• Most ETFs are hovering around key levels
  • Watch for SPY, QQQ, XLY, XLRE to make decisive moves higher (or lower if the breakout fails)
  • But, IWM is still underperforming and looks to be stuck trading sideways for now
  • XLU is still rallying strongly, making new all time highs
  • XLI and XLF are starting to look bearish  

• Fixed Income ETFs are consolidating, but remain very weak
  • Corporate bonds, LQD and HYG, are consolidating but still face the possibility of a fall to test 2020’s COVID lows 
  • The large selloff in EM sovereign bonds has stalled and EMB is now consolidating
  • TLT is also consolidating below major resistance

• Energy stocks (XLE) remain high but have so far failed to decisively break above their quadruple top

• Wildcards:
  • Caution is warranted as long as small caps continue to underperform. In a bull market, they should be leading, not lagging rallies
  • The US yield curve has gotten even flatter (2s10s now inverted) 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 8 March
  • Exited LQD for a gain of 5.56%, HYG for a gain of 4.16%, and EMB for a gain of 6.29%; as US long yields look like they have topped out and reversed

Trading Ideas – Long

• SPY, QQQ
  • These 2 major indices are looking to breakout decisively to the upside, which would open up the possibility of a rally to retest their all time highs
  • XLY is not considered for a long as it offers the same high beta exposure as QQQ. Also, with the yield curve now inverted, downside risk is much higher for consumer discretionary stocks

• XLRE
  • Could also retest its highs with a decisive move off its current levels
  • US housing market (on the national level) is still bullish, as demonstrated by higher mortgage rates

Trading Ideas – Short

• 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 has yet to make a decisive breakout of its range between $191-$208.5

• XLI and XLF are starting to look weak even as US major indices are looking to breakout to the upside
  • If the major indices do breakout, and long positions are initiated, shorting XLI and/or XLF could act as a hedge, if not a pair trade (if hedging, be wary of beta mismatches) 

• EEM recently broke below its well established bearish channel, and is looking very weak even with its bounce

• 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