Friday, May 18, 2012

Coppock curve update

WARNING:  WHAT FOLLOWS IS RESEARCH, NOT INVESTMENT ADVICE.  YOU INVEST AT YOUR OWN RISK, UNLIKE THE WALL STREET BANKS, WHO ALSO INVEST AT YOUR RISK.

I have previously shown how the current situation resembles that of 1972-1973:  depressed Michigan sentiment, my animal spirits metric climbing above zero.  If we follow the early ‘Seventies pattern, we are on the cusp of a severe recession (actually, I believe we will have to start calling it a depression in polite society if even the mal-measured unemployment rate climbs above ten percent and lingers there). 

So it was of some interest to me to update my implementation of the venerable Coppock curve, a long-term stock market momentum indicator that gives a reliable buy signal when it turns up from a negative reading (the one false positive having been in the early ‘Oh-Ohs).  In this light the stock market also resembles the early ‘Seventies situation, even to exhibiting a very well formed “killer wave,” a descent from a top with a hitch on the way down, very much as it did in the early ‘Seventies, and before that, coming off the major late ‘Sixties top.  Here are the charts.

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Scaled the same way, side by side (note the higher highs and the lower lows in the recent period):

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