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G-bond bounceback

Coppock says buy gilts - but our analysis suggests treading carefully when trying to time entry and exit points for government bonds
March 13, 2014

Has the bear market in UK government bonds come to an end? That's what Coppock seems to be telling is this month, with the buy signal on UK government securities coming after a long sell off that, on the face of it, was predicted by the IC Coppock indicator in December 2012.

Despite the continued prospect of US tapering, a gilt bounceback actually makes some sense. As I wrote last week, after a strong run for equities many pension funds will now be trying to lock in gains with safe haven assets. That's symptomatic of a wider 'risk off' mentality seen in the wake of political tension in the Ukraine, the troubles in emerging markets, and the battle against deflation in Europe. It also tallies with the Coppock sell signals given across a number of the UK's more cyclical engineering sectors and the buy signals on FTSE Gold Miners this month. Like gilts, gold has staged a recovery of late after last year's savage sell-off, rising from its per ounce low of $1192 in mid-December to stand at $1360 today as the search for safety resumes.

There is one small fly in the ointment, however. Having rebuilt the Coppock indicator, and thoroughly back tested it, our resident chartered financial analyst Dominic Picarda reveals in this week's Coppock-themed cover feature the indicator isn't much use for beating a simple buy and hold strategy when it comes to bonds.

Dominic's number-crunching has, in fact, made us think more deeply about the usefulness of our Coppock indicator in its current form - not least that while it has proved excellent for helping you time market entry it's not been so good at telling you when to exit. So from next month we will be relaunching the Coppock indicators in a way that analysis suggests will lead to better market-timing decisions. Dominic explains how he's tweaked the system in this week's cover feature that begins on page 24

We know, however, that Coppock has many long-standing devotees among you, so before we make the switch please let us know how you use it and whether there are any existing features that you find indispensable. We'll do our best to incorporate them.

MAJOR MARKETS

Index/marketAverage Index Feb-14*FebJanDecSignal†Month of last buy signalMonthly average index thenIndex peak since last buy signal Month of last sell signalMonthly average index then
UK Govt. Secs              161.77 -30.5-31.8-31.2BUYFeb 14161.77162.50(03/02/14)12/12175.55
FT 30            2,752.34 +145.5+160.3+168.9WAITJul 121,952.992,851.40(15/01/14)12/13            2,718.83
FTSE 100           6,684.34 +62.7+70.6+75.4WAITJul 125,636.466,865.86(24/02/14)12/13            6,586.89
FTSE All-Share           3,589.84 +75.5+83.4+87.9WAITAug 123,010.363,685.07(24/02/14)12/13            3,521.71
FT Gold Mines           1,562.80 -258.2-265.7-260.6BUYFeb 141,562.801,648.39(24/02/14)12/122,982.77
Amsterdam              602.20 +68.3+67.4+66.7HOLDOct 13††579.74618.07(22/01/14)07/13552.16
ASX All Ord           5,319.60 +77.8+88.2+94.7WAITJul 124,181.705,450.10(24/02/14)12/13            5,222.90
S&P/ASX 200 Energy        13,520.31 +40.4+43.7+44.0WAITMay 1313,183.1914,371.48(27/09/13)01/1413,381.04
Belgium S.E.        10,652.27 +96.5+93.1+90.3HOLDOct 13††10,300.3111,130.18(28/02/14)06/139,017.25
Dax (Germany)           9,498.39 +126.4+125.4+124.5HOLDNov 13††9,170.559,742.96(17/01/14)08/138,332.46
Dow Jones        15,945.46 +99.4+103.2+101.0SELLMar 13††14,418.2616,576.66(31/12/13)02/14      15,945.46
Rep of Ireland (ISEQ)           4,951.51 +183.2+177.7+171.3HOLDMar 13††3,883.385,195.97(28/02/14)02/133,641.55
France CAC 40           4,294.40 +101.5+104.8+110.5WAITJul 123,199.554,419.13(24/02/14)12/13            4,172.21
Hang Seng        22,188.31 +24.6+37.3+50.1WAITSep 1322,903.9824,038.55(02/12/13)10/1323,096.68
Italy BCI           1,092.07 +107.9+102.9+104.0BUYFeb 14††1,092.071,117.93(26/02/14)01/141,070.28
S. Africa Gold           1,427.84 -248.6-261.4-255.4SELLJun 122,524.832,668.53(06/06/12)02/14††         1,427.84
S. Africa Industrial        41,027.28 +93.6+109.4+118.1WAITOct 13††43,473.1044,940.44(02/01/14)11/1343,386.55
Straits Times           3,049.96 +5.8+19.3+30.5WAITJul 122,987.493,454.37(22/05/13)07/133,209.06
Tokyo New S.E.           1,201.82 +271.1+299.7+309.9WAITAug 12748.731,306.23(08/01/14)01/141,275.17
Toronto Comp        13,950.98 +43.3+40.3+38.0HOLDAug 1211,921.0014,227.08(24/02/14)11/1112,383.20
Toronto Gold           1,718.18 -209.7-225.7-227.1HOLDOct 122,842.542,952.41(05/10/12)01/14††1,539.06
Sweden OMX           1,332.80 +93.9+99.2+99.9WAITJun 12982.671,373.36(26/02/14)01/141,044.48
FTSE techMARK 100           3,239.55 +129.1+133.9+133.8SELLJuly 12††2,283.043,312.69(24/02/14)11/111,934.67
Nasdaq 100           3,610.29 +138.5+126.0+112.2HOLDMay 13††2,981.193,699.80(27/02/14)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*FebJanDecSign.†
Argentina       18,512.14 +419.1+428.2+437.2WAIT
FTSE Aim             873.97 +81.0+72.7+60.2HOLD
Brazil       47,380.80 -75.3-68.5-59.3WAIT
China          2,247.21 -19.2-3.9+10.1WAIT
Greece          1,256.04 +194.7+214.7+233.2WAIT
India          6,074.75 +29.8+36.0+43.1WAIT
Indonesia          4,515.12 +15.6+26.8+39.6WAIT
Israel          1,220.13 +64.1+61.8+57.5HOLD
Mexico       10,758.31 -81.6-66.8-49.8WAIT
Philippines          6,155.45 +52.3+78.7+103.7WAIT
Poland       52,698.20 +81.0+82.9+92.1WAIT
Portugal          7,062.28 +91.2+93.9+98.4WAIT
Russia       16,054.18 -21.7-22.3-22.4HOLD
South Korea          1,937.73 +5.2+8.8+12.3WAIT
Spain          1,025.59 +119.2+115.3+114.7HOLD
Switzerland          8,355.40 +105.4+117.7+127.7WAIT
Thailand          1,303.49 +13.5+42.1+72.1WAIT
Turkey       63,437.34 -8.2+25.9+66.2WAIT

