A Look At The SPY, Bitcoin And Spot Gold Heading Into The Fed's Big Decision On Rate Hikes

The first week of May could be a turbulent one for the markets, with the Federal Reserve set to issue its decision on interest rates on Wednesday and the release of employment data on Friday.

Last Thursday, the Bureau of Economic Analysis reported that U.S. gross domestic product increased at a 1.1% annualized pace over the first quarter, coming in under the 2% estimate and lower than the 2.6% that was reported for the fourth quarter of 2022. The GDP price index came in slightly higher than expected, however, showing that price pressures continue.

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The news led to expectations that the Fed will apply a 0.25% interest rate hike on Wednesday.

With the decision looming, the SPDR S&P 500 SPY, Bitcoin BTC/USD and spot gold may trade muted, which will likely be followed by short-term wild volatility before the apex crypto, general market and commodity sector bellwethers choose a direction.

Traders wishing to trade the volatility in the stock market can use Miax’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index (SPIKE), track expected volatility in the SPDR S&P 500 over the next 30 days.

From a technical-analysis perspective, here’s what to watch heading into the week.

The SPY Chart: The SPY reacted positively to GDP data, surging 2.2% between Thursday’s opening price and Friday’s market 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. If the Fed, however, issues a surprise 0.5% rate hike, the market could suffer a bearish reaction and tumble.

Although the SPY negated its daily downtrend on Friday by printing a higher high above the April 24 lower high of $413.07, the ETF hasn’t yet confirmed a new uptrend by printing a lower high above $403.78. If an uptrend is on the horizon, the SPY will eventually retrace, which could provide a solid entry for bullish traders not already in a position.

The 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 as it relates to the Fed’s decision. The cryptocurrency sometimes trades alongside the SPY and sometimes in tandem with gold.

Since Friday, Bitcoin has been trading in a triple inside bar pattern, with all the price action taking place within Thursday’s trading range. The pattern leans bullish, but traders and investors can watch for the crypto to break up or down from the mother bar 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 under that area, a longer-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.

The Spot Gold Chart: Spot gold is the most likely of the three to react bullishly to continued hawkish policy moves from the Fed. 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 apex of the formation on Wednesday. Bullish and bearish traders can watch 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 $1980.84 and $1,943.81.

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