Jefferies’s chief equity strategist Sean Darby turns to an obscure Church-sanctioned technical indicator to explain why housing hasn’t bottomed yet.
Yes, he’s talking about the Coppock indicator, a measure of sentiment inspired by economist Edwin Coppock’s conversation with American Episcopalian bishops, who said that people mourned for between 11 and 14 months.
Here’s what the indicator is signaling:
The US housing market is still ‘clearing’. While affordability is on the side of the buyer and the employment picture is improving, real disposable income is flatlining. Perhaps, the understated ‘recovery’ in US housing is not so much about the rebound in sales but the better tone in housing permits and architectural billings which ought to produce multipliers for the broad economy. Equally, while housing transactions may allow the market to clear, the real underlying improvement is through existing household balance sheets as the debilitating effects of negative equity (deflation) are exorcised. The Coppock indicator has yet to indicate a Buy