The Rotation is Clearly Visible

One Relative Rotation Graph (RRG) variation I frequently review highlights the relationships and rotations between growth and value stocks, as well as the size categories: large-cap, mid-cap, and small-cap. This RRG, available as a dropdown on the RRG page, provides a comprehensive view of how these segments interact and rotate over time. Let’s walk through the key relationships and insights this RRG reveals.

Growth vs. Value: A Clear Rotation

The first relationship to examine is between growth and value stocks. On the weekly RRG, growth and value are highlighted, while other market segments are dimmed for clarity. The current rotation is striking: US value stocks are powering into the leading quadrant with strong momentum, while growth stocks are moving into the lagging quadrant with a negative trajectory. This rotation clearly favors value stocks.

This trend is also visible on a standard chart comparing the Dow Jones US Growth Index ($DJUSGR) to the Dow Jones Value Index ($DJUSVA). The raw relative strength (RS) line between these indices is breaking below horizontal support, suggesting further downside for growth and more strength for value. Both the RS-ratio and RS-momentum lines are closely aligned and moving lower, reinforcing the shift toward value.

Size Segments: Large-Cap, Mid-Cap, and Small -Cap

The next RRG highlights the relationships among US large-cap, mid-cap, and small-cap stocks. The message is a clear rotation out of large-cap stocks and into mid-cap stocks, with small-caps also benefiting to a lesser extent. Large-cap stocks are moving in a negative direction and are close to crossing from the leading into the weakening quadrant. In contrast, mid-cap and small-cap stocks are on a positive RRG heading, indicating growing strength. Although large-caps still have a higher RS ratio, the direction of the tails on the RRG tells the real story of rotation happening beneath the surface.

Large-Cap

On price-relative charts, large-cap stocks are struggling to maintain momentum. A lower low has formed, and price is testing a key horizontal level, which could act as support or resistance. The raw relative strength line of large caps versus the broader Dow Jones US Index remains in a broad range, with the RRG lines rolling over.

Mid-Cap

For mid-caps, the outlook is more positive. After setting a higher low around 2,300 (compared to a previous low near 2,000), the market is moving toward the previous high, signaling an ongoing uptrend. The raw relative strength line for mid-caps versus the broader market is approaching overhead resistance, and a breakout would confirm further relative strength. The RRG lines for mid-caps are already moving higher and are closely aligned.

Small-Cap

Small-cap stocks are also showing signs of improvement. The price chart indicates a move higher, with the most recent low finding support at previous lows. The relative strength line made a new low, but it remains above the trough set at the end of 2025. The RRG lines are starting to catch up, though small-caps have generally lagged the market since July.

Growth and Value Across Size Segments

Finally, the RRG view of growth and value across size segments shows a clear rotation. Large cap value stands out as the segment to be in, with a long tail pushing into the leading quadrant. Value mid-caps follow, positioned in the improving quadrant with a positive heading. Value small-caps are further left, also with a positive heading but lower RS-ratio levels. Among growth stocks, only small-cap growth is moving at a positive heading, crossing into the improving quadrant near the center of the chart.

The Bottom Line

The big picture indicates that value stocks, particularly in the large-cap and mid-cap segments, are currently the market's preferred areas. Within the growth segment, investors are rotating out of large-cap and mid-cap growth stocks and into small-cap growth stocks.

#StayAlert -Julius