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Turning Japanese

January's Coppock indicator suggests it could be time to bail out of the soaring Japanese market
February 13, 2014

The IC Coppock indicators gave no buy signals in January, unsurprising given the chaos that gripped markets around the world as 2014 got under way. Six major markets did give sell signals, though, along with a handful of sectors and emerging markets. Chief among these negative indicators was a sell on Japan's broad-based Topix index, which by last week had fallen 13 per cent from its 8 January high of 1306 as the yen suddenly found itself a safe haven for investors seeking refuge from the sell-off in emerging markets currencies. A weak yen is an important component of Abenomics, making Japanese exports more competitive - the currency fell 18 per cent last year relative to the US dollar but appreciated more than 4 per cent in January and early-February.

Could this be the start of a sustained rout for Japanese equities? Opinions are mixed. Many believe that, regardless of the yen's progress, Japanese shares are cheap on a widely followed price-to-book value measure, and the majority of Japanese companies are delivering earnings growth ahead. Nearly two-thirds of those that have reported this year have beaten analysts' earnings forecasts. Others argue that it's still early days for Abenomics, and that it will be some time before it will be possible to tell whether Japan's economic experiment has created a sustainable recovery. There are also concerns that a proposed sales tax increase from 5 to 8 per cent in April this year, and potentially again to 10 per cent in 2015, could create a headwind to further earnings growth.

As ever, we'd advise caution when interpreting our Coppock sell signals - but it may help you make up your mind if you think the Japanese market's stellar 2013 will be a tough performance to follow.

Topix/yen chart

MAJOR INDICES

Index/marketAverage Index Jan-14*JanDecNovSignal†Month of last buy signalMonthly average index thenIndex peak since last buy signal Month of last sell signalMonthly average index then
UK Govt. Secs              160.79 -31.8-31.2-28.5WAITAug 11*163.26177.08(24/07/12)12/12175.55
FT 30            2,780.67 +160.3+168.9+173.5WAITJul 121,952.992,851.40(15/01/14)12/13            2,718.83
FTSE 100           6,714.86 +70.6+75.4+77.5WAITJul 125,636.466,840.27(22/05/13)12/13            6,586.89
FTSE All-Share           3,598.07 +83.4+87.9+89.7WAITAug 123,010.363,660.84(20/01/14)12/13            3,521.71
FT Gold Mines           1,414.08 -265.7-260.6-248.1WAITOct 123,213.213,330.73(01/10/12)12/122,982.77
Amsterdam              607.37 +67.4+66.7+65.9HOLDOct 13*579.74618.07(22/01/14)07/13552.16
ASX All Ord           5,289.60 +88.2+94.7+98.3WAITJul 124,181.705,437.30(28/10/13)12/13            5,222.90
S&P/ASX 200 Energy        13,381.04 +43.7+44.0+39.6SELLMay 1313,183.1914,371.48(27/09/13)01/1413,381.04
Belgium S.E.        10,584.41 +93.1+90.3+88.2HOLDOct 13*10,300.3110,791.10(20/01/14)06/139,017.25
Dax (Germany)           9,516.78 +125.4+124.5+122.9HOLDNov 13*9,170.559,742.96(17/01/14)08/138,332.46
Dow Jones        16,243.72 +103.2+101.0+94.2HOLDMar 13*14,418.2616,576.66(31/12/13)01/1313,615.32
Rep of Ireland (ISEQ)           4,732.00 +177.7+171.3+165.8HOLDMar 13*3,883.384,853.61(22/01/14)02/133,641.55
France CAC 40           4,248.40 +104.8+110.5+114.3WAITJul 123,199.554,332.07(15/01/14)12/13            4,172.21
Hang Seng        22,725.16 +37.3+50.1+55.9WAITSep 1322,903.9824,038.55(02/12/13)10/1323,096.68
Italy BCI           1,070.28 +102.9+104.0+100.2SELLAug 121,129.421,150.23(29/04/11)01/141,070.28
S. Africa Gold           1,153.93 -261.4-255.4-241.7WAITJun 122,524.832,668.53(06/06/12)12/122,295.53
S. Africa Industrial        43,695.96 +109.4+118.1+122.9WAITOct 13*43,473.1044,940.44(02/01/14)11/1343,386.55
Straits Times           3,115.88 +19.3+30.5+40.1WAITJul 122,987.493,454.37(22/05/13)07/133,209.06
Tokyo New S.E.           1,275.17 +299.7+309.9+303.2SELLAug 12748.731,306.23(08/01/14)01/141,275.17
Toronto Comp        13,728.07 +40.3+38.0+34.6HOLDAug 1211,921.0013,990.29(20/01/14)11/1112,383.20
Toronto Gold           1,539.06 -225.7-227.1-218.1SELL††Oct 122,842.542,952.41(05/10/12)01/14*1,539.06
Sweden OMX           1,329.04 +99.2+99.9+98.8SELLJun 12982.671,355.24(22/01/14)01/141,044.48
FTSE techMARK 100           3,213.16 +133.9+133.8+132.1HOLDJuly 12*2,283.043,258.82(20/01/14)11/111,934.67
Nasdaq 100           3,557.89 +126.0+112.2+93.7HOLDMay 13*2,981.193,627.72(22/01/14)01/132,736.90

*Average index for January 2014. †IC/Coppock indicator. ††Unofficial signal. BUY/SELL = self explanatory; WAIT = you sold at the last sell signal and are now waiting for the next buy signal; HOLD = you bought at the last buy signal and are now awaiting the next sell signal.

