Right. Thank you. This is a great point and is consistent with much of what I’ve been hearing about potential debt downgrades.

JNK & HYG shorts are certainly on way to play it but I think another option that obviously most don’t see right now (or I am/will prove to be wrong) is a short on investment-grade bonds such as LQD. JNK & HYG has been plunging along with the stock market recently (as they usually do during corrections & bear markets) while LQD has been rallying.
If we get a large number of rating downgrades on the huge amount of BBB debt, then the mutual funds & ETFs that hold investment-grade bonds, by prospectus, will be forces to sell the bonds they hold that have been downgraded from BBB to BB or below (i.e.- high-yield or junk status). The potential for a “rush for the crowded exits” as the potential buyers of those recently downgraded bonds are dwarfed by the sellers has the potential for a very large & swift drop in the investment-grade market.
I’m considering adding LQD as an official short trade idea & if so, I will provide an objective entry point(s) and price target(s).

I looked at the longer-term charts of /CL & USO last night & we really don’t have an solid support in which to make a strong case to go long on a drop to, nor even the slightest evidence of a reversal yet although the fundamental case to buy oil this cheap (as it is a very needed commodity with zero-chance of demand completely evaporating) is certainly compelling.

The best support that I see on the long-term charts of crude futures is around the $26-27 level & /CL hit a low of 27.34 so far last night. With that massive gap overhead, there really isn’t any solid resistance anywhere nearby worth mentioning & I imagine that crude will be extremely volatile & tough to trade for a while. One strategy would be to take a long position & just trail up stops although any trade on crude right now, long or short, would be what I call a ‘pot shot” trade.

Wish I could be of more help & if/when I see a potential trading opp in crude I’ll post it on the home page (if a swing trade) or trading room (day trade or short-term swing trade).