A Look at SPY, Bitcoin and Spot Gold Heading into the Fed’s Big Decision on Rate Hikes – SPDR S&P 500 (ARCA:SPY)
The first week in May can be a turbulent one for the markets, with Federal Reserve set to deliver its decision on interest rates on Wednesday and the release of employment data on Friday.
Last Thursday was Bureau of Economic Analysis reported that U.S. gross domestic product rose 1.1% year over year during the first quarter, coming in below the estimate of 2% and lower than the 2.6% reported for the fourth quarter of 2022. The GDP price index came in slightly higher than expected , but shows that price pressure continues.
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The news led to expectations that the Fed will add a 0.25% rate hike on Wednesday.
With the decision imminent SPDR S&P 500 SPY, Bitcoin BTC/USD and spot gold may trade muted, likely to be followed by near-term wild volatility before top crypto, general market and commodity sector bellwethers pick a direction.
From a technical analysis perspective, here’s what to watch heading into the week.
The SPY chart: The SPY reacted positively to GDP data, rising 2.2% between Thursday’s opening price and Friday’s close. On Friday, the market ETF printed a bullish Marubozu candlestick, indicating that prices may rise again on Monday.
The second most likely scenario is that the SPY trades sideways into Wednesday’s Fed decision, possibly forming a series of inside bars. If that happens, the pattern leans bullish for continuation. However, if the Fed issues a surprise rate hike of 0.5%, the market could have a bearish reaction and fall.
Although the SPY negated its daily downtrend on Friday by printing a higher high above the April 24 low of $413.07, the ETF has yet to confirm a new uptrend by printing a lower high above $403.78 . If an uptrend is on the horizon, SPY will eventually pull back, which could provide a solid entry for bullish traders who aren’t already in a position.
SPY has resistance above at $420.76 and $426.56 and support below at $414.89 and $408.
The Bitcoin Chart: Bitcoin is a wild card when it comes to the Fed’s decision. The cryptocurrency sometimes trades alongside SPY and sometimes in tandem with gold.
Since Friday, Bitcoin has been trading in a triple inside bar pattern, with all price action taking place within Thursday’s trading range. The pattern leans bullish, but traders and investors can look for the crypto to break up or down from the main line on higher than average volume to gauge future direction.
If Bitcoin breaks down from Thursday’s range, bullish traders want to see the crypto hold above the 50-day simple moving average (SMA). If Bitcoin falls below this range, a long-term downtrend could be in the cards.
Bitcoin has resistance above at $31,418 and $35,593 and support below at $28,690 and $25,772.
Spot Gold Chart: Spot gold is the most likely of the three to react bullishly to continued hawkish Fed policy moves. The commodity historically experiences bull markets during economic downturns.
From a technical perspective, gold is trading in a triangle pattern and is set to meet the top of the formation on Wednesday. Bullish and bearish traders can look for gold to break up or down from the triangle on higher than average volume to indicate future direction.
Spot gold has resistance above at $2,038.23 and $2,075.14 and support below at $1,980.84 and $1,943.81.
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