Ask Colin

The Coppock indicator only seems to dip below zero every 10 years or so. What about when it turns up from above zero?

The markets do not care whether any one investor has money to invest or not. They reflect the business/economic cycle(s) and much more besides. They have no way of knowing whether any one small investor has cash or not.

So the problem for a small investor with cash at any time is to decide what to do with it. The investor may decide to wait for a Coppock signal, if that is the only investment plan they have. However, such a strategy is only one of the many ways that such an investor could approach the problem of wealth creation. It may not even be the best way. History has shown and continues to show that there are many ways to build wealth in the stock market. It also shows that there are other asset classes that may be better at any one time.

It is simply not possible to make the Coppock indicator give more signals, just because one small investor, or even many of them, would like to have them. The Coppock indicator is designed to do a specific job and it has a good record. However, I would never suggest that it be the only basis for an investment strategy.

The other night I tried to explain - and discussed it at length - that most small investors get into bull markets too late. The Coppock is a good wake-up call that they should be looking to get into the market. I don't think that I have ever made any claim for it beyond that. My articles in Shares magazine on the Coppock also make this point.

Also you said that shallow dips below zero tend to give false signals, but it seems to me that the last two (1993 and 1995) were quite good continuation signals following corrections in the main 1990's bull market. Even bottoms above zero at the end of 1997 & 1998 seem to be the same.

I said TEND. Two examples for only one market over 100 years do not prove that the tendency I observed was incorrect or that it might be extended to include wider observations. I think you are trying to make far more out of what I was saying than I intended or that is useful.

ALL I tried to show in ten minutes was that the best Coppock signals tend to come deep below the zero line and when there is a steep V-shaped bear market or when a trading range develops after a steep bear market.

Finally Coppock may have bottomed in November 2001. What other longer term indicators do you suggest I look at? I realize that in the end it is necessary to seek out strong individual stock with good long term prospects, but I don't want to invest against the major market trend.

As to whether Coppock bottomed in November, it depends entirely on what market you are talking about. The Nasdaq Composite Index shows a Coppock signal. None of the other major markets do. The Nikkei 225 Index may be close, but there was not a signal in November.

The best other indicator I use is the 260-day moving average, as I stress in nearly all my writing in Shares magazine. I also use the Advance - Decline Line for market tops.

If you do not want to invest against the market trend, the best approach always is to read the trend from the chart of the index and only ever buy strong stocks.