U.S. equity markets cautiously advanced higher on Thursday after better than expected weekly jobless claims data reassured investors of the domestic labor market recovery. On the earnings front, quarterly performance results continue to come in mixed; upbeat results from Akamai Technologies (AKAM) sent the stock flying, although words of caution from conglomerate 3M Co. (MMM) reminded investors of the sluggish global economy.
Our ETF to watch is the well-known SPDR S&P 500 (SPY, A), which could swing in either direction as it flirts with a major resistance level ahead of the U.S. GDP report slated to hit the street later today. Analysts are expecting for economic growth to come in at 3.2%, marking a major improvement from the previous reading of 0.4% [see Visual History Of The S&P 500 Index].Chart Analysis
Consider SPY’s one-year daily performance chart below. This ETF has posted a stellar run-up along a fairly steep and rising support level (blue line) since bottoming out in early June of 2012; in fact, bullish euphoria on Wall Street has bolstered SPY to all-time highs as shares hit $159.71 on April 11. Year-to-date, SPY is up over 11% and its uptrend remained incredibly resilient despite the growing urgency to take profits amid rising prices. Furthermore, as the chart below reveals, each dip in SPY over the last few months has been extremely short-lived, and has been welcomed by bargain buyers eager to jump aboard the bull train [Download 101 ETF Lessons Every Financial Advisor Should Learn].
The biggest concern here is that SPY could be showing signs of a double-top, judging by its inability to close above $160 a share (red line) on two occasions over the last month. Today’s GDP report may knock it lower; however, it could also serve as the much-needed fundamental boost that carries it past this major resistance level [see 17 ETFs For Day Traders].Outlook
Better than expected economic growth can propel SPY past $160 a share, but caution should be exercised as volatile trading could erupt following the GDP releases. At the same time, lackluster data can give investors a reason to take profits, which would conform to the potential double-top formation highlighted in the chart above; from a technical perspective, this ETF has major support at $155 a share, along with very stiff resistance at the $160 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.
- Basic Materials Industry
- Akamai Technologies