is any guide, demographic trends may turn out to be extremely helpful over the next 15 years.

Average Stock Near Critical Area

The broad Value Line Geometric Index (VTI) is a good way to monitor the progress of the average stock. Given the index made a stand near similar levels in 2011, 2016, and 2018 (green arrows), the upward-sloping blue line represents an area of possible support. The expression "what once acted as major resistance may now act as major support" applies to the horizontal blue line where the index was rejected in 1998, 2007, and 2015 (red arrows).


Stocks vs. Bonds

If the stock market (SPY) is about to push higher, we would expect growth-oriented investments to outperform defensive investments, such as bonds (TLT). The ratio of stocks to bonds is also near a key area from a very long-term perspective. The ratio was rejected on a rally attempt in 2001 and was unable to clear the same area in 2007. The ratio stalled near the same blue horizontal line in 2017 before breaking out. Therefore, it is possible that the blue horizontal line that acted as resistance for 18 years may now act as support. We also have reason to believe stocks could make a stand soon relative to bonds based on the prior areas of support in 2009, 2012, and 2016 (green arrows).


Demographics Could Drive A Major Breakout

The chart on the left below shows the stock market (SCHX) is trying to move away from levels that have been relevant for 21 years. The stock-bond ratio is trying to move away from levels that have been relevant for 18 years (right-hand side).


Bank of America recently issued a report that points to the increasing possibility that the role of bonds in a diversified portfolio may change significantly in the years ahead. From MarketWatch:

In a research note published by Bank of America Securities

This article was written by

Chris Ciovacco profile picture
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. Copy and paste links into your browser: Market Model: More About CCM: YouTube: Twitter: CCM Home Page:

Disclosure: I am/we are long VOO, TLT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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