The Top Macro Trades to Close Out 2019 (SPY, QQQ, USO)

SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is our first point of focus. The SPDR S&P 500 trust is an exchange-traded fund which trades on the NYSE Arca under the symbol. SPDR is an acronym for the Standard & Poor’s Depositary Receipts, the former name of the ETF. It is designed to track the S&P 500 stock market index. This fund is the largest ETF in the world.

The oscillations in the broad US equities market have been driven predominantly by several major forces in play over the previous six weeks. The most important factors driving the price of US stocks include seasonality, as money managers position for competition with each other into the end of the year where they will be compared against performance benchmarks, and navigating the twists and turns of the rhetoric and headlines associated with the trade war between the United States and China.

On the one hand, money managers don’t want to be under positioned to an equities market that has recently broken out to new all-time highs. But, on the other hand, those in control of large resources also don’t want to be caught leading too long into a situation where talks between the United States and China could potentially break down.

That has led to a difficult battle resulting in significant whipsaws for those in charge of large amounts of money.

At this point, the public relations needs of the United States government and the Chinese government will likely supersede their willingness to continue to play a game of chicken in which none shall come out the winner. However, at the same time, we see extreme valuations in play and a failure of economic data to keep up with equity prices. This clearly presents a risk.

At this stage, this is the defining conundrum guiding stocks involved in the S&P 500.

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PowerShares QQQ Trust, Series 1 (NASDAQ:QQQ) is where we next turn our attention.

The Invesco QQQ is an exchange-traded fund based on the Nasdaq-100 Index. According to materials, the fund includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.

One major difference between the S&P 500 and the NASDAQ 100 has to do with sector allocation. Whereas the S&P 500 contains a relatively even spread among the 10 sectors that dominate the equities markets, the NASDAQ 100 is much more focused on the technology sector, where cyclicality is less of an issue because structural growth themes dominate the picture.

For example, the NASDAQ 100 contains all of the major mega-cap technology companies (AAPL, AMZN, TWTR, NVDA, MSFT, TSLA, GOOG, etc), but does not contain many of the older and more well-established cyclical names involved in the industrial sector, the utility sector, the transportation index, and the financial sector. In addition, the energy sector is sorely underrepresented in the NASDAQ 100.

Therefore, if we continue to see underperforming economic data, as we have seen for the majority of the past decade, one may continue to see the NASDAQ 100 outperform the S&P 500.

At present, the NASDAQ 100 is already racing out ahead of the pack as traders and the money managers discount this potential dilemma.

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Finally, we will take a close look at United States Oil Fund LP (NYSEARCA:USO). The United States Oil Fund is an exchange-traded fund that attempts to track the price of West Texas Intermediate Light Sweet Crude Oil.

One other major macro factor in the current scene guiding the macro picture for markets is the performance of the oil market.

Right now, both energy stocks and the oil commodities market are largely defined by the process of Saudi Arabia gearing up to go through the IPO of the largest energy company in the world, Aramco. Don’t think for a moment that this is not a primary concern for those involved in the largest positions dominating the oil market. Aramco, and its success as an IPO, I one of the defining points across all asset classes at present. The Aramco IPO will unquestionably be the largest IPO in stock market history.

And the relative performance of oil as a commodity market will be the number one input defining exactly how much that IPO is worth.

In addition, tomorrow will bring us the results of the latest OPEC meeting, in which the countries in control of OPEC’s destiny will decide whether or not to do further production cuts to support the price of oil.

Traders will want to pay special attention to this catalyst as it unfolds today.

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