SPDR S&P 500 ETF Trust (SPY) Forecast: Could we get a pre-Fed rally?
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- Equity markets continue to fall on Friday.
- Some riskier assets outperform such as Tesla.
- Apple remains stable as iPhone 14 initial reports look promising.
Equity markets remain under pressure as Friday brought yet more losses. The S&P 500 closed down 0.7%, while the Nasdaq closed 0.5% lower. This outperformance by the Nasdaq is often a "tell" of an impending rally. The Nasdaq is more volatile and more susceptible to interest rate moves, so on a down day the normal expectations would be for it to fall a greater percentage than the S&P 500.
SPY news
We also note Tesla outperforming as it closed flat on Friday. Again Tesla is more volatile and has a higher beta. It would be a greater risk asset due to its larger retail support base. The only caveat is the meltdown suffered by Bitcoin again this morning. Currently down 4% at $18,600, there is a strong correlation between Bitcoin and the Nasdaq. All eyes will be on Wednesday's interest rate decision from the Fed.
While it is widely expected that the Fed will raise rates by 75 bps, it is the commentary accompanying this more important decision that will count. The Fed is expected to be more clear on its commitment to fighting inflation as its last mixed message caused a massive risk-on rally. The Fed likely does not want a similar outcome this time round. The added data point from last week's CPI will ensure a more measured and likely hawkish tone from Fed Chair Powell in the post-decision press conference. With this outcome largely anticipated, the reaction of risk assets will be key. How will the Nasdaq react to a higher path of interest rates? We may get a short-term rally, but the medium-term picture continues to look darker for the Nasdaq and SPY.
SPY forecast
We have seen more bullish setups on some of the constituent stocks of the SPY, but the SPY itself does look more bearish. For example, the bearish island formation was replicated in Tesla, but the stock has since moved back to bridge the island formation. The SPY remains bearish. We also got a significant break of the double bottom at $389. This is our pivot and will need to be broken if we are to get a short-term rally. Positioning and sentiment point to a short-term rally, and also a bearish position closing head of Wednesday could add to this argument.
All action is likely to remain choppy though until after the Fed speech. Then we will take our cues from the path of interest rates. Already with 1-year treasuries yielding nearly a risk-free 4%, it looks too tempting to shelter there. That means equities may struggle long term, especially if the Fed signals higher rates for longer.
SPY daily chart
- Equity markets continue to fall on Friday.
- Some riskier assets outperform such as Tesla.
- Apple remains stable as iPhone 14 initial reports look promising.
Equity markets remain under pressure as Friday brought yet more losses. The S&P 500 closed down 0.7%, while the Nasdaq closed 0.5% lower. This outperformance by the Nasdaq is often a "tell" of an impending rally. The Nasdaq is more volatile and more susceptible to interest rate moves, so on a down day the normal expectations would be for it to fall a greater percentage than the S&P 500.
SPY news
We also note Tesla outperforming as it closed flat on Friday. Again Tesla is more volatile and has a higher beta. It would be a greater risk asset due to its larger retail support base. The only caveat is the meltdown suffered by Bitcoin again this morning. Currently down 4% at $18,600, there is a strong correlation between Bitcoin and the Nasdaq. All eyes will be on Wednesday's interest rate decision from the Fed.
While it is widely expected that the Fed will raise rates by 75 bps, it is the commentary accompanying this more important decision that will count. The Fed is expected to be more clear on its commitment to fighting inflation as its last mixed message caused a massive risk-on rally. The Fed likely does not want a similar outcome this time round. The added data point from last week's CPI will ensure a more measured and likely hawkish tone from Fed Chair Powell in the post-decision press conference. With this outcome largely anticipated, the reaction of risk assets will be key. How will the Nasdaq react to a higher path of interest rates? We may get a short-term rally, but the medium-term picture continues to look darker for the Nasdaq and SPY.
SPY forecast
We have seen more bullish setups on some of the constituent stocks of the SPY, but the SPY itself does look more bearish. For example, the bearish island formation was replicated in Tesla, but the stock has since moved back to bridge the island formation. The SPY remains bearish. We also got a significant break of the double bottom at $389. This is our pivot and will need to be broken if we are to get a short-term rally. Positioning and sentiment point to a short-term rally, and also a bearish position closing head of Wednesday could add to this argument.
All action is likely to remain choppy though until after the Fed speech. Then we will take our cues from the path of interest rates. Already with 1-year treasuries yielding nearly a risk-free 4%, it looks too tempting to shelter there. That means equities may struggle long term, especially if the Fed signals higher rates for longer.
SPY daily chart
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.