The Coppock curve or Coppock indicator is a technical analysis indicator created by Edwin Coppock, first published in Barron’s Magazine in 1962.
The indicator is designed for use on a monthly time scale. It’s the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average.
Coppock = WMA \; of \; (ROC + ROCK ).
Coppock was an economist and he had been asked by the The Episcopal Church to identify buying opportunities for long-term investors. He thought market downturns were like bereavements and required a period of mourning. He asked the church bishops how long that normally took for people, their answer was 11 to 14 months and so he used those periods in his calculation.
A buy signal is generated when the indicator is below zero and turns upwards from a trough. No sell signals are generated (that not being its design). The indicator is trend-following, and based on averages, so by its nature it doesn’t pick a market bottom, but rather shows when a rally has become established.
Coppock designed the indicator for the S&P 500 index, and it’s been applied to similar stock indexes like the Dow Jones Industrial Average. It’s not regarded as well-suited to commodity markets, since bottoms there are more rounded than the spike lows found in stocks.
Although designed for monthly use, a daily calculation over the same period can be made, converting the periods to 294 day and 231 day rate of changes, and a 210 day weighted moving average.
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