ETF Trading Ideas You Need To Know: Exploit Trends!
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Russia’s heavy shelling hits markets with heavy selling.
While volatility and correlations remain high, ETFs are trading with more nuance now. Some are holding up well, and others are either in free fall, or poised to do so.
- Heavy selling has returned to most markets as volatility, uncertainty, and correlations remain high
- Most ETFs are still moving in tandem, although some nuance has returned to trading activity
- 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 of the major equity indices
- Fixed Income ETFs still look very bearish with the exception of TLT, which is struggling for a clear direction amidst volatile trading
- 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
- Consumer Staples (XLP), Energy (XLE), and now even Utilities (XLU) are rare bright spots for bulls
- XLE continues to rally with oil prices, boosted by Russia’s invasion, and is very close to testing a quadruple top
- The bearish threat of our twin wildcards have now materialized, catalyzed by Russia’s war in Ukraine:
- Consumer staples stocks (XLP) continue to outperform consumer discretionary ones (XLY) even as the Fed maintains its hawkish stance
- 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
- Exited TLT for a gain of 1.72%, as the market is now more focused on the “safe haven” bids narrative rather than the “rising rates” one
- Remained long in XLF as an “aggressive hedge” to the short IWM position
- Beta mismatch means the gains from IWM falling can outpace losses in XLF, but the reverse would incur losses
- 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
- Holding on to long XLE
- Reasons detailed in this article
- XLP – XLY pair trade is still doing well, and is also an “aggressive hedge” with a beta mismatch
- Remained short LQD, HYG, and EMB to maintain exposure to the “rising rates” narrative
Trading Ideas – Long
- XLE to take advantage of how bullish oil prices are
- XLP is an interesting bet which could offer the best of both worlds
- Defensiveness against current sell off and market volatility
- Upside potential from very bullish trend
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
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