NEW YORK (TheStreet) -- The U.S. economy grew by 2% in the third quarter and business activity accelerated in October, signs that corporate and consumer spending are holding up providing positive price support for the iShares Dow Jones US Industrials (IYJ), the Vanguard Materials ETF (VAW) and the PowerShares DB Base Metals (DBB) funds.

According to the latest data from the Institute for Supply Management, economic expansion is at the forefront illustrated by its business barometer reading of a 60.6. Furthermore, data suggests that output climbed at the fastest pace in the third quarter as companies are upgrading equipment and boosting output to meet enhanced increased foreign and domestic demand.

The momentum behind this uptrend in manufacturing and industrials has been driven by improved capital investment, increases in output of business equipment and increases in consumer and investor confidence. As nations continue to recover, it appears that manufacturing and industrials likely will remain at the forefront of economic growth.

The three ETFs previously mentioned are directly correlated with the economic expansion:
  • iShares Dow Jones US Industrials, which boasts industrial conglomerate General Electric (GE) as its top holding and closed at $47.11 on Friday;
  • Vanguard Materials ETF, which holds copper giant Freeport-McMoRan (FCX) and industrials giant Dow Chemical (DOW) as top holdings. VAW closed at $75.65 on Friday;
  • PowerShares DB Base Metals, which enables one to gain exposure to copper, aluminum and zinc, all metals that are expected to continue to witness insatiable demand around the world. DBB closed at $22.75 on Friday.

When investing in these ETFs, it's equally important to consider the inherent risks that are involved. To help mitigate the effects of these risks, the use of an exit strategy which identifies specific price points at which downward price pressure is likely to prevail is important.

Downward price pressure on these ETFs is likely to prevail on IYW at $59.08, VAW at $71.90, and DBB at $21.94.

Written by Kevin Grewal of SmartStops in Houston.

Grewal has no positions in the securities mentioned.

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Kevin Grewal is the founder, editor and publisher of ETF Tutor and serves as the editor at www.SmartStops.net , where he focuses on mitigating risk and implementing exit strategies to preserve equity. Additionally, he is the editor at The ETF Institute, which is the only independent organization providing financial professionals with certification, education, and training pertaining to exchange-traded funds (ETFs). Prior to this, Grewal was a quantitative analyst at a small hedge fund where he constructed portfolios dealing with stock lending, exchange-traded funds, arbitrage mechanisms and alternative investments. He is an expert at dealing with ETFs and holds a bachelor's degree from the University of California along with a MBA from the California State University, Fullerton.

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