June 1st, 2009

Coppock Curve:Truck Original Equip, Parts and Tires Under Green Light

CNBC’s Fast Money finally caught up to with the Stock Chartist blog. They had a segment called “New Bull? Rare Pattern Could Signal Market’s Next Move!” this evening about the Coppock Curve (click here to read more about it on the CNBC site).

I say “caught up” because I first wrote about the Coppock Curve in January and followed up on March 25 when I wrote:

“I’ve also extrapolated what the [Coppock] Curve values might be if the S&P 500 Index is able to hold at approximately 900 through the end of May. Interestingly, the Curve hits a low in April and begins to turn up in May.

So long as there’s no further deterioration in the market, and the S&P 500 Index can hold current levels for the next 60 days, there’s a convergence of indicators that will point to a positive signal at that time that it will be “all right to get back into the pool”. Among those indicators are the Coppock Curve, the 200-day Moving Average crossover, my MTI, and the long-term reversion to the mean chart.”

We foresaw it and it just happened. The Coppock Curve actually turned up based on Friday’s close and today the Index crossed above the 200-day moving average (it closed above my 180-day moving average indicator last week). Note the similarity between today’s Coppock Curve chart and the projection from March:

The Reversion to the Mean chart also crossed above the bottom range boundary in April.

To round out the picture, the Index crossed above the neckline. All indicators now confirm a “green light” signal (you can’t appreciate how long I’ve waited to include that image at the top). I don’t know about you but I’m ecstatic. I can’t explain why the market has turned positive at just this time but do we really care? We have to go with the flow; I’m sure there will be explanations galore later giving all the reasons momentum turned from bear to bull just at this time.

So where to go from here? I’ve already written about foreign stocks metal ores (March 22), (April 17), steels (April 26), alternative energy including solar and coal (May 7) and gold miners (May 11). Each of these groups have contributed stocks to today’s leaders. Here’s another group that seems to be advancing for some unknown reason: truck parts suppliers. For example, Auto/Truck-Original Equipment suppliers has climbed dramatically to the top of the IBD Industry Group rankings:

The group has skyrocketed in ranking from near the bottom to near the top, a position it hadn’t seen since early 2007. Many of the major stocks in the group are on the verge of completing reversal patterns (like inverse head-and-shoulders, ascending triangles) or have already done so; these stocks are also close to or have already crossed above 90-, 180- or even 300-day moving averages. Key stocks in the group with great stock charts include:

  • MOD (Modine Mfg.)
  • LEA (Lear)
  • XIDE (Exide)
  • BWA (Borg Warner)
  • JCI (Johnson Controls)
  • ALV (Autoliv)
  • WBC (Wabco)
  • MGA (Magna)
  • GETI (Gentek)

The herd may again stampede the stocks in this group (along with the Tire and the Replacement Parts Groups) now that there appears to be some resolution to the auto industry bankruptcies.

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