ETF Trading Ideas You Need To Know: Bear Market Rally?
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The fog of vol has markets suddenly looking bullish again. Are bulls really back, or is this just a bear market rally?
Small caps might give us an important clue.
- Most ETFs, after looking very bearish just last week, have bounced or rallied quite substantially
- SPY, QQQ, XLI, XLY look primed for further gains
- Although IWM is underperforming and looks to be stuck trading sideways for now
- Fixed Income ETFs remain very weak
- Corporate bonds, LQD and HYG, still face the possibility of a fall to test 2020’s COVID lows
- The large sell off in EM sovereign bonds (EMB) has finally begun
- TLT is selling off again as UST yields rise
- Energy stocks (XLE) are back to rallying as WTI is back above $100 and moving on $110
- Another test of its quadruple top looks likely
- Wildcards:
- Caution is warranted as long as small caps continue to under perform. In a bull market, they should be leading, not lagging rallies
- The US yield curve has gotten even flatter even as the Fed amps up its hawkish rhetoric
Trading Ideas – Performance

Trading Ideas – Commentary
- Volatility in the markets has led us to exit/stopped us out of some positions
- IWM stopped out for a gain of 1.43%
- XLY stopped out for a gain of 9.26%
- XLI stopped out for a loss of -3.45%
- XLF stopped out for a loss of -6.27%
- XLP stopped out for a loss of -3.14%
- Exited TLT for a gain of 1.72%, as the market focused on the “safe haven” bids narrative at the start of the Russian invasion at the end of Feb
- Exited XLE for a gain of 16.64% after oil’s sharp move higher and immediate reversal on 7 March
- Letting winners run:
- Remained short LQD, HYG, and EMB to maintain exposure to the “rising rates” narrative
- Cost push inflation is still high, and will likely be driven higher by the Russian invasion of Ukraine
- Also, fixed income charts are very bearish, especially EMB
- Volatility, uncertainty and general bearishness due to the invasion are weighing heavily on EM debt
- Remained short LQD, HYG, and EMB to maintain exposure to the “rising rates” narrative
Trading Ideas – Short
- LQD, HYG, EMB
- LQD and HYG look poised for a large move lower, possibly all the way to COVID 2020’s lows
- EMB is now in the midst of the large drop it has been threatening since mid Jan
- IWM has begun to trade sideways but is underperforming the SPY and QQQ
- If US equities turn down again small caps will probably lead the way lower
- Wait for the market to signal which direction it wants to move in as IWM is currently trading in a range between $191-$208.5
- EEM has now broken below its well established bearish channel, and is looking very weak
- EZU and FXI are also good short candidates, as their charts still look bearish
- FXI is trickier to trade now as the Chinese government has verbally intervened to halt the selloff in Chinese stocks
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