Wednesday’s ETF Chart To Watch: DIA In Spotlight With GDP Data

by on July 31, 2013 | ETFs Mentioned:

Stocks inched higher on Tuesday following Monday’s rather weak start to the trading week, as investors geared up for a slew of major data releases in the coming days. For the most part, stocks oscillated as investors were reluctant to make any big plays ahead of this morning’s GDP release and the FOMC announcement in the afternoon [see also The Complete Visual History Of SPY].

Our fund to watch for the day is the Dow Jones Industrial Average ETF (DIA, A-), which will attempt to summit a major resistance level as investors digest the latest economic growth data. Analysts are expecting for second quarter U.S. GDP to post growth of 1.0%, which would mark a notable deterioration from the previous reading, which stood at 1.8%. 

Chart Analysis

Consider DIA’s one-year daily performance chart below. U.S. markets have been on a tear all year and DIA has enjoyed a steady run to record highs amid the euphoria. The bulls have hit a roadblock, however, as the $156 level has proven to be unreachable over the last few weeks despite numerous attempts at topping it. With all eyes on GDP and FOMC today, the Dow Jones Industrial Average may receive the much-needed fundamental catalyst to bolster it past resistance; DIA has been grinding along the $155 level (green line) for over two weeks, and as such, investors will need to hear very encouraging commentary that prompts new buyers to help propel it past resistance [see How To Swing Trade ETFs].


Click to Enlarge

Worrisome GDP data or pessimistic Fed commentary can easily inspire another correction to retest the 6/24 lows (red line). Despite the attractive downside potential for those with a short position, we advise longer-term investors to remain on the sidelines until DIA definitively breaks out higher, or affirms support after the next pullback [see How To Take Profits And Cut Losses When Trading ETFs].


If the latest GDP report comes in better-than-expected, DIA should have the wind at its back for the day with no clear-cut resistance levels in sight. On the other hand, worse-than-expected growth could spark a sell-off; in terms of downside, DIA has immediate support at $154 a share followed by major support at the $145 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.