The last piece I wrote – about the Coppock Guide – generated a lot of interest. It is always a comfort to be reminded that I am not the only “indicator junkie” out there.
A few notes which will hopefully answer a lot of questions that have been raised:
-Please note that I was not attempting to imply that yes, the Coppock Guide really is the only indicator you will ever need. Hence the inclusion of these two sentences “So is the original Coppock Guide or my simple adaptation really the only indicator you will ever need? In all candor the answer is certainly “no.”
-Please note the inclusion of the (?) in the title of the article, which was intended to make it more of a question than a statement.
-The headline was admittedly a cheap trick on my part to try to get people to read the article – which I apologized for in the opening sentence.
-Lastly, and most importantly, the version of the Coppock Guide that I presented, when used as a standalone indicator can underperform a buy and hold approach for very long periods of time. This is particularly true when the overall market is extremely bullish. This is not surprising given that the method I described is only in the market about 45% of the time.
So the bottom line is this:
*No, the Coppock Guide is NOT the only indicator you will ever need
*The method I described is only in the market 45% of the time
*I use the method that I described in the article as a “Weight of the Evidence” indicator rather than as a specific timing tool.
In my next piece I will combine the method I described in the last piece with another simple indicator to create a “composite model” (if in fact a two indicator model can be considered a composite). The interesting thing about it is this:
From August 1900 through 2/7/14:
-$1,000 invested in the Dow Jones Industrials Average if both indicators are bullish grew +36,599% (if you factor in 1% of annual interest when out of the market, that figure more than doubles to +77,390%).
-$1,000 invested in the Dow Jones Industrials Average when neither or only one of the indicators is bullish lost -26%.
So that’s +36,599% (or +77,390% if interest is added) versus -26%.
That’s what we “quantitative” types refer to as “statistically significant.”
So stay tuned (I still need to think up a headline that will trick people into reading it…..)