Value vs. growth.
That seems to be the "question of the day" this week. It's as if you must love one or the other, but not both.
Needless to say I am questioned about it, as I'm sure many are, but unlike where I see the banks doing something they haven't done in two years relative to the S&P 500, I do not see the same in the chart of iShares Russell 2000 Value ETF IWN relative to iShares Russell 2000 Growth ETF IWO.
IWN vs. IWO. I'm sure there are any number of ways to determine value and growth using ETFs but I have used this particular metric before so I'm happy to return to it.
Let's begin with the black trend line in the IWO chart below. It's relatively flat so crossing it is probably a bit more important than a steep one. But notice that in the fourth quarter of 2018 we crossed it - twice -- and it didn't matter. As soon as the calendar turned to 2019 the downtrend resumed.
Even if you prefer the steeper blue line, we crossed it in October 2018 and then proceeded to make lower lows in 2019.
I do think it is encouraging that IWN has made a higher high this week, now logging in at the highest level since the spring of this year. However, I don't know if you can call it a trend until well after the fact.
And think about this: growth has been getting clobbered of late so what if growth has gotten oversold and is ready to enjoy an oversold rally? You'd have to hope that value keeps pace (it rarely does) to keep the ratio moving upward, otherwise the ratio can fall of its own weight.
The chart of IWN, below, hasn't even made it to the September high yet so call me skeptical that any breakout in this chart can keep on running. It looks to me as if it would exhaust itself right after it crosses resistance.
In the meantime, breadth remains strong, which has kept the breadth indicators marching upward. Sentiment has not gotten giddy -- not yet at least.
I maintain that if we see the S&P make a new high we will see a change in sentiment very quickly. If the S&P can make a new high the FOMO Bulls will tug the Recency Bias Bears all the way over the line, even including the big guy who is roped in as the anchor.
I believe this because we saw the Investors Intelligence bulls at 52.7% this week, so I have to believe that a new high would scoot this right up solidly over 55%. It wouldn't take much to get them there.
And if those growth names that move the S&P do rally -- notice the S&P has been milling around this same level for seven straight trading days because these big-cap names aren't doing the heavy lifting -- we might get the S&P to a new high. Then we'll see if the indicators change. For now, they remain mixed.