EMERGING MARKETS

IC/Coppock IndicatorIndex*JanDecNovSign.†
Argentina       17,386.11 +428.2+437.2+417.6SELL
FTSE Aim             870.42 +72.7+60.2+44.1HOLD
Brazil       49,139.75 -68.5-59.3-55.1WAIT
China          2,224.04 -3.9+10.1+8.7SELL
Greece          1,225.02 +214.7+233.2+240.8WAIT
India          6,216.29 +36.0+43.1+47.5WAIT
Indonesia          4,353.65 +26.8+39.6+54.7WAIT
Israel          1,218.90 +61.8+57.5+54.0HOLD
Mexico       11,209.84 -66.8-49.8-34.8WAIT
Philippines          6,009.95 +78.7+103.7+127.7WAIT
Poland       50,820.34 +82.9+92.1+97.0WAIT
Portugal          6,922.12 +93.9+98.4+98.5WAIT
Russia       16,073.06 -22.3-22.4-27.2HOLD
South Korea          1,948.22 +8.8+12.3+12.7WAIT
Spain          1,035.96 +115.3+114.7+109.9HOLD
Switzerland          8,323.67 +117.7+127.7+136.4WAIT
Thailand          1,274.55 +42.1+72.1+95.9WAIT
Turkey       66,002.06 +25.9+66.2+98.1WAIT

*Average index for January 2014. †IC/Coppock indicator. ††Unofficial signal. BUY/SELL = self explanatory; WAIT = you sold at the last sell signal and are now waiting for the next buy signal; HOLD = you bought at the last buy signal and are now awaiting the next sell signal.

FTSE SECTORS

For a list of the constituents of the FTSE All-Share sector indices click here

IC/Coppock IndicatorIndex*JanDecNovSign.†
Mining  15,542.98 -69.8-61.4-55.1WAIT
Oil & Gas    8,223.40 +1.1-2.1-9.1HOLD
Chemicals  11,620.28 +90.4+85.7+85.5HOLD
Constr & Bldg mats    4,649.36 +137.3+130.4+121.7HOLD
Forestry & paper  11,589.52 +319.7+214.1+213.5HOLD
Steel & other metals    1,351.60 -285.0-274.8-268.6WAIT
Aerospace & defence    5,518.10 +185.9+189.2+189.2WAIT
Diversified industrls    3,679.35 +154.2+154.0+151.9HOLD
Electronic & electr eqpt    5,709.48 +142.5+142.3+139.3HOLD
Eng'g & machinery  10,617.09 +169.0+178.5+184.0WAIT
Automobiles & parts    9,177.14 +342.7+336.1+325.3HOLD
H'hold goods textiles    5,279.57 +626.1+670.6+679.1WAIT
Beverages  14,193.09 +74.4+90.3+105.9WAIT
Food producers    7,358.91 +91.1+104.9+119.8WAIT
Health    5,040.78 +116.3+112.3+106.9HOLD
Personal care  21,209.20 +132.4+134.9+130.4SELL
Pharmaceuticals  11,868.11 +99.2+92.8+85.2HOLD
Tobacco  34,784.59 +1.6+9.1+14.7WAIT
General retailers    2,734.51 +232.3+232.3+235.4WAIT
Leisure & hotels    7,250.93 +203.2+206.1+209.4WAIT
Media ent't    6,490.84 +179.7+183.3+182.2SELL
Support services    6,433.34 +130.9+133.2+135.4WAIT
Transport    4,837.74 +254.4+244.4+228.5HOLD
Food & drug rtlrs    4,453.00 +62.8+74.2+82.4WAIT
Telecommns svs    4,504.18 +289.7+283.0+271.6HOLD
Electricity    8,990.80 -4.7-4.1-1.8WAIT
Other utilities    7,343.48 +46.5+53.5+61.7WAIT
Banks    4,817.83 +108.0+134.3+156.1WAIT
Insurance    2,111.74 +75.1+82.2+91.1WAIT
Life assurance    7,056.54 +198.5+205.9+212.8WAIT
Investment cos    7,158.86 +93.3+100.0+102.2WAIT
Other finance    6,628.22 +215.7+224.2+222.6SELL
IT hardware    1,490.83 +187.3+216.5+234.7WAIT
Software & comp svs    1,319.48 +142.1+148.0+154.1WAIT

*Average index for January 2014. †IC/Coppock indicator. ††Unofficial signal. BUY/SELL = self explanatory; WAIT = you sold at the last sell signal and are now waiting for the next buy signal; HOLD = you bought at the last buy signal and are now awaiting the next sell signal.