Can the market rally leading up to the next Fed meeting?
Jerome Powell’s testimony helped alleviate some of the recent bearish pressure on equity markets, after he effectively confirmed the growing expectation of a tamer rate hike cycle amidst the uncertainty being created by situation Russia-Ukraine war.
The S&P500 appears to have put in a 3-wave correction from its highs at the start of the year. Even though it formed the most recent low at 4114.65 on the day of the invasion, the index printed a strong bullish candle on higher volume for the day, indicating a willingness for buyers to step in around the current levels, as $SPX has also avoided a weekly close below the key level of 4300 so far. Therefore, the broader market might be looking to put in a new leg higher as the prospect of easier monetary policy could support local risk-appetite.
However, it is important to note that yesterday’s session highs were around the downtrend resistance coming from the all-time-high, with $SPX pulling back slightly into the close. Although the Fed is being more cautious, strong economic data could still support a 50bps hike in March, while the situation in Ukraine is continuing to get worse. With the testimony out of the way, and still around 2 weeks until the next FOMC Meeting, investors’ focus could swing back towards the geopolitical tensions, which could easily spook the market if it begins to show signs of a larger-scale conflict on the horizon.
All trading carries risk, but it should be worth watching how $SPX and overall risk sentiment fairs over the coming days.
Submitted March 03, 2022 at 10:38AM by City_Index
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