Growth vs Value

By Todd Gordon
October 25, 2019

We’re back to the age-old question: growth or value?

The S&P 500 Value Index (SPYV) hit an all-time high during Thursday’s trading, while the charts are sending sinister signs that could put the growth-stock rally at risk, says Todd Gordon, founder of TradingAnalysis.com.

In the SPYV ETF, “we’ve seen three main periods of consolidation since the 2009 lows,” Gordon told CNBC’s “Trading Nation” on Thursday.

Those consolidation periods have lasted 86 and 101 weeks, with the most recent still in its 91st week as of Thursday, Gordon said.

“The big question right now is when will this consolidation end?” Gordon said. “Could we move higher in value? Absolutely. So, this is the time where, I think, in the earnings season, we’re starting to look for a breakout.”

Turning to a chart of growth relative to value — that is, the S&P 500 growth index divided by the value index — Gordon said the bear case for growth appears to be taking hold.

“What you can see is we have a very, very nice uptrend, which is growth outperforming value. We’re starting to see this ratio start to sell off,” he said. “A natural pullback would be about that 1.10 level. If you break through 1.05, … that would start to suggest that the uptrend in growth since ’08 is now in trouble.”

That would mean value could start to substantially outperform growth in the coming months. The iShares S&P 500 Value ETF (IVE) has underperformed the iShares S&P 500 Growth ETF (IVW) over the last two years, with the former up just over 10% versus the latter’s nearly 24% gain.

Gordon wanted to play the potential trend turnover with a stock that has caught the eye of both value and growth investors alike: Apple.