Major equity indexes traded sideways with an upward bias on Wednesday as corporate earnings collided with a reduced global growth forecast from the World Bank. Investors largely shrugged off pessimistic commentary from the World Bank, which emphasized its concerns regarding austerity measures and sluggish labor market market recoveries around the globe, as upbeat quarterly results stole the headlines; behemoths JPMorgan (JPM) and Goldman Sachs (GS) helped to restore confidence in the infamous financials sector as both companies surpassed analyst expectations [Download 101 ETF Lessons Every Financial Advisor Should Learn].
The health of the U.S. housing market will be in the spotlight later today as December housing starts data is expected to hit the Street at the opening bell. Given the string of upbeat news surrounding the housing market in recent months, investors will surely critique the latest report under a microscope. As such, our ETF to watch for the day is the iShares Dow Jones U.S. Home Construction Index Fund (ITB, A-), which may swing in either direction. Analysts are expecting for the housing starts figure to come in at 883,000 versus last month’s reading of 861,000 [see also ETFs To Tap Into 2013's "Hidden Cities"].
ITB has kicked off 2013 with a string of gains, managing to trade higher alongside major equity indexes. Although this ETF has traded sideways for the last few sessions, bullish momentum is still very much alive considering that it has managed to creep higher after holding its gap at the start of the year. From a technical perspective, entering into any sort of position at current levels is a bit speculative as ITB is trading in between support and resistance levels; notice how this fund is currently in the middle of its longer-term trading channel (blue lines), which makes it more difficult to forecast its direction in the near-term [see How To Swing Trade ETFs].
Upbeat housing starts data may serve as the catalyst that propels this ETF higher, however, from a technical perspective caution should be exercised as ITB nears the upper boundary of its trading channel [see 5 Important ETF Lessons In Pictures].
Better-than-expected housing data certainly has the potential to re-ignite bullish momentum in ITB; in terms of upside, the next resistance level for this ETF comes in at around $23 a share followed by the $25 level. Likewise, disappointing results can disrupt the aura of optimism surrounding the housing market; in terms of downside, this ETF has support near-term support at $21 a share followed by the $20 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
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Disclosure: No positions at time of writing.