• Easter holidays in a number of major markets made for a shortened trading week, and lots of sideways trading. Will we see some breakouts this week?
  • SPY, QQQ, XLY are consolidating after their selloffs, but have not yet moved to retest their post invasion lows
  • IWM’s underperformance looks to have been prescient (at this point) in signaling the lack of conviction in the broader Mid-March to April rally, and remains stuck in its range
  • XLU and XLP are looking bullish; XLI, XLF are starting to look bearish  

• Fixed Income ETFs were split between consolidation and selling off
  • In corporate bonds, LQD sold off while HYG traded sideways, though both are still likely to test 2020’s COVID lows 
  • EMB is still hovering above major support, a break of which could also see it fall to its COVID lows
  • TLT continues to make new lows for the year, as US long yields trade at or near their highs for 2022

• Energy stocks (XLE) finally broke above their quadruple top, and look primed for more gains. Curiously, WTI isn’t trading near its highs for the year

• Wildcards:
  • Consumer staples stocks (XLP) have reverted to outperforming their consumer discretionary counterparts (XLY), which hints at serious economic problems compounded by high inflation 
  • The US yield curve remains flat and inverted in some places even as the Fed amps up its hawkish rhetoric

Trading Ideas – Performance

Trading Ideas – Commentary

• Re-established shorts in LQD and HYG on breakouts of their previous lows
  • Looking to do the same with EMB

• Volatility in the markets has led us to exit/stopped us out of:
  • 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%

Trading Ideas – Long

• XLE is an interesting trade now for a few reasons
  • It is trading at new highs for the year
  • Looks to be a more effective way of capitalizing on the bullish trend in energy prices vs going outright long on oil
  • WTI isn’t close to its early March peak (for now)
  • WTI is also trading with a lot more volatility

• XLU provides a nice, strong bullish trend to follow that is also a play on the shortage and uncertainty surrounding global energy markets  
  • Oil prices remain volatile and difficult to trade without getting stopped out

• XLP again provides us with an interesting bet
  • Defensiveness against selloffs in major indices and general market volatility
  • Upside potential from its bullish trend
  • As before, can pair an XLP long with a short in XLY, especially if IWM breaks out to the downside (be mindful of the beta mismatch and the ways in which it can work for and against you)

Trading Ideas – Short

• IWM is still trading sideways, with a downside break looking more and more possible
  • 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

• LQD, HYG, EMB
  • LQD, HYG, and EMB again look poised for a large move lower, possibly all the way to COVID 2020’s lows

• 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 once to halt the selloff in Chinese stocks   

• XLI and XLF are starting to look weak, although further downside breakouts are needed for confirmation