The Coppock Breadth Indicator, originally known as Trendex’s Timing Technique for Texas Traders, is used to identify buy signals from around the bottom of a bear market. It was first developed in 1945 when church authorities asked Edwin Sedgewick Coppock for a low-risk, long-term signal for use on the Dow. Coppock believed that, in the markets, collective emotion outweighed collective reason and investors panic-sold to avoid losses. He asked the bishops how long it took to recover from bereavement or similar trauma. They said between 11 and 14 months, so using the Coppock Breadth Indicator he would judge the momentum of the markets based on the average of their 11 and 14-month rates of change. By adding up the percentage changes, relative to those intervals, a picture emerges of when those who had their fingers burned might be brave enough to dip them back in again. It is excellent when used for predicting upturns, but is less successful at predicting downturns.
In a series of three short videos, Merryn Somerset-Webb talks to Hugh Hendry, manager of the Eclectica hedge fund, about everything from China to the US, Europe, and Japan.
More from MoneyWeek
|How to buy and sell penny shares|
|A beginner's guide to investing in gold|
|How to invest in British fracking|
One of the world's greatest scientific hoaxes took place today in 1912, with the presentation of human evolution's missing link to the Geological Society in London.