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1994issue C111-7

Evaluating a Coppock-style rate of change as a bottom-regime filter

Treat a stacked rate of change as a falsifiable bottom-turn procedure. Editorial view: decide whether a confirmed below-zero upturn is a momentum-strategy trigger or a multi-year asset-allocation regime, then run a market-transfer test before trusting the same rule on another national index.

  • A Coppock-style curve starts from rates of change versus an adaptation-level, then adds year-scale percentage changes so a rising sequence is read as strengthening momentum.
  • The stated buy rule is a below-zero upturn, and the curve is presented as a tool for locating major bottoms rather than tops.
  • A confirmed turn can be framed as a momentum strategy or as an asset-allocation regime lasting about two years.
  • Editorial view: only after that choice should a market-transfer test ask whether the same formula still behaves as hypothesized when the national market changes.
Entries in this reading3 entries
Asset allocation21 readingsCurrent trackRate of Change50 readingsMomentum strategy103 readings

Start from a rate of change

In this framework an oscillator starts from the percentage change of current price versus a prior price used as the adaptation-level, because percentage change is treated as the relevant return comparison.

A Coppock-style momentum reading is formed by adding several recent year-scale percentage changes so that a rising sequence of those changes is read as strengthening momentum. That stacked reading is the Coppock-style curve: a long-horizon oscillator formed by combining two multi-month percentage changes and smoothing them into one signed series.

How the curve was stacked and smoothed

The original computation used 14-month and 11-month percentage changes on a major US industrial average, added those two rates of change, then applied declining monthly weights from 10 down through 1.

A later computational variant replaced the declining-weight total with an exponential average of monthly average index levels.

The below-zero upturn is the buy rule

The stated buy rule is a change to a positive slope while the oscillator remains below its zero line. That condition is the below-zero upturn: the oscillator is negative and its slope turns from down to up.

The curve is presented as a tool for locating major bottoms rather than tops, with those bottoms often discussed as appearing within about one to two months of the turn.

Because the construction is framed as a reading of mass psychology, it is described as better matched to broad stock-market indices than to individual stocks or funds.

A trade trigger or an allocation regime

A momentum strategy is a complete procedure that turns oscillator slope and zero-line location into entry, exit, or abstention rules and then measures what follows.

One historical evaluation applied monthly average data on a broad US equity index from 1960 through third-quarter 1993 and measured subsequent results at six months, one year, 18 months, and two years after buy signals.

A confirmed below-zero upturn was framed as an asset-allocation regime lasting about two years, and such turns were described as arriving about every three and a half years. Asset allocation here is a regime choice about how large an equity share a portfolio carries after a confirmed bottom turn, rather than a single-trade overlay.

Editorial view: the same below-zero upturn can be scored as a momentum-strategy trigger or as a multi-year equity-allocation regime. Those are different hypotheses and should not be mixed in one test.

Then change the national market

A market-transfer test repeats the same formula on another national index to see whether the bottom rule still behaves as hypothesized.

The same original formula produced a February 1991 bottom-style signal on a UK large-cap index, yet generated multiple false bottom turns during Japan's 1990-92 decline.

Editorial view: run that transfer test only after the rule has been fixed as either a trade trigger or an allocation regime. A signal that appears on one national index and fails on another is evidence about the hypothesis, not a reason to rewrite the rule after the fact.

