Wednesday, May 21, 2014

SPDR S&P MidCap 400 ETF (MDY) Coppock Guide: Nonbullish as of May Day 2014

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

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

MDY is the 11th 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: MDY And Its Coppock Guide, The Complete History

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Note: The MDY 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 MDY 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: MDY’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 MDY Coppock guide’s initial bullish signals collectively have been almost perfect in forecasting the future upward movements of the ETF on monthly closing bases. In 15 cases since July 1997, these signals have been correct on 14 occasions, or 93.33 percent of the time, and incorrect on one occasion, or 6.67 percent of the time.

The latest initial bullish signal flashed in January, sandwiched between initial nonbullish signals generated in December and February. Accounting for the one-month lag in the confirmation of any signal, MDY’s closing share price advanced to $250.57 in March from $249.71 in February, which constitutes bullish action.

Figure 3: MDY’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 MDY Coppock guide’s initial nonbullish signals collectively have compiled an interesting track record since July 1997. As customary, it is important to keep in mind a nonbullish signal is not equivalent to a bearish signal in the context of the guide. Following 15 initial nonbullish signals over the years, the ETF’s share price on monthly closing bases fell on nine occasions, or 60.00 percent of the time, and rose on six occasions, or 40.00 percent of the time.

The most recent initial nonbullish signal was produced in February, when MDY’s closing share price was $249.71. Factoring in the one-month lag in the confirmation of any signal, the ETF’s closing share price declined to $246.84 in April from $250.57 in March, which constitutes nonbullish action.

Intriguingly, the change in market participants’ mood between last year and this year was indicated first not by the behaviors of either SPY, a proxy for large-capitalization equities, or IJR, a proxy for small-cap issues, but by the performance of MDY, a proxy for mid-cap stocks.

Correction: To fix a data-download error, this article’s graphics and their related text have been changed to reflect the incorporation into the underlying analyses information relevant to MDY between August 1995 and November 1998.

Coppock Guide: The Blog Series











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Author’s Note: This is the 11th 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.