The SPY Falls As Jerome Powell Testifies Inflation Remains Stubbornly High: A Look At The Chart

The SPDR S&P 500 SPY dropped 0.66% between 10 a.m. and 10:05 a.m. on Tuesday, when Federal Reserve chair Jerome Powell told the U.S. Congress that stubborn inflation may require interest rates to be moved higher.

The SPY extended its slide intraday, falling a total of over 1.5% as the market started to price in a half-point percentage hike later this month. The previous expectation was the central bank would raise rates by a third consecutive 0.25% when it meets on March 21 and March 22.

The U.S. dollar jumped 1.27% intraday, confirming the greenback is trading in an uptrend, which helped to pressure the SPY lower. Powell started two days of testimony before congress on Tuesday with a hawkish tone, reiterating the central bank’s commitment to dropping inflation down to its 2% goal.

Recent economic data has been stronger than expected, which pressured the stock market lower over most of February. A bullish start to March increased positive sentiment, although Tuesday’s price action has likely removed some of the bullish sentiment.

From a technical standpoint, the SPY looks bearish over the short term at least, with volatility likely to continue into Wednesday.

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The SPY Chart: The SPY was working to print a big bearish Marubozu candlestick on Tuesday, which could indicate lower prices will come again on Wednesday. The second most likely scenario is that the ETF trades sideways, possibly printing an inside bar pattern to consolidate Tuesday’s large decline.

• Bullish SPY traders and investors want to see the market ETF close above the 50-day simple moving average (SMA), which the SPY was attempting to do. If The SPY closes under that level, it could fall further to test support at the 200-day SMA.
• In terms of price action, bullish traders want to see the SPY regain the important psychological level at $400 over the next few trading days. The area has been a major battleground between the bulls and the bears on numerous occasions over the last many months, especially on smaller time frames.
• Although the SPY negated its downtrend on Friday and Monday, by printing a higher high above the most recent lower high of $401.29, which was formed on Feb. 27, the ETF hasn’t yet confirmed an uptrend by printing a higher low.
• Bullish traders will want to see the ETF eventually print a bullish reversal candlestick, such as a doji or hammer candlestick, above $392.33, which would confirm a new uptrend.
• The SPY has resistance above at $400 and $404 and support below at $394.17 and $385.85.

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