• 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