Hawkish Tone Of Fed's Bullard Throws Markets Into Chaos: What To Watch On The SPY

The SPDR S&P 500 SPY opened Thursday’s trading session down 1.36% lower, but bulls came in and bought the dip. By 10:30 a.m. EST, the ETF had erased almost all of its daily losses.

That changed at 12:45 p.m. EST, when Federal Reserve President James Bullard said he is in favor of a 100-basis point interest rate increase by July and would like to see a balance-sheet reduction begin during the second quarter.

The comments, made to Bloomberg news in an interview, immediately caused the SPY to begin falling on higher-than-average volume on smaller timeframes, declining 0.85% within about 45 minutes.

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The SPY Chart: The SPY reversed course into an uptrend on Jan. 24 and has since made a series of higher highs and higher lows, with the most recent higher low created on Feb. 4 at the $443.83 mark and the most recent higher high printed on Feb. 2 and Feb. 9 at $458.12.

• The level of the higher high was reached twice, which created a bearish double top pattern. If the SPY is not able to regain the $454 area, it could see further downside.
• The ETF is being supported by the eight-day exponential moving average (EMA) on the daily chart, and bullish traders will want to see the SPY close the trading day above that level to feel confident a rebound will occur.
• If the SPY falls below $437.92, the uptrend will be negated.
• The SPY has resistance above at $454.05 and $458.49 and support below at $447.06 and $437.92.

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