DIA ETF forecast: what next for the Dow Jones index fund?

The SPDR Dow Jones Industrial Average (DIA) ETF continued charging ahead this week, reaching its highest level on record. The fund, which tracks 30 big companies in the US, jumped to a high of $448.9 on Tuesday, bringing the year-to-date gains to almost 22%.

Catalysts for the DIA ETF

The Dow Jones Index has soared this year, helped by the rising hopes that the Federal Reserve will continue cutting interest rates in the coming months.

It has already slashed rates by 0.75% this year, and analysts expect it to deliver several more in 2025. Minutes released on Tuesday showed that officials favor a more gradual pace of cuts going forward, which is also a good thing for the market.

The Dow Jones and other stock indices do well when the Federal Reserve is cutting interest rates. In most cases, these rate cuts usually lead to a rotation from fixed-income to the relatively risky stock market. 

The DIA ETF has also jumped because of the year’s strong corporate earnings. Data compiled by FactSet showed that 95% of all companies in the S&P 500 index have published their Q3 results. Of these firms, their earnings growth was about 5.8%, marking the fifth consecutive quarter of earnings growth. 

Additionally, the Dow Jones index has benefited from the recent entry of NVIDIA, the biggest company in the world. NVIDIA has been one of the best-performing companies in the United States in the past few years. 

Further, analysts now believe that Donald Trump will be a good president for the market. He has already appointed Scott Bessent as the next Treasury Secretary. Bessent, a billionaire is seen as a more market friendly person for the role.

Top Dow Jones companies in 2023

NVIDIA, which has just entered the index, is the best performer as its stock jumped by over 176% this year. Its rally has been propelled by the artificial intelligence craze that has led to a substantial demand for its products.

The most recent NVIDIA earnings showed that the company made over $37 billion in the last quarter, a record high. These numbers mean that it has now generated over $80 billion in the first nine months of the year, a trend that may continue.

NVIDIA has a large market share that is also supported by its Cuda software which helps to reconfigure GPUs to be compatible in handling other tasks.

Walmart, the biggest American retailer, has been the second-best performer in the index as it jumped by 73% this year. The company has benefited from the resilient demand for its products, which are often seen as being fairly priced. It has also expanded its business and gained market share in areas like health and sports. 

American Express stock price has jumped by 63% this year, while Goldman Sachs, JPMorgan, 3M, IBM, Travelers, Caterpillar, Amazon, and Salesforce have soared by over 35% this year. 

On the other hand, the top laggards in the DIA ETF are companies like Boeing, Nike, Merck & Company, and Amgen. 

SPDR Dow Jones ETF analysis

DIA ETF chart by TradingView

The daily chart shows that the DIA ETF stock has been in a strong bullish trend in the past few years. It recently crossed the important level at $444.60, its highest level on November 11. By moving above that level, it has invalidated the double-top pattern.

The ETF has moved above the 50-day and 100-day moving averages, a bullish sign. It has moved to the overshoot level of the Murrey Math Lines and is quickly approaching the extreme overshoot. 

The DIA ETF’s Relative Strength Index (RSI) has moved to the overbought level at 70. Therefore, the fund will likely continue rising as bulls target the next key resistance point at the extreme overshoot of $453. As I warned on the Russell 2000 and S&P 500 index on Tuesday, a short-term reversal cannot be ruled out.

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