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Coppock confusion

Simultanous buy signals on key equity markets and so-called safe havens such as bonds and gold are a troubling contradiction for investors to contemplate
June 10, 2016

May brought a rare sight - from a recent perspective - on our Coppock system: buy signals on both the US and UK blue chip indices. The S&P 500 had been flashing sell since March 2014, while the FTSE 100's sell signal had persisted for just over a year.

In the case of the FTSE, blame for its long winter can be laid largely at the door of the commodity markets, which have battered the oil producers and miners. Yet they are behind the bounceback, too - the oil price has continued to recover, with Brent crude hitting the psychologically important $50 a barrel mark at the end of May, prompting a powerful response in producer's share prices; Shell's share price has now risen nearly 40 per cent since January. May was a poor month for industrial metals, but even there the trend is upwards, reflected in shares prices for the likes of BHP Billiton and Rio, and also the new buy signal on the mining heavy Johannesburg Top 40 index.

The S&P's buy signal has also proved well-timed, with the index back to all time highs and threatening to break through to higher levels still after the Federal Reserve's decision to keep the Fed Funds rate on hold, and also the positive effect of a rising oil price on US energy stocks. Is it a signal worth heeding, though? The Fed's decision was based, after all, on weak jobs numbers, while US shares remain expensive on around 19 times forward earnings. Somewhat jarringly, worries over global growth have seen a sudden resurgence in bond prices and ever-tightening yields - as reflected in the recent sudden reversal of signals on the bond indices covered by our Coppock system.

Such clamour for safe haven investments, alongside a rush back into gold, should give investors cause to think carefully about following any equity buy signals blindly - because it is a clear indicator of investor fearfulness.

North AmericaFebMarAprMayLatest signalLatest signal (date)
S&P 500 Composite-1.45-1.7-2.69-2.06BUY*May-16
Dow Jones Industrial Average-4.25-3.89-4.26-3.56BUY*May-16
Nasdaq 1001311.187.126.22SELLSep-14
Nasdaq Composite8.46.222.220.81SELLApr-14
S&P/TSX-21.06-21.6-21-19.03BUYApr-16
Asia Pacific, Africa
Bangkok SET-24.63-24.81-24.26-22.04BUYApr-16
FTSE Bursa Malaysia KLCI-17.6-16-15.07-14.87BUYFeb-16
FTSE China B3518.966.58-4.38-13.96SELLJul-15
Hang Seng-21.24-27.07-30.83-33.22SELLJul-15
Korea SE Composite-2.4-3.01-3.6-4.34SELLDec-15
Indonesia Jakarta Composite-22.887-22.112-21.772-20.575BUYMar-16
Singapore Straits Times-29.46-31.92-33.22-34.28SELLMay-15
Taiwan SE Weighted-18.96-19.63-21.39-21.26BUY*May-16
Japan Topix17.758.25-1.71-8.79SELLAug-15
Australia ASX 200-13.3-15.7-17.3-16.7BUY*May-16
New ZealandNZ 5011.2213.0914.6818.24CANCEL SELLMar-16
South Africa JSE TOP 401.880.910.311.5CANCEL SELL*May-16
India Sensex-12.26-15.61-18.18-17.67BUYMay-16
South America
Mexico IPC (Bolsa)-0.322.022.743.38CANCEL SELLMar-16
Brazil Bovespa-31.62-27.78-21.81-19.75BUYMar-16
MSCI EM Latin America US%-70.338-64.353-56.281-51.253BUYJan-16
Europe/UK
Netherlands AEX7.942.75-2.9-6.41SELLAug-15
Greece Athex Composite-68.09-64.62-63.89-58.23BUYMar-16
ATX Austrian Traded1.81-0.33-3.56-6.54SELLJan-16
Belgium Bel 2014.748.72.91-0.41SELLAug-15
Germany Dax 307.541.15-5-9.51SELLDec-15
Euro Stoxx 50-1.594-7.522-13.223-17.438SELLDec-15
France Cac 408.312.59-3.09-6.97SELLDec-15
FTSE 100-13.53-15.27-16.65-16.27BUY*May-16
FTSE 25012.649.785.413.26SELLJan-16
FTSE All Share-8.98-10.85-12.67-12.7SELLJun-15
FTSE MIB2.05-5.46-12.85-20.12SELLDec-15
Ibex 35-19.98-25-28.96-31.96SELLSep-14
Ireland SE General (ISEQ)59.9353.3444.0138.19SELLJan-16
OMX Stockholm 30-1.84-8.69-15.64-20.06SELLJun-15
Oslo Exchange All share-2.98-4.76-5.03-4.2BUY*May-16
Portugal PSI 20-11.97-12.53-14.24-16.63CANCEL BUYFeb-16
Russia MICEX Index34.8332.8632.3732SELLMar-16
Swiss Market Index-4.99-8.92-13.01-14.83SELLAug-15
Fixed Income
Barclays US Aggregate Bond-0.5-0.63-0.41-0.16BUYApr-16
US 10y Treasury2.7162.1232.462.945CANCEL SELLApr-16
UK 10y Treasury5.5114.8084.3734.644CANCEL SELL*May-16
Japan 10y Treasury5.9086.4587.3028.307CANCEL SELLJan-16
Germany 10y Treasury5.9445.3964.8935.252CANCEL SELL*May-16
FT All Govt3.5082.2771.8281.939CANCEL SELL*May-16
IBOXX Liquid £ Corp Long-dated1.045-0.487-0.726-7.983BUY*May-16
FTSE British Govt index linked all mats10.597.95.874.69SELLJun-15
Commodities (S&P Goldman Sachs Total Return indices)
Agriculture-31.07-28.15-23.48-20.59BUYAug-15
Industrial Metals-49.35-48.85-44.76-42.26BUYFeb-16
Livestock-32.16-31.26-31.8-30.87BUY*May-16
Precious Metals-17.05-13.74-7.97-4.5BUYJan-16
Gold Bullion-14.64-11.26-5.81-2.55BUYJan-16
Crude Oil-103.94-102.91-98.88-92.62BUYFeb-16

*New signals