What is the Coppock Curve? Definition, Formula, and Example
The Coppock Curve is a long-term momentum oscillator that identifies major market bottoms by calculating the weighted moving average of the sum of two rates of change.
What is the Coppock Curve?
The Coppock Curve is a long-term momentum oscillator used primarily to identify major market bottoms and the start of new bull markets. Developed by economist Edwin Coppock in 1962, the indicator was originally designed for the S&P 500 index. Coppock was asked by the Episcopal Church to identify long-term buying opportunities, and he modeled the indicator after the psychological recovery time of individuals grieving a loss—assuming the stock market requires a similar mourning period after a major crash. A reading below zero indicates a bear market, and a move from below zero to above zero generates a buy signal.
How it is Calculated
The Coppock Curve formula relies on two distinct Rate of Change (ROC) periods—classically 14 and 11 months—and a 10-month Weighted Moving Average (WMA). The formula is:
Coppock Curve = WMA(10) of [ROC(14) + ROC(11)]
Where:
- ROC(n) = [(Current Price - Price n periods ago) / Price n periods ago] × 100
- WMA(10) = A 10-period weighted moving average where the most recent period carries the highest weight. The weighting multiplier is calculated as (10 / 55), yielding weights of 10, 9, 8, 7, 6, 5, 4, 3, 2, and 1 across the 10 periods.
The indicator is traditionally calculated on a monthly basis using monthly closing prices.
Worked Example
Assume an analyst is calculating the Coppock Curve for the SPX. The 14-month ROC is currently -8% (or -8.0), and the 11-month ROC is -5% (or -5.0).
1. Sum the ROCs: -8.0 + (-5.0) = -13.0
2. Apply the WMA: If the sums of the ROCs over the previous nine months were -15.0, -16.0, -18.0, -20.0, -22.0, -24.0, -25.0, -26.0, and -28.0, the weighted moving average is calculated by multiplying the most recent sum (-13.0) by 10, the previous sum (-15.0) by 9, down to the oldest sum (-28.0) by 1.
3. Calculate Total Weight: (10×-13) + (9×-15) + (8×-16) + (7×-18) + (6×-20) + (5×-22) + (4×-24) + (3×-25) + (2×-26) + (1×-28) = -130 + -135 + -128 + -126 + -120 + -110 + -96 + -75 + -52 + -28 = -1000.
4. Divide by Sum of Weights: -1000 / 55 = -18.18.
The Coppock Curve reading is -18.18. A buy signal triggers when this value crosses above zero.
When Traders Use It
Traders and macro investors use the Coppock Curve to time long-term entry points in broad equity indices. Because it is a monthly indicator, it filters out daily market noise and focuses on secular trends. When the curve is below zero, it indicates the market is in a bear phase. The buy signal is generated when the curve crosses from below zero to above zero, signifying the end of the market's "mourning period." Some modern traders adapt the formula to daily or weekly timeframes by substituting 14, 11, and 10 with periods like 231, 182, and 210, though the monthly interpretation remains the standard.
Limitations and Common Misconceptions
The primary limitation of the Coppock Curve is its severe lag. Because it relies on 14-month and 11-month lookback periods smoothed by a 10-month average, signals often generate months after the actual market bottom. In fast-recovering V-shaped markets, the indicator can signal a buy long after the easiest gains have been captured. Furthermore, the Coppock Curve is strictly a buy signal indicator; Edwin Coppock never designed it to signal market tops or sell signals. Traders expecting bidirectional signals will find the tool incomplete. It is also ineffective on individual stocks, as it was mathematically optimized for broad market indices.