Comments on: Coppock Guide Update & Forecast For 2009

by: Richard

Tue, 05 May 2009 15:43:23 +0000

If I’m not mistaken we just got a buy signal on the NASDAQ index at the end of April.

by: roam92

Mon, 02 Feb 2009 07:12:58 +0000

Marketwatch quotes Eliades on the Coppock:

…

Stock Market Cycles’ Peter Eliades is another Crash of 2008 star.

Uniquely, he continues to try to be cheerful. He wrote on Friday: “We are looking forward to next week’s market action and a possible resolution of a market bottom of some degree.”

See? That’s unique.

Not for the first time, Eliades is excited about a new technical tool I’ve never heard of, something called a “Coppock Curve”.

But whatever it is, it’s not yet applicable. Eliades concludes his discussion of the Coppock Curve: “We do not believe we have a buy signal to look forward to at the end of February because it would take a reading above 10,212 on the Dow to generate a buy signal at that time. That would entail a rally of almost 28% on the Dow over the next four weeks.”

Oh. That’s too bad.

Eliades is in cash, although, as he did last week, he’s trying a quick trade if conditions are right Monday morning.

by: Roam92

Tue, 27 Jan 2009 15:50:28 +0000

Great - glad we caught that… Since January is very likely to be another down month (four out of the past five for the SPX), does that mean that long-termers should continue their holiday for another month?

Or maybe another several months?

Market Outlook: The Golden Cross Won’t Happen for Months
http://seekingalpha.com/article/115024-market-outlook-the-golden-cross-won-t-happen-for-months

by: Russ Abbott

Tue, 27 Jan 2009 04:45:46 +0000

I don’t have the data, but I’d like to see how the Coppock compares to a monthly MACD. Does anyone have the data for that?

by: Babak

Tue, 27 Jan 2009 01:46:56 +0000

Roam92, thanks for pointing that out!
The chart is incorrectly labeled. The Coppock guide turned up for Feb 1975 from -316 to -297 so it was a bit “late” but it usually is. Nevertheless it was a very good signal that the bear market had indeed ended.
I’ll fix the chart.

by: Roam92

Mon, 26 Jan 2009 20:47:47 +0000

On your chart - I see about March ‘03, but why was Jan ‘74 such a good signal?

That bear didn’t bottom out until Sept ‘74, at about one-third lower levels…

by: Vega

Mon, 12 Jan 2009 17:22:42 +0000

Russ Abbott, great observation. I’ve done a lot of work with both Coppock and the MACD. And you are right: they pretty much do the same thing. In fact, the MACD is so much easier to calculate, I like to use it instead. But when you compare the Coppock and MACD you’ll def see that they give you pretty much the same thing — and I mean no disrespect to Coppock users, it really is a fascinating indicator, IMO.

by: Russ Abbott

Sun, 11 Jan 2009 18:26:11 +0000

I said it backwards. MACS subtracts the longer term MA from the shorter, which gives you the current change.

by: Russ Abbott

Sun, 11 Jan 2009 18:24:26 +0000

When I said that the Coppock Guide is like an MACD on a monthly basis what I had in mind is that both look at the second derivative of the time series (i.e., prices) they are tracking.

The MACD subtracts a shorter term loving average from a longer term moving average. The reason for using moving averages instead of the actual price is simply to smooth out the series so that it doesn’t bounce all over the place. Subtracting a shorter term MA from a longer term MA gives you something like the first derivative of the series.

The first derivative is the rate of change of the series. The faster MA gives you something like the value of the series a few steps back, i.e., close to the present but smoothed out to eliminate random daily fluctuations. The slower MA gives you the value of the series a few more steps back. Subtracting the slower from the faster gives you the change in the series. You would get something similar if you took a single moving average and subtracted a value a number of steps back from the current value. Basically it tells you whether the series is going up or down.

The next step with MACD is to see if that first derivative is changing. That’s the point of the MA of the MACD line, which serves as the signal or trigger line. If the MACD turns around and crosses the trigger it means that the first derivative has changed enough so that it’s worth paying attention to. So basically one is looking at the change in the first derivative, which is the second derivative.

The Coppock Guide does the same thing. Instead of using two MAs. It subtracts previous values from the current value. That gives you the first derivative. Then it looks to see if that series is turning around. (The business of using 14 months and 11 months, etc. is relatively unimportant. What matters is that you are looking at the change over approximately a year.)

In both cases you want the first derivative to be strongly negative, i.e., that the price series itself is going down fast, so that a change from that trend makes a difference. That’s why Coppock and MACD are most important when the signal occurs from a relatively extreme spot.

by: Guru

Sun, 11 Jan 2009 13:19:45 +0000

The MTI is essentially a momentum tool. I calculated 4 moving averages on 45-years (actually March 12, 1963-December 31, 2007) of S&P 500 Index closing values. There are 24 permutations of 4 moving averages and 5 possible positions of the Index itself relative to these averages. For example, over the 44 years (nearly 11,400 trading days), the Index was above all 4 moving averages (the most bullish alignment) 53% of the time; it was below the 4 moving averages (the most bearish alignment) 18% of the time. Combining all possible moving average arrays and the position of the Index relative to them yields 120 possible combinations. In actual fact, only 93 of those possible combinations actually occurred and some for only a few days.

Rather than solve the question on a theoretical basis, I took a bull-in-a-china-shop approach. A $1000 portfolio of S&P stocks on 3/12/63 would have grown to $22,414 by 12/31/07 (the buy-and-hold strategy). I then back-tested on a binary basis (own or not own) each of the 93 combinations to determine whether, at the end of 45 years, the hypothetical portfolio of the SPY Index would have been higher or lower than the buy-and-hold strategy. Combining all the possibilities of these 93 combinations for every trading day on an “all-in” or “all-out” basis resulted in the $1000 growing to $50,171. And most aggressively, had the “all-out” days been fully-margined (150%)” then the $1000 would have grown to $258,602! Surprisingly, the back-testing didn’t demand overly active trading activity. Over the 45 years, there weren’t very many runs of less than 10 trading days and most ran up to 30-60 days.

Actually, due to the severe and deep collapse of the market in 2008, the MTI signaled an “all-out” cash position December 26, 2007 and hasn’t yet signaled it safe to be back in and looks like it will be some time before the MTI signals it’s safe (low risk of further decline) to fully reenter the market.