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 the first of three interviews with Merryn Somerset Webb, Hugh Hendry, manager of the Eclectica Fund, talks about what it takes to be a good hedge fund manager – and how he learned to stop worrying and love central banks.
More from David Thornton
|How to buy and sell penny shares|
|A beginner's guide to investing in gold|
|How to invest in British fracking|
A milestone in the formation of the internet, the first permanent Arpanet link was established on this day in 1969 between researchers in the United States.