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Dow Jones (DIA) ETF forms risky patterns ahead of FOMC

By: Invezz
caterpillar shares

The SPDR Dow Jones ETF (DIA) continued its uptrend this year as demand for American equities rose. It has jumped by more than 20% in the past 12 months and by 3% this year. Its total assets have soared to over $33.6 billion. Other US ETFs like the Nasdaq QQQ and S&P 500’s SPY have also soared.

Federal Reserve decision ahead

The DIA ETF will be in the spotlight this week as the Federal Open Market Committee (FOMC) delivers its interest rate decision. 

This will be an important decision because of the recent economic numbers from the United States. The labour market remains tight, with the unemployment rate sitting at 3.9%. 

Inflation, on the other hand, remains significantly high, with the headline Consumer Price Index (CPI) sitting at 3.1%. Core inflation rose to 3.8%, almost double the Fed target of 2.0%.

Other numbers like the US consumer confidence, durable goods, and factory orders have been in the deep red.

Still, some analysts believe that the Federal Reserve has no reason to start cutting interest rates any time soon. Besides, the odds of a recession have reduced in the past few months while inflation is stubbornly high. On Monday, analysts at Vanguard noted that the Fed may not cut rates this year after all.

Most companies in the SPDR Dow Jones ETF have risen this year. Walt Disney has been the best-performing company as it jumped by more than 26% this year. The company will be in the spotlight as a proxy vote between Disney and Nelson Pelts happens.

Caterpillar stock price has jumped by over 19% and is now sitting at its highest point on record. The company has joined other industrial firms like General Electric, Emerson Electric, and Illinois Tool Works have also surged.

American Express stock has jumped by 17% after the company announced a deal to buy Discover. The other top performers in the ETF are IBM, Travelers, Walmart, and Amazon.

On the other hand, the worst-performing companies in the Dow Jones are Boeing, Intel, Apple, Nike, and UnitedHealth.

DIA ETF technical analysisDIA ETF

DIA chart by TradingView

Turning to the daily chart, we see that the SPDR DIA ETF has formed a double-top pattern at $391.67. In most cases, this pattern is one of the most bearish signs. 

Further, the Relative Strength Index (RSI) and the Stochastic Oscillator have formed a bearish divergence pattern. This is a sign that the bullish momentum is fading. On the positive side, the fund has remained above the 50-day and 25-day moving averages. 

Therefore, there is a likelihood that the fund will soon have a bearish breakout in the coming days. If this happens, the fund could drop to $370. On the flip side, a move above the double-top pattern will invalidate the bearish view.

The post Dow Jones (DIA) ETF forms risky patterns ahead of FOMC appeared first on Invezz

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