It’s pretty simple. Growth stocks do not perform well when indicators like a strengthening US Dollar, rising interest rates, and slowing growth take place.

Hence, see the chart below.

This is a ratio of the Growth Stocks ETF (VUG) to the Value Stocks ETF (VTV). And it’s a bit ugly of late.

As you can see, the Growth/Value ratio double-topped and headed decisively lower. It’s currently trading well off the highs as the aforementioned market environment has not been good for growth-oriented stocks.

So, will it get worse? Better? Well, a big test is taking place at (2) on the chart below. The ratio is testing it’s up-trend line and price area of prior months' closing lows. A close this month below the up-trend line would be bad news.

What happens at (2), might go a long way in determining if the growth story is in real trouble… or ready to bounce back.

(Click on image to enlarge)

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