• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock 10% Downside Risk For Stocks as Value Takes The Lead
Stock

10% Downside Risk For Stocks as Value Takes The Lead

by April 24, 2024
by April 24, 2024 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

Value taking the lead from growth

The weekly RRG above shows the rotation for Growth vs Value stocks. The benchmark is the DJ US index. The recent rotation clearly shows the rotation out of growth into value, taking shape and picking up steam. For now, Growth is still positioned on the right-hand side of the RRG, but the $DJUSGR tail is rapidly heading toward the lagging quadrant at a negative RRG-Heading.

The daily version of this RRG underscores the preference for Value stocks.

The $DJUSVA tail dropped into the weakening quadrant after a rotation through leading since mid-March and sharply hooked back up after one day inside the lagging quadrant and is now returning into the leading quadrant, supporting a further strengthening for the Value tail on the weekly time-frame.

$SPX usually tracks the Growth/Value ratio pretty good

Plotting the Growth/Value ratio on top of the price chart for $SPX shows that they have tracked each other quite well over time. This is a monthly chart, so we’re discussing long-term trends here.

The main takeaway here is that the S&P usually does well when the growth/value ratio goes up and less well when the ratio moves lower.

With the RRG currently showing a strong preference for Value stocks, caution is warranted as this might be the precursor for a further decline in the S&P 500 itself.

The preference for value over growth shows up across all size segments

When we break down the Growth and Value segments into their respective size buckets, we get the RRG above. This shows that value beats growth across all size segments. Large-, Mid-, and Small-cap Value tails are all inside the improving quadrant and moving at a positive RRG-Heading.

The growth tails are slightly more divided, but all three are on a negative RRG-Heading, with large-cap growth showing the fastest deterioration. Mid-Cap is the most stable, with its short tail just inside the weakening quadrant. While small-cap growth stocks have rolled over inside the leading quadrant and are starting to head lower on both scales.

All in all, this underscores the need for caution regarding price developments for the S&P 500 in the coming weeks.

5%-10% downside risk within long-term uptrend

On the weekly chart, SPY found support at the level of the former rising resistance line at around 494. More important support is found at the level of the January-2022 peak at 480, and in case that breaks, the area around 460 will provide another solid support area. With the current longer-term trend of higher highs and higher lows still firmly in place, we have to conclude that the uptrend is still in play.

But at the same time, we have to realize that within that uptrend, a 5-10% decline is perfectly possible.

The more detailed daily chart of SPY shows that the decline from the recent peak at 524 back to the low near 495, which is one move lower on the weekly chart, is already showing lower highs and lower lows, which means that rallies now have to be seen as up-ticks within a downtrend until this structure changes again.

The green-shaded areas represent the support levels mentioned on the weekly chart. New buying opportunities within the long-term uptrend should start to arise in these ranges.

Rotation into defensive sectors confirms risk-off

Finally, the daily RRG for defensive sectors shows a rapid rotation into Health care, Consumer Staples, and Utilities in the last two weeks of trading, which confirms the need for caution in the coming weeks.

#StayAlert, –Julius

You Might Also Like
  • OptionsPlay: Macro Market Outlook and Options Strategies
  • DP Trading Room: NVDA Going Into Earnings – Hold or Sell?
  • Stock Market Today: Real Estate and Tech Lead, Energy Down
  • META Stock in Limbo: What You Need to Know Before the Next Big Price Swing
Share
0
FacebookTwitterPinterestWhatsapp

previous post
What’s Really Driving Tesla’s Surprising Stock Surge?
next post
Trump v US: SCOTUS likely to determine presidents get ‘some amount’ of immunity, experts say

You may also like

The Master Sentiment Chart You Need to Follow

October 16, 2024

The Ord Oracle October 10, 2023

October 11, 2023

Fight This Bullish Development At Your Own Risk

May 28, 2023

Find Trades Using These POWERFUL MACD Combinations

July 17, 2024

The 4 Best Tech Stocks to Watch Now!

June 27, 2024

Flip the Script: Defense as Your New Offensive Playbook

February 27, 2024

The Economic Modern Family & the MOST IMPORTANT Data Ever

April 15, 2023

Strong Upside Potential in These Two Mega-Caps

July 28, 2023

Bull or Bear Market? A StockCharts Member Special

March 15, 2023

The Best Technical Indicator for Long-Term Investors

February 23, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,631 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Demystifying Tariff Impact: Essential Insights for...

    April 5, 2025

    Q1 Ends With A Small Cap...

    March 31, 2024

    Tariff Turmoil: 3 Stocks You Need...

    March 14, 2025
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here