Category Archives: Coppock Index

"Too much too soon." Those are the words of E.S.C. Coppock in describing the emotional state of the uninitiated investors response to the ups and downs of the stock market. The purpose of the Coppock Curve is to measure the emotional overreaction to the movement of the stock market.

Mr. Coppock observed that investors tend to ignore the fact that earnings are stable or rising and instead sell off a stock which is thought to be in trouble. Therefore, the monthly averaging of an index like the Dow Jones Industrials allows for better clarification of the what the price action is telling us.

So far the Coppock curve is indicating that, although we may not be at the bottom in the stock market, we are still in a relatively risk free period to invest in stocks. The following is the movement of the index from the lowest point since April 2009:

Please revisit Dividend Inc. for editing and revisions to this post.

Today is the end of the month which means that we can now review the Coppock Curve(also known as the Coppock Index) to determine if the direction for stocks is indicated to be moving higher overall. Since the last bottom in the Coppock Curve back in April the index has had the following monthly figures:

• April 2009:-388
• May 2009:-383
• June 2009:-378
• July 2009: -359

From what I can tell we need another 3 months of rising numbers along with an increase above -260 for the Coppock Curve to establish a clear signal that a sustainable market reversal is at hand. I know that asking for 3 more months of rising figures seems like a lot. However, I just don't want to get faked out like what occurred in May of 2002. The actual turn in the index took place in March of 2003, almost a full year later. Would I be missing a lot of market "action" by taking this stance? Absolutely. However, the risk to your hard earned principal is what is at stake. It is always best to take the cautious stance on these matters.

Remember, The Coppock Curve is a relative strength index. In almost every instance that this index rises from a negative number to a positive number it has coincided with a relatively risk-free time to invest in stocks. In turn, an improvement in the stock market is a reflection of the better times in the U.S. economy overall. Let us hope that the trend continues. Touc.

Please revisit Dividend Inc. for editing and revisions to this post.