As it stands, the S&P remains modestly up on a year to date basis as we move into the historically vulnerable summer months.
With stocks coming under pressure over the last 3 weeks, we've been looking for the rotation in leadership that's bound to happen at these types of inflection points. One potential development that we're watching is the relationship between Growth & Value stocks. For years now, Growth has outperformed on a relative basis and while still in an uptrend, Growth stocks could be weakening relative to their Value counterparts. The chart below shows the long term relationship between iShares S&P 500 Growth (IVW) and the iShares S&P 500 Value (IVE). We're seeing a clear breakdown by IVW which is suggestive of Value stocks assuming leadership.
The chart below shows the Nasdaq from the Feb 11th bottom (grey line). The blue line, representing 20 day highs, shows how breadth and momentum topped much earlier than price in this recent run-up. As we can see, the index ran for another month after this breadth measurement topped out. And why was the index able to continue upward? Well for one reason, even though the buying thrust slowed down in early March there was also a real lack of selling pressure (orange line = 20 day lows) until the end of April/early March.
Have a great week.
Let's Go Caps!
