ETF Daily Trading Digest: Buy QQQ, QLTA; Avoid USO

Tech continues to earn a strong buy rating, but oil funds should be avoided for the time being.
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Good morning! Here's the ETF Daily Trading Digest for Friday, May 11, 2020.

What To Watch

Friday's jobs report created some optimism about an economic recovery, but let's see how if this week can build on that momentum. The economic and earnings calendars will be comparatively light relative to the past couple weeks, which should give investors some opportunity to digest the relationship between the state of the economy and stock valuations.

The coronavirus latest will be the only thing traders will really pay attention to. Businesses reopening is generally being taken as a positive sign, but indications that consumers aren't turning out or new COVID-19 cases are rising again could derail the recovery.

3 ETF Trade Ideas For The Week Ahead

Invesco QQQ ETF (QQQ)

Tech is the only S&P 500 sector up year-to-date and the tech-heavy QQQ has gained 6% so far in 2020.

Tech has outperformed in both up & down markets in 2020, and its momentum & relative strength still make QQQ a strong buy.

QQQ just became the 5th ETF to top $100 billion in assets.

iShares AAA - A Rated Corporate Bond ETF (QLTA)

Downgrade and default risk in BBB-rated bonds has risen significantly since the coronavirus outbreak.

QLTA avoids the BBB-rated bucket altogether and sticks with corporate bonds rated A and above.

You sacrifice about 75 basis points of yield currently going with QLTA, but it's also outperformed by more than 2% year-to-date.

United States Oil Fund (USO)

USO has rallied hard off of its late-April low, gaining more than 25%, but the risk of a decline here remains high.

The fund has mitigated a lot of risk since the oil market crash, but a return to sub-$10 oil in the June contract is still possible.

There's more downside than upside over the next couple weeks and traders may want to stay away for the time being.

Trending Higher

  1. Technology
  2. Consumer Discretionary
  3. Energy

Trending Lower

  1. Utilities
  2. Consumer Staples
  3. Healthcare

Quick Thoughts

Investors found reason for optimism in the jobs report despite awful numbers. Carry through from Friday's climb, especially in small-caps, would go a long way in confirming this rally. I'm also watching Treasuries to see if traders are worried about negative rates in the United States.

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