American Daddy Trader
  • Politics
  • Business
  • Stock
  • Editor’s Pick
  • Politics
  • Business
  • Stock
  • Editor’s Pick

American Daddy Trader

Stock

10% Downside Risk For Stocks as Value Takes The Lead

by admin April 25, 2024
April 25, 2024
10% Downside Risk For Stocks as Value Takes The Lead

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

previous post
New poll reveals how voters’ views on abortion have changed as Dems seek to make issue a central 2024 theme
next post
Pinpoint the Next Buying Opportunity in SPY

You may also like

Chart Mania – 23 ATR Move in QQQ...

July 26, 2025

How to Shield Your Stocks During a Market...

April 24, 2025

Week Ahead: NIFTY Likely To Continue To Consolidate;...

February 25, 2024

Your Weekly Stock Market Snapshot: What It Means...

June 10, 2025

Week Ahead: Markets To Stay Tentative; This Defensive...

May 12, 2024

Offense vs. Defense: How Geopolitical Tensions Shape Market...

June 25, 2025

An Enticing Gold Mining Stock with a Strong...

January 31, 2025

This Breadth Indicator Points to More Downside –...

August 2, 2024

Master the 18/40 MA Strategy: Spot Trend, Momentum...

May 1, 2025

Equities Struggle in Strong “NoGo” as Materials try...

April 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

    • European leaders will join Trump-Zelenskyy meeting, signaling solidarity with Ukraine

      August 18, 2025
    • ‘Our position is clear:’ Zelenskyy and EU dismiss ceding Ukrainian land to Russia

      August 18, 2025
    • Ukrainian designer predicts Zelenskyy will wear military suit for high-stakes Trump meeting

      August 18, 2025
    • Trump blasts ‘lightweight’ Dem senator who criticized Putin summit in Alaska: ‘Stupid’

      August 18, 2025
    • Zelenskyy heads into crucial Trump meeting as US weighs security guarantees for Kyiv

      August 18, 2025

    Archives

    • August 2025
    • July 2025
    • June 2025
    • May 2025
    • April 2025
    • March 2025
    • February 2025
    • January 2025
    • December 2024
    • November 2024
    • October 2024
    • September 2024
    • August 2024
    • July 2024
    • June 2024
    • May 2024
    • April 2024
    • March 2024
    • February 2024
    • January 2024

    Categories

    • Business
    • Editor's Pick
    • Politics
    • Stock
    • Uncategorized
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Copyright © 2025 americandaddytrader.com | All Rights Reserved