The SPY Forms This Key Pattern As Stock Market Tracks Russia-Ukraine War, Federal Reserve Decision

The SPDR S&P 500 SPY was trading slightly higher Wednesday after a sell-off on Tuesday dropped the ETF 1.52% off the previous day’s closing price.

The intensifying Russia-Ukraine conflict, paired with the Federal Reserve’s impending decision on raising interest rates, has weighed on investors.

U.S. oil surged over the $110-per-barrel mark as supply fears continued to grow amid the looming disruption to Russian exports. The result will be higher prices at the pumps, which will further pressure the Fed to find a quick solution to soaring inflation.

At 10 a.m., Fed chairman Jerome Powell will testify before the House Financial Services Committee, where he is expected to discuss details of how much and how often the central bank plans to raise rates this year. Analysts now expect the Fed could enact nine consecutive rate hikes at 25bp over the next year, with the first hike anticipated to be announced following the March 16 and March 17 FOMC meeting.

As the market awaits further information regarding the possible extent of the war in Ukraine and key economic data from the Fed, the SPY is likely to remain volatile, which may require traders of the ETF and individual stocks to remain agile.

One key pattern is in the works, and if it’s recognized, the markets could be in for a rally.

See Also: 28 Stocks Moving in Wednesday’s Pre-Market Session

The SPY Chart: The SPY may be settling into a bull flag pattern on the daily chart, with the pole created between Feb. 24 and Feb. 25 and the flag formed over the days that followed. If the pattern plays out, the measured move is about 6.6%, which indicates the ETF could soar up toward the $455 level.

The SPY may also be trading in a falling channel on the daily chart. On both the daily and the weekly chart, the ETF is in a downtrend. A falling channel is considered bearish until a stock or ETF breaks up from the upper descending trendline of the pattern, which can indicate a strong reversal to the upside.

On Monday and Tuesday, the SPY attempted to break bullishly from the channel but rejected and wicked from the upper trendline.

The SPY is trading slightly below the eight-day exponential moving average (EMA) as well as below the 21-day EMA, which is bearish. The ETF is also trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.

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• Bulls want to see big bullish volume come in and break the SPY up from the bull flag and falling channel patterns, which will negate the downtrend because Tuesday’s price action will have marked the higher low. There is resistance above at $433.69 and $437.92.
• Bears want to see big bearish volume come in and drop the SPY down below the median line of the falling channel, which will negate the bull flag and put the ETF in danger of revisiting the lower trendline of the channel. The SPY has support below at $425.46 and $420.76.