A little known but important technical indicator which many consider to be a vital prerequisite for the birth of a bull market is still mired in negative territory.
This summer, the Coppock curve fell below zero and since then, I’ve been watching this indicator for the eventual upturn. Here’s a quick update with more background information on this indicator.
Right now we are at -243, which is almost at the same level at which the market turned around in March 2003 (corresponding Coppock guide level at that time was -246).
The deepest level we’ve seen this indicator fall was in 1932, when it plumbed -643 for the S&P 500 index. That shouldn’t be that surprising when you consider that it was the most brutal bear market for US stocks.
While I haven’t measured this pattern, it is observable that, often, the more negative the Coppock Guide is when it finally turns up, the longer and stronger the bull market that follows it.
If the market continues to rise, the Coppock curve will eventually turn up from this deeply negative level. Depending on how fast the market rises, it will take at least 2-3 months or more for that to happen.
That’s assuming that the eventual signal is a valid one.
No technical indicator is foolproof. Including the Coppock Guide. As it is based on monthly data, it moves so slowly, but in its history there have been a few whipsaws:
- Coppock curve first published in Barron’s in 1962
- Edwin Coppock was an economist from Texas
- originally called “long-term buying guide”
- Coppock was asked by Episcopal Church to find long term opportunities
- saw bear markets as “bereavements” requiring mourning before recovery
- based formula on length of time people need to recov: 11 to 14 months
- a daily Coppock curve can be calculated as well
Enjoyed this? Don't miss the next one, grab the feed or