Second Trade Setup of 2022 Coming into View

Back in January, I posted: The First Setup of 2022

On a 10-year breakout. Long: value, commodities, financials, USDJPY (US dollar in general), crypto. Short: growth, tech.

On a 10-year reversal, reverse the outlook. Energy and commodities could lead the way lower in a rout of the value/inflation trade, but the ARKK-related trades probably don't do well if its a Fed-triggerd correction.

Financials only worked short-term and I quickly went bearish on them, but everything else was a slam dunk with many rainmaker options trades. Commodities moonshot, growth and tech imploded, USDJPY rocketed higher.

The next trade is the 10-year reversal.

I have the bond leg of this trade on with TLT calls.

The next leg of the trade is bearish positions on energy and commodities. There are many ways to play this with futures, commodities funds running the gamut from copper miners (COPX) to steel (SLX) and so on, but for the purposes of simplicity I'm focusing on USO. Partly because USO outperformed (for bears) during QT1 in 2018.

I'm not sold on an immediate short because it looks like another pop could be coming. The other thing that I wonder about, but will let the chart answer for me: is the current amount of liquidity along with disruptions and ESG/green policies going to prop oil up? QT2 will begin at the QT1 maximum ($47.5 billion per month is close enough to $50 billion for me). Is that enough, given everything else, to trigger a drop in crude oil and weaken inflation? In the back of my mind, the short-term shocker for the market might be no, it is not enough. If crude oil broke out from here all the talk of the Fed pausing in September would go poof. 

I found a similar setup in oil with the stochastics turning lower, but crude still rising, from spring 2000. Crude oil rose into the autumn before turning lower.

While I was composing this post, crude was ripping: