ETF Trading Ideas You Need To Know: Bears Rule For Now
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Markets are looking increasingly bearish, interestingly as the asset class most affected by the war, commodities, gives back most of their gains.
- Most ETFs have now turned bearish, or are in the process of doing so
- SPY is now in a clear short term (for now) downtrend
- IWM is still in its downtrend but looks to be trading sideways for now
- QQQ and XLY (Consumer Discretionary) are the most bearish
- Even Consumer Staples (XLP) has turned lower
- Fixed Income ETFs are extremely weak
- Corporate bonds, LQD and HYG continue to drop, opening up 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
- The rally in energy stocks (XLE) seems to have run its course, at least for now
- XLE tested its quadruple top and briefly traded higher before reversing in a major way. Oil is now <$100 a barrel
- Markets seem more risk averse than anything else as the Fed prepares to raise rates
- Both defensive (XLI, XLP) and high beta plays aren’t doing well
- The USD continues to strengthen, and the US yield curve has gotten even flatter!
Trading Ideas – Performance

Trading Ideas – Commentary
- XLI stopped out for a loss of -3.45%, as industrials start to break down
- XLF stopped out for a loss of -6.27%, as financials start to look more bearish
- XLP stopped out for a loss of -3.14%, as consumer staples turn bearish
- 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
- Letting winners run:
- Remained short IWM and XLY as higher beta plays remain weak
- 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
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 is now in a clear downtrend
- This could be a good short if you do not think a bottom is in for equities, or if you simply want to follow the trend
- Buying IWM puts is another way to express this view which would also allow you to take advantage of a possible spike in volatility (vol is now expensive as we are in the middle of said spike)
- XLY is struggling, and now that IWM has broken out to the downside, it’s hard to imagine XLY doing well
- Could hedge a XLY short with a XLP long to create a pair trade that still makes money if XLY falls, and loses less if XLY changes direction
- 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 look increasingly bearish
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