Major U.S. benchmarks settled into shallow green territory as Tuesday’s closing bell rang. Bullish pressures surprisingly prevailed despite mixed economic data releases on the day; small business confidence ticked higher in August while July’s retail sales expanded by 0.2%, falling short of the projected 0.3% as well as last month’s figure of 0.6% [see also Complete Visual History Of GLD].
Our chart to watch for the day is the SPDR Euro STOXX 50 ETF (FEZ, A-) which will look to summit a major resistance level after investors digest the latest eurozone GDP report just hours before Wall Street’s opening bell. Analysts are expecting for the currency bloc to post an economic contraction of 0.8%, which would be an improvement from the previous quarter’s GDP figure, which contracted by 1.1%.Chart Analysis
Consider FEZ’s one-year daily performance chart below. This ETF has been oscillating around its 50-day simple moving average (blue line) thus far on the year, failing to summit resistance at $37 a share while also managing to rebound off support near $32-$33 a share on several occasions as well. Although the intermediate-term trend has been frustrating and range-bound, the longer-term trend remains encouraging seeing as how FEZ’s 200-day moving average (yellow line) continues to steadily climb higher [Download 101 ETF Lessons Every Financial Advisor Should Learn].
With FEZ trading near the top of its range, we advise conservative investors to hold off from jumping in long given the fund’s history of failing to summit this resistance level. Active traders may want to keep an eye on this because a breakout higher could signal the start of a new uptrend; however, tight stop-losses should be utilized to avoid getting washed out in case of a broad-market correction [see How To Swing Trade ETFs].Outlook
If the latest eurozone GDP report beats expectations, overseas markets should have the wind at their back; in terms of upside, FEZ must settle above $37 a share while the next major resistance level comes in at around the $40 mark. On the other hand, lackluster economic growth can re-ignite fears of a potential double-dip recession overseas; in terms of downside, this ETF has immediate support around $36 a share followed by the $34 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.
Follow me on Twitter @SBojinov
[For more ETF analysis, make sure to sign up for our free ETF newsletter]
Disclosure: No positions at time of writing.
- Basic Materials Industry