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Time to Bet on Dow ETFs This Thanksgiving Week?

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After languishing in October on rising rate worries, U.S. stocks bounced back in November. SPDR Dow Jones Industrial Average ETF (DIA - Free Report) which fell about 5.8% last month, has advanced 0.4% this month (as of Nov 16, 2018) (read: Top ETF Stories of October).

In any case, the Thanksgiving week has historically proven beneficial for the Dow Jones. According to the Stock Trader’s Almanac, the Dow gained in the week before Thanksgiving about 19 times of the past 24 years. Since 1988, the Dow went up 18 of the last 29 times on Wednesday and Friday of Thanksgiving week, as quoted on CNBC.

Let’s take a look at the factors that could earn the Dow Jones bountiful returns this Thanksgiving week.

U.S.-China to Negotiate on Trade?

The reason for which the Dow Jones gained on Nov 16 was the possible trade truce between the United States and China. Stocks moved northbound after President Trump said that he was hopeful that the United States and China could reach a deal on trade. Trump and the China’s president Xi are scheduled to meet in Buenos Aires on the side-lines of G20 meeting on Dec 1.

Already, the auto sector has started rejoicing on the news that the Trump administration may postpone, probably even brush off the move that could impose new tariffs of up to 25% on imported vehicles and car parts.

Oil’s Gains

Furthermore, it has been noticed lately that the Dow Jones shares a deep relationship with oil price movement. In most cases, on a particular day of oil surge, the spurt in the Dow Jones is steeper than that of the S&P 500 or vice versa.

And oil prices could see an uptrend all over again with Saudi Arabia and OPEC mulling over a fresh oil output cut, as increasing output, signs of falling demand growth and weaker-than-expected U.S. sanctions on Iran’s energy sector hint at oversupply next year (read: Brent in Bear Market: 4 Country ETFs to be Cautious About).

WTI fund United States Oil (USO) added about 0.8% on Nov 16, while United States Brent Oil (BNO - Free Report) has advanced about 0.9%.

Upswing in Manufacturing Sector

Manufacturing numbers point to a recovery in the United States. An uptick in manufacturing numbers can act as a strong tailwind to Dow Jones Industrial Average’s forward growth, in our opinion. After all, Dow Jones-based ETF DIA invests about 21% weight — the highest allocation — in the industrial sector.

Notably, the IHS Markit US Manufacturing PMI was revised down to 55.7 in October of 2018 from a preliminary 55.9, but slightly higher than 55.6 in September. This marked the highest reading in five months as there is a sharp uptick in new business.

How Long Will the Rebound in Dow Last?

If there are positive developments related to Washington-Beijing trade deal in the coming days and in the oil price thanks to the OPEC-led renewed output cuts, the Dow could surge higher (read: Oil in Bear Market: Leveraged ETFs to Gain From).

ETFs in Focus

So, investors intending a momentum play, can bet on DIA, Invesco Dow Jones Industrial Average Dividend ETF (DJD - Free Report) and iShares Dow Jones US ETF (IYY - Free Report) . Investors can also settle on leveraged Dow ETF plays as long as the trend favors them. Here, ProShares Ultra Dow30 (DDM - Free Report) and ProShares UltraPro Dow30 (UDOW - Free Report) are a couple of choices.

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