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This little-known indicator has a remarkable 93-year track record ofsignaling the best, low-risk buying opportunities in the stock market.

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The Coppock Guide

InvesTech Research1

The Coppock Guide or Curve was originally developed over 50 years ago by Edwin S. Coppock. Its been describedas a barometer of the markets emotional state, methodically tracking the ebb and flow of equity markets from oneextreme to another. By calculation, the Coppock Guide is the 10-month weighted moving total of a 14-month rate ofchange plus an 11-month rate of change of a market index. In simpler terms, its really just a momentum oscillator.Because of this, it reverses direction when the momentum or rate of change in the market reaches a peak or a trough.

The historical value of the Coppock Guide lies in signaling or confirming low risk buying opportunities thatemerge once a bear market bottom is in place (black dotted lines on graph below). And since market bottomsare usually sudden or spiked reversals, the Coppock Guide works amazingly well as it did immediately afterthe bottom in 2009.

Once the Coppock Guide drops to 0 or below, a mere 1-point upturn can usually be treated as an excellent buyingopportunity. And often, the more negative the Coppock Guide is when it turns upward, the more impressive theprofits ahead. The only four false signals under this guideline were in 1938, 1941, 1947 and November 2001.

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NOTE: S&P 500 estimated prior to 1928 by correlation with a similar index.

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Coppock Guide

-Double Tops-

"Killer Waves"

NOTE: Double Tops or "Killer Waves" have preceded 1929, 1969, 1973, 2000, and 2007 - five of the biggest bear markets this century.

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S&P 500

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However, the Coppock Guide has never been noted for timely sell signals. The reason is that market tops are usuallyslow, rounding formations in which momentum (and the Coppock) peak up to a year or more ahead of the market.Except, that is, in a few cases

In the late 1960s a technician named Don Hahn observed another phenomenon about the Coppock Guide. When adouble-top occurs without the Coppock falling to 0, it identifies a bull market where corrections havent drivenout nervous investors or cleansed excesses from the market. When those psychological excesses are not washedout, the nervousness can continue to build and extremes can multiply with the result that the next downturn can

become severe as everyone heads for the exits.

So there is a critical historical aspect to double-tops: They can result in nasty bears!Double-tops have occurred only7 times in 93 years with 5 of them accompanying the start of the most notorious bear markets of the 20th century:1929, 1969, 1973, 2000 and 2007.

The table at right shows the month of the second peak, along withthe start of the S&P 500 bear market. And a glance at those resulting

bear markets reveals why the double-top in the Coppock Guide hasbeen nicknamed a Killer Wave. The average decline (excludingthe -86% loss in 1929) was almost -42%!

In summary, there are two critical lessons in this model. First isthe inherent danger that accompanies a double-top in the CoppockGuide. Such a formation often precedes the biggest and mostdevastating bear markets. The second, and perhaps most important,lesson is the knowledge that the safest and most profitable buyingopportunities appear after this Guide declines to (or below) 0 andthen turns upward.

With its remarkable track record, the Coppock Guide should be a key tool in any investment strategy. When usedwith our other indicators, it can provide the discipline and patience to avoid treacherous bear market rallies andwait for the best buying opportunities that occur only a couple times each decade.

InvesTech Research2472 Birch Glen Whitefish, MT 59937 (406) 862-7777

www.investech.com

Coppock Guide

2nd Peak in Start of Bear Killer Wave S&P 500 Bear Market Loss

1 Oct 1929 Sept 7, 1929 -86.2%

2 May 1946 May 29, 1946 -28.8%

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Feb 1969 Nov 29, 1968 -36.1% 4

Jan 1973 Jan 11, 1973 -48.2%

5 Sept 1987 Aug 25, 1987 -33.5%

6 Apr 1998 Mar 24, 2000 -49.1%

7 Jul 2007 Oct 9, 2007 -56.8%