SPDR Dow Jones ETF Forms a Golden Cross: What Next for DIA?

Summary:
• The SPDR Dow Jones ETF (DIA) surged to its highest point since April and exited the bear market. It rose to a high of $346

The SPDR Dow Jones ETF (DIA) surged to its highest point since April and exited the bear market. It rose to a high of $346, which was about 21% above the lowest level this year. In the same period, the other key ETFs like the Invesco QQQ and SPDR S&P 500 rose to multi-month highs. The US dollar index (DXY) slipped to the lowest level since August.

US stocks exit bear market

The SPDR Dow Jones ETF continued its strong recovery in the overnight session as the Federal Reserve changed its tune on rate hikes. In a statement, Jerome Powell said that it was too early to determine whether inflation will continue falling. 

Nonetheless, he welcomed the positive trends and signaled that the Fed will adjust the size of its interest rate hikes. The bank has already hiked by 400 basis points this year and analysts now expect that it will increase by a final 50 basis point in December. Historically, American stocks tend to do well in a period of low-interest rates and when the Fed is not aggressive. 

Therefore, there is a likelihood that the Dow Jones sell-off has capitulated and that the rally will be sustained in the coming months. Besides, a Santa Rally could happen as the fear and greed index remains at the greed zone.

Most Dow Jones constituents tilted upwards after the Fed comments, Microsoft stock price surged by over 6% while Salesforce, Apple, Intel, Visa, UnitedHealth, and Walt Disney rose by over 5%. The only laggards in the index were 3M and Walmart. However, Salesforce stock price plunged in extended hours after the firm recorded weak financial results.

SPDR Dow Jones ETF forecast

The daily chart shows that the DIA stock price has been in a strong bullish trend in the past few weeks. As it rose, the stock moved above the important resistance level at $343, the highest level on August 15. It has rallied above all moving averages. Most importantly, a golden cross has happened as the 200-day and 50-day moving averages while the Stochastic Oscillator moved to the overbought level.

Therefore, the stock will likely continue soaring as buyers target the next key resistance level at $400. A move below the support at $335 will invalidate the bullish view.