As Volatility Recedes, New ETF Trade Ideas to Consider By: Christopher Mistal | April 17, 2025 | Email | Print

There is little doubt that a significant amount of uncertainty still hangs over the market, the U.S. economy, and the future of global trade. But based upon the retreat in CBOE Volatility index (VIX) from around 60 back down to around 30, our own waterfall decline research, and the Republican post-election year seasonal trend, the bottom could be in, at least in the short term. Additionally, the bounce, since the announcement last week that most of the tariffs were being paused for 90 days, has held and longer-dated Treasury bond yields appear to have calmed down.

 

 

Looking at the familiar S&P 500 Post-Election Year Seasonal pattern chart above, all of the patterns show some degree and duration of strength from around now through sometime between early June to early August, before the next bout of seasonal weakness could arrive. The 90-day tariff pause, if it does last the full length, would theoretically end in the first half of July and could be a potential catalyst for additional market weakness and volatility sometime in Q3.

 

Between now and then, we believe the market could give the Trump administration the “benefit of the doubt” and/or “until proven otherwise” with tariffs and associated negotiations. But the administration likely has a limited amount of time to start showing progress and announce new meaningful trade deals. Deals with Japan, and/or E.U. member countries are what we would consider meaningful.

 

Our “Best Six Months” MACD Seasonal Sell signal for DJIA and S&P 500 has triggered. NASDAQ’s Best Eight Months MACD Seasonal Sell signal has not triggered. The earliest it can trigger is June 2 this year. Based upon the prospects for a near-term rally, we are going to look to reestablish positions in Invesco QQQ (QQQ) and iShares Russell 2000 (IWM). QQQ can be considered on dips below a buy limit of $440.10. IWM can also be considered on dips with a buy limit of $182.75.

 

Consistent with our Seasonal Switching strategy short-duration bond ETFs, SHV and SGOV can also still be considered on dips. With the Fed determined to also “wait and see,” TLT, AGG, and BND are on Hold. Whether or not tariffs will result in inflation remains to be seen, but it does appear as though the bond market is embracing that possibility with higher long-term interest rates.

 

 

In consideration of the elevated risk that still exists in the market, we are going to look at new trades that have been working recently or could potentially benefit from the weakening U.S. dollar. Historically, commodities and foreign currencies have benefited from a softening dollar. The U.S. dollar has broken through key support around the 100 level and its 50-moving average is below its 200-day moving average confirming the bearish trend.

 

 

There are three currency ETFs that currently look attractive as the U.S. dollar weakens, FXE, FXY, and FXF. They represent the Euro, Japanese Yen and Swiss Franc respectively. FXF also tends to benefit from increases in gold price. FXE, FXF and FXY can all be considered on dips. Suggested buy limits and stop losses are in the table below.

 

Invesco DB Agriculture (DBA) provides exposure to coffee, live cattle, corn, cocoa, soybeans, wheat, sugar, lean hogs, feeder cattle and cotton via its futures contract holdings. DBA can be considered on dips below $26.40. If purchased, set an initial stop loss at $25.10.

 

Existing positions in XLP and XLU can also still be considered near current levels or on dips.