ETF Trading Ideas You Need To Know: Watch For Decisive Moves
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Some ETFs are showing signs of wanting to breakout, but have yet to do so decisively.
It is best to wait for the market to give us direction at this point, considering the deteriorating macro backdrop, and the potential for a resurgence in volatility from war headlines.
- 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
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