*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*FebJanDecSign.†
Mining  16,487.70 -72.9-69.8-61.4WAIT
Oil & Gas    8,032.86 +1.7+1.1-2.1HOLD
Chemicals  11,639.68 +92.4+90.4+85.7HOLD
Constr & Bldg mats    4,762.40 +138.6+137.3+130.4HOLD
Forestry & paper  11,768.92 +282.6+319.7+214.1SELL
Steel & other metals    1,156.64 -298.5-285.0-274.8WAIT
Aerospace & defence    5,146.38 +168.3+185.9+189.2WAIT
Diversified industrls    3,610.14 +146.8+154.2+154.0SELL
Electronic & electr eqpt    5,611.84 +132.4+142.5+142.3SELL
Eng'g & machinery  10,704.70 +154.7+169.0+178.5WAIT
Automobiles & parts    9,543.09 +342.7+342.7+336.1SELL
H'hold goods textiles    5,023.39 +552.3+626.1+670.6WAIT
Beverages  13,435.17 +49.9+74.4+90.3WAIT
Food producers    7,373.40 +74.2+91.1+104.9WAIT
Health    5,322.13 +126.0+116.3+112.3HOLD
Personal care  21,366.72 +125.3+132.4+134.9WAIT
Pharmaceuticals  12,322.40 +105.8+99.2+92.8HOLD
Tobacco  34,829.97 -7.5+1.6+9.1WAIT
General retailers    2,776.25 +229.9+232.3+232.3WAIT
Leisure & hotels    7,270.42 +192.8+203.2+206.1WAIT
Media ent't    6,408.25 +168.6+179.7+183.3WAIT
Support services    6,402.07 +123.8+130.9+133.2WAIT
Transport    4,922.85 +258.7+254.4+244.4HOLD
Food & drug rtlrs    4,437.97 +48.0+62.8+74.2WAIT
Telecommns svs    4,704.27 +286.1+289.7+283.0SELL
Electricity    9,245.37 -1.8-4.7-4.1BUY
Other utilities    7,521.99 +41.6+46.5+53.5WAIT
Banks    4,634.98 +76.2+108.0+134.3WAIT
Insurance    2,123.92 +66.4+75.1+82.2WAIT
Life assurance    7,083.11 +189.9+198.5+205.9WAIT
Investment cos    7,155.46 +83.2+93.3+100.0WAIT
Other finance    6,639.45 +197.2+215.7+224.2WAIT
IT hardware    1,444.66 +148.1+187.3+216.5WAIT
Software & comp svs    1,315.07 +129.9+142.1+148.0WAIT

*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.