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"Coppock Guide" Signals A Bear Market Is At Hand
With Emerging Market currencies, bonds, and stocks collapsing, US corporate debt crashing, and carry trades unwinding everywhere (ahead of the $800 billion liquidity withdrawal that looms from next week's 25bps hike from The Fed), it is no surprise that US equities are beginning to shudder (even the FANGs are not immune). But, as InvesTech Research notes, among its 6 compelling reasons to be cautious in 2016, the so-called Coppock Guide may be close to confirming that a bear market is at hand...
In March 2015, the Coppock Guide was signaling that both primary and secondary momentum had peaked and this continues to be the case today.
The Coppock Guide is a valuable tool to gauge the emotional state of a market index as it transitions from one psychological extreme to another. It was developed more than 50 years ago by Edwin S. Coppock and it measures momentum by taking a 10-month weighted moving total of a 14-month rate of change plus a 11-month rate of change of a market index.
The Coppock Guide is typically most useful at market bottoms, when market indexes reverse sharply as psychology shifts. It signals a “Best Buy” opportunity when the index turns upward from below “0” (see black dashed lines). The last such buy signal came within 60 days after the March 2009 market bottom.
Early in a bull market, momentum runs high and often peaks early. For this reason, the Coppock Guide isn’t as effective in identifying market tops. In fact, the initial peak in the Coppock Guide was seen during the first 18 months of this lengthy bull market, with a secondary peak in March 2014.
When a double-top occurs in an extended bull market without the Coppock falling below “0”, it signals that psychological excess could be at an extreme. And when that momentum finally peaks (see red dashed lines), it usually means a bear market isn’t far behind. This phenomenon was first observed by a market technician named Don Hahn in the late 1960s. Since 1929, there have been only eight instances of a double-top, and each one was followed by bear market losses of 30% or more.
We are currently seeing the likely completion of a double top (yellow shading on upper chart). When the Coppock Guide falls below zero, it confirms that a bear market is in place 77% of the time. The current value is 4.9 – which has resulted in a further drop below zero in 22 out of 24 instances.
Bottom line: If the Coppock Guide continues falling through zero, the probability of a bear market will increase... as will our portfolio defenses.
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I hope it is a Russian Grizzly
A 30% decline will seem optomistic once the rout begins... S&P at 1800 on options expiration next week, then the fun begins...
Looks like chicken bones and frog innards to me. What, another "index"? Yeah.
"...emotional state of a market index as it transitions from one psychological extreme to another."
Emotional states of markets? Markets aren't even an entity, let alone having "emotions".
Fer chrissakes folks, get a grip. This is grasping at some real doom/gloom straws. I don't need an index nor a graph to tell me the economy is an addled mechanism. Best way to win is not to play.
There's gotta be a Central Bank manipulation scheme to thwart the negative impacts of such a signal. . . PPT on line 1!
Unfortunately the fed will go all in again print or no print
What isn't signaling a bear market?
Talking to clueless people who will give one anecdotal evidence to the contrary, such as "the restaurants are full", or "I am working massive over time", or "Where I work, we are so far behind on orders", or "The lines for Black Friday were long", or "my stock in NFLX, FB, GOOG, and AMZN is up THIIIIS much".
We're getting close to a major correction."restaurants are full" was yesterday,several reastaurants in "booming" downtown San Diego are closing down,people are reigning in their spending on every level. Friday was just a pre tremor imo. its all about psychology,folks are getting nervous,one more "bad" event will send everybody for the one 2' x 2' emergency exit. stay in cash or go short,UVXY up 30% as of friday's close,gold still asleep and silver hammered down right along with iron ore and oil,seriously!?
At best, that emergency exit will be the size of a garden hose coupling, or most likely locked and welded shut.
I remember Black Monday, August 24, and how long it took to even execute some orders that day on various whatevertrade services online. Provided one could even log in.
I WANT to believe it. But there's also historical similarities on that chart that would lead you to believe the market would have much higher to go.
Markets will begin dropping soon, followed by some minor spasm higher due to some private investors who really think the Fed has their backs, but unfortunately for them.......the Fed has lost it All. No way back. Everything will go down the drain.
"Emotion" "psychological extreme"
Since when did computers have these new traits?
The market will either go up, down, or trend sideways. I have never been wrong about this.
<-----BULLBEARISH
<------BULLSHITUS
Love the tech porn. Not so much.
Rigged Casino?
LOL
chartin and a-farting is now....a fools game.
Read the fine print:
"The Coppock Guide is typically most useful at market bottoms,...."
LOL markets LOL, all these analyses are from times when there was such a thing as "money". Today we have proto-money from a ginormous group of hedge funds (formerly called "central banks") so who knows what happens next. Could be financial singularity and the canned food and ammo trade...but something tells me no matter what Mr. Yellen does, we will see a "rally".
When are the fucking "Technicians" going to get it?
All of these very interesting market indicators were valid in the rat pack casino days when there were markets.
Then came the Bernanke/Obama Pimp Daddy Gorilla.
This fucking 800lb gorilla had unlimited cash and wandered into the casino around 2009 to "save" the casino.
That fucking ape threw cash in all directions.
It didn't matter if the ape won or lost. He was on a mission from God.
Over time, the other players left the games and went home.
That is, except the pension funds, insurance companies and the retail suckers playing in the gorilla's shadow.
The gorilla changed all of the casino rules, because, that is what 800 lb. fucking gorillas do.
So, over more time the fucking gorilla was the only player left in the casino,
while Frank Sinatra sang, "I did it my way."
The casino, the dealers, the cocktail servers were all happy.
They were paid to serve the fucking gorilla.
So, now that fucking gorilla has a problem...
No one in the casino likes that fucker. They distrust him and wonder when he will get bored and leave.
But until that time, they must bow to him to survive.
They have to figure out a way to get out of the casino before he does.
Slowly, but surely, each of the dealers, and servers leaves the casino.
Then, there is no one left in the casino but that fucking gorilla,
and one Technician.
Remarkably, just before I read your comment, I was thinking the exact same thing...other than the "casino, Sinatra, and fucking gorilla" parts.
I'd like someone to do a graph of percentages of equities owned by private retail investors vs institutional investors. I'd like to meet that last retail investor where ever he is, and ask him why the fuck is he still in the market?
It cant be the end yet, that makes too much sense, maybe they are all trapped to play along, game theory, they can still maximizie their positions, time to hold or sell, its hair trigger ,they are all knowing of each others hand of cards. If they work together this end could take a revolution to come about, I am worn by the longevity, my god these guys deserve credit for the balls of the best con.
Here I thought there was a spelling error. I thought it was a kopek guide.
Interesting Indie. Other than the Great Depression, 2007 barreled through zero to tag -40. Luv the bearish divergence in the current Double Top. And lots of air below, I almost have vertigo looking down.
MACAD signal line over same time frame shows same thing. Might be better than this. Says we are in it.
https://www.tradingview.com/x/raejwUUJ/
Take a good look at the Real Dow
http://www.showrealhist.com
http://www.showrealhist.com/recDJIAtoRD.html
Those that took the time to look at the "Real Dow" chart will should note tha,t at the bottom in the early 80's before the large run-up in the Dow, that's where the 401k laws were created and became the virtual mandatory reason that, if you wanted to retire with money, you HAD to play in the markets. Essentially, the Casino now had a huge number of additional players. With the gutting of the middle class incomes and the millenials mostly stuck in low paying service jobs, there isn't as much money being injected into the Ponzi. The chart will tend to revert to the trend line before 1980 which is a long ways down on the Dow.