Picture du Jour: Coppock shows bottom in Treasuries
Source: http://www.investmentpostcards.com/2009/07/22/picture-du-jour-coppock-shows-bottom-in-treasuries/Posted on Wednesday, July 22nd, 2009 | In Bonds, Investments, Market Commentary
Further to my post of yesterday, arguing that government bond yields have in all likelihood bottomed (see “Is the yield curve pointing to better tidings“), I have also analyzed the Coppock indicator for a longer-term perspective.
The Coppock curve is a long-term price momentum indicator used to recognize major bottoms in financial markets. For those who are mathematically minded, the indicator uses a monthly time scale and is the sum of a 14-month rate of change and 11-month rate of change, smoothed by a 10-period weighted moving average (see skyjuice for formula).
The market will typically reverse its trend whenever the Coppock curve reverses from an extreme low or extreme high. The graph below shows the historical relationship between the Coppock indicator and the US 10-year Treasury Note yield going back 20 years. A picture paints a thousand words …
Source: Plexus Asset Management (based on data from I-Net Bridge)
“You pays your money and takes your chance”, but it would seem as if the odds are stacked in favor of rising long-term interest rates for a while to come.
Last 5 posts by Prieur du Plessis
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Bonds, I-Net Bridge, investment postcards, Investments, Market Commentary, The Macro Trader, United States
 About Prieur du Plessis (http://www.investmentpostcards.com)
Prieur du Plessis has 25 years’ experience in professional investment research and portfolio management. More than 1,000 of his articles on investment-related topics have been published in various regular newspaper, journal and Internet columns. He has also published a book, Financial Basics: Investment. Prieur is chief executive and principal shareholder of South African-based Plexus Asset Management, which he founded in 1995. The group conducts investment management, investment consulting, private equity and real estate activities in South Africa and other African countries. Plexus is the South African partner of John Mauldin, author of the Thoughts from the Frontline e-letter, and also has an exclusive licensing agreement with California-based Research Affiliates for managing and distributing its enhanced Fundamental IndexTM methodology in the Pan-African area. Prieur is 52 years old and lives with his wife, television producer and presenter Isabel Verwey, and two children in Cape Town, South Africa. His recreational activities include long-distance running, motor cycling, traveling and reading. |
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