Value vs Growth on Watch for Breakout
- Posted by DynamicHedge
- on January 17th, 2012
The spread between large cap value and large cap growth has been coiling for several months. The wedge has been tightening in this relationship since correlations all went to 1 in August. This spread measures value and growth based on the strict style classifications that Standard and Poors uses to calculate their indexes. Which is not necessarily the same definition value investors assign when describing their methodology.
Why does this matter? The breakout from this range should tell us more about the character of the next leg of this market. Value driven bull conditions tend to be low volatility and have staying power. Growth driven bull conditions tend to be more volatile and come at the end of the run. Value destroying bear conditions tend to be relentless, whereas growth destroying bear conditions are violent and signal the crescendo of the move lower. Several other similar indexes already given a nod to the value side. We’ll see how this one plays out.
Disclaimer: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please click here for a full disclaimer.
DynamicHedge is an equities, futures and derivatives trader based on the West Coast. He runs a long/short opportunistic relative-value strategy within a proprietary trading group. More
- 70 days of suffering in WalMart
- April is very bullish in a weird way
- Representativeness Bias: Easy Classifications
- Confirmation bias: A dependable filter of objective information
- Conservatism Bias: How to know what new information to focus on
- Sentiment Flip
- Pardon the interruption
- Wait for the market to flex
- How SPY typically trades after a gap up/down on NFP report
- Ebay Monster Gaps