It would seem to be the case judging by the Coppock Curve on $RUT.  The Coppock Curve was created by E.S.C. Coppock in 1962.  Mr. Coppock was asked by 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. 

The Coppock Curve, using month-end values, calculates the sum of the 11-month moving average and the 14-month moving average to generate a value and then weights values for the last 10 months to generate the current month’s value.  The weighted value of the Curve oscillates above and below the zero line.  The original intent of the Coppock Curve as an indicator was as a buy signal only.  Said buy signal considered to have been generated when the Curve moves up from a trough.  For my purposes, not so much that a sell signal is given but that a downtrend is confirmed when the value of the Curve moves below the zero line.

The Coppock Curve moved below the zero line as of the end of May and, if yesterday’s $RUT close were used for the end of month value for June, would continue lower despite the June rally.  Since the inception of $RUT, there have been 4 other occasion when the Coppock Curve for $RUT has moved below the zero line;

August 1990 – $RUT close at 139.51 on 8/31/90 and hit a low of 118.82 on 10/30/90.  The $RUT low occurred 60 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 14.8% below the end of August closing value.

November 1998 – $RUT close at 397.75 on 11/30/98 and hit a low of 383.37 on 3/23/99.  The $RUT low occurred 113 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out only 3.6% below the end of November 2008 closing value.

April 2001 – $RUT close at 485.32 on 4/30/01 and hit a low of 327.04 on 10/9/02.  The $RUT low occurred 527 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 32.6% below the end of April 2001 closing value.

February 2008 – $RUT close at 686.18 on 2/29/08 and hit a low of 343.26 on 3/9/09.  The $RUT low occurred 374 calendar days after the $RUT Coppock Curve moved below the zero line with the $RUT bottoming out 50.0% below the end of February 2008 closing value.

I do not use the Coppock Curve as a stand-alone indicator.  But, given the track record of confirming downtrends, I do feel more comfortable in my short equities/long vol holdings given the recent move of the $RUT Coppock Curve below the zero line.

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