The S&P 500 has had a strong 2023, up 18% year to date. Yet this may just be the start of a multi-year bull market according to a long-term indicator which has provided reliable buy signals over the last several decades.
The Coppock Curve marks major up trends and downtrends in stock indices. The indicator is used on monthly charts.
Over the last 30 years when a buy signal has been generated the ensuing up moves have lasted:
- 68 months, with a sell signal at 72 months
- 48 months, with a sell signal at 54 months
- 65 months, with a sell signal at 73 months
- 65 months, with a sell signal at 74 months
Cory Mitchell, an analyst with Trading.biz said, “Over the last 30 years, at least a 4-year uptrend has followed a Coppock Curve buy signal. More often it is a 5.5 year rally before the decline begins and the Coppock Curve creates a sell signal several months after the peak.
“The Coppock Curve triggered a buy signal at the end of August. This rally is only two months old according to indicator, and may have four or more years left to run if recent history is any indication.”
A buy signal is generated when the Coppock Curve moves above its own zero (0) line, and a sell signal is generated when the price drops below the zero line.
Investors should understand exactly what they are getting with the Coppock Indicator. It is a long-term indicator so it isn’t usually affected by short-term moves, even if they are large.
When the S&P 500 fell more than 30% over two months in early 2020, but then recovered almost as quickly, that didn’t generate a sell signal on the Coppock Curve.
When a Coppock buy signal occurs prices have progressed higher, reaching a peak 48 to 68 months later. But it could be a bumpy ride along the way.
As for the sell signals, in the 2000 and 2008 declines, the Coppock sell signal told investors to exit about ⅓ of the way into the decline. This could have saved investors a lot of money and mental anguish as prices continued to plunge following the signal to exit the market.
There was also a sell signal in early 2016. Even though the stock market had not fallen dramatically, it did move sideways for two years. The Coppock Curve gave a sell signal as the sideways period was ending, but then provided a buy signal again shortly after.
The sell signal in 2022 was not ideal, selling right near the bottom of the decline.
In summary, over the last 30 years the Coppock buy signals have been great, corresponding to multi-year rises in the S&P 500 index. The sell signals have been mixed in terms of their quality.
While past performance isn’t always indicative of future performance, the major stock market indices could be in for a four to five year uptrend.
Investing is risky and large moves can occur both to the upside and downside. Position size and manage risk accordingly.
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