In early September we posted a chart about value stocks warning of a correction.  Today we’re seeing almost the exact same pattern playing out again.  The chart below compares the S&P 500 Index (SPX) to Berkshire Hathaway (BRKB) (we use it as a proxy for value stocks).  Notice how SPX put in a lower low during the September through November correction while BRKB held above its last minor low.  This shows that as the market fell into mid November investors were taking money from the general market while others were allocating money to value stocks. During the subsequent rally BRKB is making new highs.  SPX on the other hand is stalling at its recent peak.  This is a sign that investors are still moving money into defensive stocks.  They’re looking for value that will hold up relatively better in a down trend.  If you look at the charts of some of the most loved stocks during the first part of 2012 you’ll be able to see where the money to

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A few weeks ago we highlighted Nasdaq new highs as one of the things that had us concerned that this up trend is in the late stages (rather than a new long term up trend off the June lows).  We like to watch several measures of market health to get a feel for where the S&P 500 Index or Nasdaq is headed next.  Another sign that we could be near the end of this up trend is the rotation to value stocks that started in April of this year. In the chart below we show Berkshire Hathaway (BRKB) as a proxy for value stocks compared to the S&P 500 Index (SPX).  Notice that the small sell off in April and the subsequent rally in May created a divergence between BRKB and SPX.  BRKB made new highs and SPX didn’t confirm.  The next leg down in SPX created a decent size correction, however, BRKB diverged again by not making a lower low.  This action showed money moving out of stocks in

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