• Most ETFs that were selling off before Russia’s invasion have reverted to selling off, and vice versa
  • SPY, QQQ, XLY have tumbled over the past week, but have yet 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 rally over the last 2 weeks, although it remains stuck in its range
  • XLU continues to make new all time highs; XLI, XLF are starting to look bearish  

• Fixed Income ETFs have started to sell off again
  • Corporate bonds, LQD and HYG, are looking increasingly likely to test 2020’s COVID lows 
  • EMB is testing major support, a break of which could also see it fall to its COVID lows
  • TLT is making new lows for the year, as US long yields make new highs for 2022

• Energy stocks (XLE) remain high, but have so far failed to decisively break above their quadruple top. Energy stocks aren’t reflecting the weakness and volatility in oil prices… how long will this disconnect last?

• 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

• 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
  • XLE, while (curiously) detached from oil’s volatility, is stuck in consolidation

• 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