ETF Trading Ideas You Need To Know: Important Nuances In War
If the slides above aren’t loading, you can read ETF Edge over here.
War between Russia and Ukraine has driven volatility higher, and correlation towards 1.
While markets are currently moving together, they are doing so to different degrees. It’s these nuances that are important for traders and investors to be aware of.
- Volatility remains high with large intraday swings since the start of Russia’s invasion of Ukraine, with almost all markets moving in lockstep with each other
- Most ETFs followed the same pattern of selling off heavily and then reversing their losses since Thursday (the day of the invasion), but to different degrees
- 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 still looks the most bearish of the major equity indices
- Fixed Income ETFs still look very bearish with the exception of TLT as USTs get a “safe haven” bid
- Corporate bonds, LQD and HYG, have bounced but still look weak
- EM sovereign bonds (EMB) still looks poised for a larger sell off
- Consumer Staples (XLP) and Energy (XLE) are rare bright spots for bulls
- XLE continues to rally with oil prices, boosted by Russia’s invasion
- Wildcards:
- Consumer staples stocks (XLP) continue to outperform consumer discretionary ones (XLY) even as the Fed grows increasingly hawkish
- The USD remains strong, 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
- 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
- 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
- XLF if you buy into the narrative that rate hikes are good for bank stocks
- If you don’t, most traders do, and would be looking to position themselves accordingly
- Regardless, XLF is trading in a very bullish manner
- 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 also looks set for a large drop
- 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
- 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 is trading in a well established bearish channel
Do You Want To Make Money Trading?
Learn how to, and more, in our Trading Courses.
Tags :