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Chart Indicators Signal an Important Turn in Markets
30-Week Moving Average Indicator
Many stock markets have risen above their 30-week moving averages (5th May 2009) including the Irish, UK, US, European and Japanese markets. The Asian and Chinese markets had risen above their 30-week moving averages some time ago. Members can see this for themselves by looking at the updated 30-week moving average charts in the usual area of the members section of the web site. The chart opposite highlights the 30-week moving average indicator on the US S&P 500 Index as on 1st May 2009. A buy signal has been given as the index (blue line) has moved above the 30-week moving average (red line).
The Coppock Indicator - Great Track Record
The Coppock Indicator, a longer term and more reliable 'Buy' indicator, has also turned positive on several markets including the Irish, European and Japanese markets. Again, the Coppock Indicator for the Asian and Chinese markets had turned positive a few months ago. At the time of writing (5th May 2009), this indicator has not given a positive signal for either the UK or US markets but it most likely that it will do so by the end of May.
The Coppock Indicator has a great track record of calling turns to the upside in markets. On the UK market, for example, the Coppock Indicator has only given two false signals in the past 70 years (a false signal was given in early 2002 whereas the market did not bottom until early 2003).
The chart opposite highlights the Coppock Indicator on the Japanese market at end of April 2009. It may be barely distinguisable from the graph but the indicator turned less negative while below zero (the buy condition) on 30th April 2009 and hence a buy signal has been given.
Although the economic news remains grim, the positive turns in the above indicators suggest that the odds are high that the markets have seen the bottom and can make further progress from here. The positive signals being given by these indicators fly in the face of what investors are reading in the printed media or hearing from many market commentators.
The 30-week moving average or the Coppock indicators were introduced to our 1-day training seminar in September 2009. We had previously introduced the combined 30 & 50-week moving average signal to the seminars in late 2007. This was the technical indicator put forward by Mark Shipman in his book 'Big Money, Little Effort'.
30 & 50-Week Moving Average Slower to Turn
The 30 & 50-week moving average indicator has not yet turned positive. Again, members can see this from the chart below and from the full range of charts available in the member's section of the web site. A copy of this indicator on the US market is below. This is a slower, more conservative, indicator and it will go positive in the next few months if markets continue to recover or range trade around current levels. As the chart highlights, unlike the 30-week moving average and coppock indicators, there was no 'Buy' signal from this indicator at the start of May 2009.
Overall, however, the evidence from the charts is now overwhelmingly suggesting that the markets have turned.
5th May 2009