S&P VALUE INDEX IS GAINING GROUND -- IT'S GETTING A LOT OF HELP FROM STONGER FINANCIALS AND INDUSTRIALS -- SMALL CAP RALLY CONTINUES

S&P VALUE IS GAINING GROUND... Value stocks are continuing to fuel much of the stock market's recent gains.   Chart 1 shows the S&P 500 Value iShares (IVE) rising this week to the highest level in a month.   And it's been rising faster than its counterpart growth index that's dominated by tech stocks.   The solid line on the chart plots a ratio of the S&P value to growth iShares (IVE/IVW ratio).   The RS line bottomed in early September and has been gaining ground since then.  That means that value stocks have outperformed growth stocks over the past month.  A lot of the value buying is coming from financial and industrial stocks which are heavily represented in the IVE.

INDUSTRIALS AND FINANCIALS TURN UP... Chart 2 shows the Industrial Sector SPDR (XLI) rising above its September high today to trade at the highest level since February.    Chart 3 shows the Financial SPDR (XLF) trading above its 200-day moving average for the second day in a row.  The XLF is being led higher today by asset managers, insurers, and bank stocks.   The recent rise in bond yields is also drawing some money into the rate-sensitive financial sector.  Financials and industrials account for 28% of the S&P 500 Value iShares.  Both cyclical groups are also contributing the recent surge in small cap stocks.

SMALL CAP RALLY CONTINUES...Chart 4 shows the Russell 2000 iShares (IWM) rising today to the highest level in seven months.  That's another part of the recent rotation into more economically-sensitive stock groups.   A lot of that recent surge is coming from value stocks.  Chart 5 shows the Russell 2000 Value iShares (IWN) surging this month and nearing a test of their August highs.   My Tuesday message mentioned that financials and industrials were the two biggest sectors in the IWN with a combined weighting of 42%.  So their recent strength is contributing to the small cap rally.    Russell 2000 Growth iShares (IWO) have already hit a new record.