Stock markets rebounded higher on Thursday as investors rejoiced over better-than-expected employment data on the home front. U.S. jobless claims fell to 364,000, marking the lowest number of people applying for unemployment benefits since April 2008. Bullish momentum on Wall Street was further bolstered by improving consumer sentiment, which also topped analyst expectations. Gold futures drifted lower amidst the improving economic outlook, and prices for the precious yellow metal settled near $1,605 an ounce as the trading session drew to a close.
Improving economic conditions at home are helping to restore confidence in the U.S. recovery and investors will turn their attention to the latest durable goods data release later today. The State Street Industrial Select Sector SPDR (XLI) is our ETF to watch for today as it may experience an increase in trading volumes after investors digest the latest economic data [see XLI Holdings]. Analysts are expecting for U.S. durable goods orders to have grown by 3.6% in November, versus the previous reading of -0.5%.
XLI has been pushing higher since hitting a recent low at $27.67 a share on 10/4/2011. Since bottoming out in early October, this ETF has gained close to 20%, an impressive three-month comeback by all means [see XLI Returns]. U.S. economic data releases have been generally better-than-expected over the last few months, although Euro zone debt woes have taken center stage, likewise creating steady headwinds for this domestic industrial sector ETF.
XLI has been establishing rising levels of support since bottoming out at $27.67 a share; however, investors looking to establish a long position at current levels ought to exercise caution as this ETF has attempted, and failed, to summit its 200-day moving average (yellow line) twice over the past two months [see XLI Technicals].
If U.S. durable goods orders blow past analyst expectations, investors may find themselves in a buying frenzy right before the holiday weekend. In terms of upside, XLI may climb past $34 a share, although short-term traders should exercise caution around the $34.50 mark, seeing as how this is a significant resistance level [see Checking In: Top 5 Equity ETFs Of 2010]. On the other hand, if investors are disappointed with the latest economic report, selling pressures could develop. In terms of downside, XLI may tumble down towards $32 a share, and investors should note that major support lies down near the $30 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No positions at time of writing.