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Coppock IndicatorThe Coppock Curve was developed by Edwin Sedgewick Coppock, a US investment advisor, in 1962. It is a momentum oscillator that was designed for long term investors to begin accumulation at the beginning of a bull market. Coppock designed the indicator to identify significant lows in the share market by applying it to the charts of broad market indices. The Coppock Curve has proven to be very good at discriminating between bear market rallies and true bottoms in the sharemarket. Share markets tend to make spike bottoms and rounding tops. That is a result of the fact that fear is a stronger emotion in people than greed. At the end of a bear market in the share market, investors generally fear losing their money. As prices fall, they fear further losses, and sell shares, accelerating the decline, and creating the spike bottom. Share market tops tend to be much more gradual affairs. It has proven to be remarkably resistant to whipsaws. The Coppock Indicator signals the beginning of a bull market when it turns upwards. This signal is usually after the first leg of a bull market is underway, thus it’s highly reliable. The indicator should be applied to monthly charts of broad market indices and will look something like the chart below which is the Coppock Indicator on a chart of Australia's All Ordinaries Index (top 500 companies index).
The indicator is calculated by taking the 14 month rate of change (%) of the index and adding the 11 month rate of change (%) of the same index. A 10 month exponential moving average is taken of the sum of the two rates of change. The Market Technicians Association in the United States gave Edwin Coppock its annual award for a lifetime of achievement in technical analysis in 1989.
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