Monday, May 19, 2014

IShares Core S&P Small-Cap ETF (IJR) Coppock Guide: Nonbullish as of May Day 2014

The iShares Core S&P Small-Cap ETF (IJR) during the first four months of the year ranked third by return among the most popular exchange-traded funds based on the S&P 1500’s three constituent indexes, which also encompass the SPDR S&P MidCap 400 ETF (MDY) and the SPDR S&P 500 ETF (SPY).

Over the first third of 2014, IJR’s adjusted closing share price fell to $107.13 from $108.82, a loss of -$1.69, or -1.55 percent. In contrast, MDY rose to $246.84 from $243.54, a gain of $3.30, or 1.36 percent, and SPY rose to $188.31 from $183.88, a gain of $4.43, or 2.41 percent.

IJR is the 10th of 13 ETFs featured in a J.J.’s Risky Business blog series this month. Basically, I have been looking at each ETF with both eyes fixed on its Coppock guide, as was the case in “SPY Coppock Guide: Away From Bullishness, Toward Nonbullishness as of March 31, 2014.” The Coppock guide, aka either the Coppock curve or the Coppock indicator, is a long-term indicator of price movements in major stock-market indexes calculated on the basis of monthly data.

Figure 1: IJR And Its Coppock Guide, The Complete History

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Note: The IJR closing-value scale is on the left, and the Coppock guide scale is on the right.

Source: This J.J.’s Risky Business chart is based on proprietary analyses of Yahoo Finance adjusted monthly share-price data and those data themselves.

Edwin S. Coppock built his long-term guide not to flash both bullish and bearish signals but to generate only bullish signals. However, I employ it to produce either bullish or nonbullish signals. It is extremely important to keep in mind that a nonbullish signal is not equivalent to a bearish signal in the context of the guide.

I anticipate IJR may rise after a bullish signal and expect it might do anything following a nonbullish signal (i.e., trade higher, lower or sideways).

Figure 2: IJR’s Behavior Subsequent To Initial Bullish Signals

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Source: This J.J.’s Risky Business chart is based on proprietary analyses of Yahoo Finance adjusted monthly share-price data.

The IJR Coppock guide’s initial bullish signals collectively have done an excellent job in forecasting the future upward movements of the ETF on monthly closing bases. In 11 cases since April 2002, these signals have been correct on nine occasions, or 81.82 percent of the time, and incorrect on two occasions, or 18.18 percent of the time.

The latest initial bullish signal flashed in July 2012, when IJR’s closing share price was $70.95. Accounting for the one-month lag in the confirmation of any signal, the ETF’s closing share price soared to $104.79 in January 2014 from $73.71 in August 2012, which clearly constitutes bullish action by any standard.

Figure 3: IJR’s Behavior Subsequent To Initial Nonbullish Signals

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Source: This J.J.’s Risky Business chart is based on proprietary analyses of Yahoo Finance adjusted monthly share-price data.

The IJR Coppock guide’s initial nonbullish signals collectively have compiled an interesting track record since April 2002. Again, it is important to keep in mind a nonbullish signal is not equivalent to a bearish signal in the context of the guide. After 12 initial nonbullish signals over the years, the ETF’s share price on monthly closing bases fell on eight occasions, or 66.67 percent of the time, and rose on four occasions, or 33.33 percent of the time.

The most recent initial nonbullish signal was generated in February, when IJR’s closing share price was $109.41. Factoring in the one-month lag in the confirmation of any signal, the ETF’s closing share price dipped to $107.13 in April from $110.14 in March, which clearly constitutes nonbullish action by any standard.

Coppock Guide: The Blog Series










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Author’s Note: This is the 10th blog post in a May series centered on the Coppock guides of 13 important ETFs, among them all nine Select Sector SPDRs and the most popular funds based on the three constituent indexes of the S&P 1500. The first installment of the series was cross-posted at both J.J.’s Risky Business and J.J. McGrath’s Instablog on Seeking Alpha, but the rest of it is being posted here. You can follow me (and the series) @JJMcGrath3000 on Twitter, at JJMcGrath on StockTwits and via myself on Google+.

Disclaimer: The opinions expressed herein by the author do not constitute an investment recommendation, and they are unsuitable for employment in the making of investment decisions. The opinions expressed herein address only certain aspects of potential investment in any securities and cannot substitute for comprehensive investment analysis. The opinions expressed herein are based on an incomplete set of information, illustrative in nature, and limited in scope. In addition, the opinions expressed herein reflect the author’s best judgment as of the date of publication, and they are subject to change without notice.