• US markets have a shortened trading week, which might be a good thing, as the market selloff continues to be broad and relentless, with almost everything continuing to fall together
  • High beta, low beta, and the SPY itself continue to fall
  • XLF is telling us something interesting – financials are “supposed” to do well in rising rate environments, like now, but they aren’t. The economy clearly isn’t doing well, at least from the market’s perspective 

• Energy stocks (XLE) continue to sell off, and might have made their cycle highs. Oil prices are down to ~$110, but this is still too high with macro conditions deteriorating all over the world
  • XLU has made an aggressive reversal to the downside, and now looks more intent on testing support than making new all time highs

• Fixed Income ETFs continue to eye a test of their COVID lows
  • LQD and HYG move closer to testing their COVID lows, while EMB has already broken briefly below its own
  • TLT has fallen below critical support as US 10y yields look to keep moving higher

Trading Ideas – Performance

Trading Ideas – Commentary

• Went short IWM again as it broke below support at 181.5
  • High beta small cap stocks are primed to suffer heavy losses given equities’ bearish trend, and deteriorating macro conditions 

• Re-entered short position in EMB as it broke below short term support at 90
  • Trade aims to capitalize on EMB’s bearish trend, as well as deteriorating global macro conditions

• Entered a straddle on XLU at a strike of 72, expiry Sep ‘22
  • Position will be profitable if XLU makes a decisive move in either direction
  • Straddle is paying off as XLU has very aggressively reversed its direction

• Shorts in LQD and HYG stopped out as both spiked higher over the end of May, for respective returns of 4.93% and 3.33% 

Trading Ideas – Long

• A straddle on XLU is an increasingly interesting prospect 
  • Consolidating between critical support and all time highs, which way will it break?
    • Straddles are expensive, but will allow us to profit as long as the market makes a decisive break
    • With global macro conditions deteriorating, and energy prices remaining sky high, XLU will have to move in one direction or the other

Trading Ideas – Short

• IWM has broken out to the downside and remains vulnerable to further sell offs given how harsh deteriorating macro conditions are on small cap equities
  • It is trading a fair distance away from the next major support level at 151.5. Its short and medium term trends have now realigned 

• LQD, HYG, EMB
  • LQD, HYG, and EMB can still make a large move lower, with a test of COVID 2020’s lows now a real possibility

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