The SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA), the tracking exchange traded fund for the Dow Jones Industrial Average, is up 5.10% to start 2019, but some technical analysts see the potential for near-term selling pressure following DIA’s recent rally.
DIA was recently pressured by slack earnings from heavy machinery maker Caterpillar (NYSE: CAT) and could face more near-term pressure if Apple Inc.’s (NASDAQ: AAPL) Tuesday earnings report is worse than expected.
Caterpillar Chief Financial Officer Andrew Bonfield pointed out that China made up between 5% and 10% of the company’s total sales and 10% to 15% of its construction unit’s revenue. The company calculated that the impact from tariffs on steel and other materials was about $40 million in the third quarter and over $100 million for the full year.
“The rapid-fire rebound in stocks from the worst of their late-December lows slowed a bit last week, just as the small-cap Russell 2000 Index (RUT) closed in on a double-digit percentage return for 2019,” according to Schaeffer’s Investment Research. “But the Dow Jones Industrial Average (DJI) outperformed its equity benchmark peers for the period, ending Friday up 0.1% from the prior week’s close, while the S&P 500 Index (SPX) fell 0.2%, the RUT advanced 0.02%, and the Nasdaq Composite (IXIC) edged up less than 0.01% on the holiday-shortened week.”
DIA ETF Drivers
Boeing Co. (NYSE: BA) is the largest Dow component at just over 10% of the benchmark’s weight. UnitedHealth Group Inc. (NYSE: UNH) and Goldman Sachs Group Inc. (NYSE: GS) combine for nearly 13% of the index’s weight.
DIA currently resides 1.56% below its 200-day moving average. It has been over a month since the fund closed above that line.
“This past Friday marked the first time since Dec. 13 that DIA traded above its 320-day moving average on an intraday basis. The exchange-traded fund (ETF) pared its gains fairly quickly after the brief excursion above this trendline, and ultimately closed at $247.39 — flat with its bull-gap opening levels of the day, but just below its 320-day at $248.07,” according to Schaeffer’s.
DIA’s relative strength indicator (RSI) indicates the fund is slightly overbought, a condition that may need to be dealt with before the fund notches more upside.
“A bit of continued choppiness from here wouldn’t be surprising, then, given the confluence of technical levels in play — and given the headline-driven nature of this market, for that matter,” reports Schaeffer’s.
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