FTSE 100 CoppockAnnual and the February 1991 below-zero upturn

A SuperCharts CoppockAnnual on the London FT 100 bottoms below zero in early 1991 and then turns up—the same below-zero buy rule used on the S&P 500. The first leg of the post-Kuwait rally is already underway, so the signal is late for the explosion but still flags a multi-year advance. Points were read from the printed Figure 4 axes, not from a table.
A SuperCharts CoppockAnnual on the London FT 100 bottoms below zero in early 1991 and then turns up—the same below-zero buy rule used on the S&P 500. The first leg of the post-Kuwait rally is already underway, so the signal is late for the explosion but still flags a multi-year advance. Points were read from the printed Figure 4 axes, not from a table.FTSE 100 · Daily · 1990-08-01T00:00:00.000Z to 1994-05-31T00:00:00.000Z

Digitized from the SuperCharts pane. CoppockAnnual is the source's smoothed year-over-year stack, not Coppock's original 14/11 weighted total. The printed quote on 15 August 1994 is 3142.20; the last oscillator print on the pane is 0.0996.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
26 of 46 in the Rate of Change track
19951-8 pp.Next on Rate of ChangeA weighted eleven-month Dow rate of change as one testable timing procedureThe construction does not try to call exact tops or bottoms. It asks whether current conditions raise the chance of a later advance.
All readings on this track · 46 readings
  1. 1985Constructing excess and momentum difference-curve oscillators
  2. 1988Five reading rules for smoothed indicator charts
  3. 1989Momentum overlays that speed moving-average oscillators
  4. 1990A laboratory template that constructs Rate of Change as a pane module
  5. 1991Volume-scaled rate of change as a momentum construction
  6. 1991Three-indicator market overview from tape, sentiment and rates
  7. 1991Three-component trend model with rate-of-change filters
  8. 1992A KST oscillator from a weighted rate-of-change stack
  9. 1992Four-window weighted rate-of-change composite
  10. 1992Constructing multi-span smoothed rate-of-change filters
  11. 1992Constructing a four-horizon summed rate of change
  12. 1992Constructing KST from four weighted smoothed rates of change
  13. 1992Constructing a composite from weighted smoothed rates of change
  14. 1992Three-horizon KST maturity alignment
  15. 1992Construct a bond-led dividend-to-bond-yield regime first
  16. 1992Constructing relative-strength KST from weighted rate-of-change
  17. 1993Constructing a volume oscillator from average ratios and smoothed rate of change
  18. 1994Gold as a cycle clock for commodities and yields
  19. 1994Constructing a composite from weighted, smoothed rate-of-change windows
  20. 1994Constructing gold-mining rate-of-change tripwires for Treasury bonds
  21. 1994A capacity-stress checklist across commodities, bonds, and breadth
  22. 1994Rate of change parameters for testable entries
  23. 1994Constructing rate-of-change midpoints, lookbacks and divergence
  24. 1994Lead oscillator breaks need price trendline confirmation
  25. 1994Nested averages for an annual momentum curve
  26. 1994Evaluating a Coppock-style rate of change as a bottom-regime filter
  27. 1995A weighted eleven-month Dow rate of change as one testable timing procedure
  28. 1996Named lookbacks, thresholds, and streaks for entry rules
  29. 1997A midpoint rate-of-change test for bond trend follow-through
  30. 1997Constructing a short-rate-adjusted equity momentum filter
  31. 1998Daily momentum rank-churn as a portfolio-construction problem
  32. 1999Constructing a lagged rate of change cycle system
  33. 2000A triple delay line then a one-bar elliptic oscillator
  34. 2001Confirming rate of change divergences with price
  35. 2001Momentum trendline breaks need price confirmation
  36. 2001Market breadth, On-balance volume, and Rate of Change as a combined timing framework
  37. 2001Know Sure Thing with stacked horizons and trendline confirmation
  38. 2003Constructing a mechanical system from a rate of change condition
  39. 2003Constructing momentum from two closes and spotting divergence
  40. 2003Formula choice tilts which momentum mismatches count as divergences
  41. 2004RSI and momentum agreement as an asymmetric filter
  42. 2005Constructing price-normalized moving-slope hybrids
  43. 2005Unsigned speed gates on a fixed average-cross pair
  44. 2007Rebuilding rate of change as a path-weighted oscillator
  45. 2008Construct Special K so short-horizon signals stay inside the primary trend
  46. 2013Restore volume balance before adding another price-time indicator
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