Growth stocks are showing relative improvement versus the market and value stocks.
While the market as defined by the S&P 500 Index SPX is flat this week through Tuesday’s action, value stocks have outperformed growth stocks in the short time. The Vanguard Value ETF VTV has added 94 basis points, while the Vanguard Growth ETF VUG has shed 88 basis points. This is a slight change in the recent performance of value versus growth during March as VTV has lost 3.65% while VUG has added 3.04%. While positive action within the growth space earlier in the year qualified as laggard improvement from technically weak sectors at the time, like Technology and Consumer Discretionary, sustained absolute improvement and recent market volatility has caused relative improvement from these aforementioned growth sectors. The charts below will discuss some of the absolute improvement within growth by looking at the technical picture of VUG and also note where additional improvement from a relative standpoint may be needed in order to see growth further separate itself from value.
On the trend chart of the Vanguard Growth ETF VUG, the fund has maintained a buy signal since November 2022 and a positive trend since February, after a second buy signal. Since then, VUG has pulled back and reversed back into a column of Xs, rallying to form a double top at $245. While broader market indices violated their bullish support lines, VUG was able to maintain above the trendline and the rallied that followed led to positive RS against the S&P 500 Equal Weighted Index SPXEWI. Following action on March 14th, VUG reversed into a column of Xs on the market RS chart against SPXEWI and upon that move, the fund’s score improved above the 4 score threshold for the first time since January 2022. With that pop in score, VUG’s fund score moved above VTV’s fund score for the first time since October 2022.
As noted above, VUG has shown near-term relative improvement versus the S&P 500 Equal Weighted Index SPXEWI. Additionally, the first RS chart to the left shows that growth has shown similar relative improvement in the near-term against value (VTV), leading to a reversal back into Xs. In this case, VUG has been in a column of Xs against VTV since the beginning of February and has shown further relative improvement to the extent that the RS chart is within two boxes of moving back to an RS buy signal. The chart has been on an RS sell signal against VTV for over 12 months after giving the initial RS sell signal in March 2022. While the near-term outperformance has favored growth, investors now look for that outperformance to sustain and see growth move back to a buy signal.
Growth areas of the size and style level of DALI have begun to show improvement, and further outperformance by growth could lead to additional improvement, potentially up the rankings. Those who may seek for a individual RS relationship to keep an eye on the VUG versus VTV relationship may utilize the My Custom RS Charts widget on the Dashboard page to set alerts for future breakouts or reversals.
