The Coppock curve, sometimes called the Coppock guide, is a forecasting tool used to try and enable traders to time big swings in the market as it is designed to signal major long-term upturns and downturns in a price index.
As a technical analysis indicator, it helps investors decide when to put the pedal to the metal or ease off with stock market bets.
It's a good time to examine this signal because technical analysts and strategists have flagged that it has turned up, essentially calling the start of a new bull market.
Created by economist and market strategist Edwin Coppock and first published in 1962, the curve is the sum of a 14-month rate of change (ROC14) and an 11-month rate of change (ROC11), smoothed by a 10-month weighted moving average (WMA).
As a mathematical formula it looks like this: Coppock = WMA10 of (ROC14 + ROC11)
These lengths of time were chosen as Coppock, an economist interested in crowd behaviour, saw the personal psychology of getting over a big investment loss as being similar to a bereavement.
A devout churchgoer, so the story goes, he was asked by his church, the American Episcopalians, to come up with a low-risk, long-term signal for investing in stock markets.
When he asked the bishops how long it took the average person to get over a bereavement, the answer put it between 11 and 14 months, which he incorporated into the calculation of his indicator.
One of the strengths of the Coppock curve is that it turns slowly, with an upwards turn from a low base interpreted as a sign that investors have recovered after the bereavement of the fall in share prices.
But as markets often have secondary highs or lows, the Coppock curve is designed as a signal that the bottom really is the bottom - so a weakness may be that it will be late in identifying a market bottom.
Its adherents say it has infallibly flagged up many buying and selling opportunities throughout history.
Investors mostly use the Coppock curve with a major stock market index or with exchange-traded funds (ETFs) that track a stock index.
The general strategy is to buy when the curve rises above the zero line and consider selling when its falls below zero.
For investors who already own the ETF, when the Coppock curve is above zero this signals to hold onto the investment.
The Investment Chronicle magazine has used an adapted curve as a buying and selling signal for many years, though it stressed the indicator was to be treated with caution as its signals sometimes pointed to dips in a continuing bull market.
The magazine takes a slight shortcut, using a 12-month period in its calculation rather 11 and 14, with both versions of Coppock calculated instantly for any index.