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SPY Technical Analysis: Testing Key Resistance Ahead Of FOMC

The chart attached shows price action filled and broke the upper channel trendline from my SPY post yesterday (Please refer to that strategy highlighted). It's now retesting that trendline waiting for a breakout on FOMC day.

SPY is now testing a multi-resistance region, which includes the $400 psychological level, the 200-day moving average and the 50% Fibonacci level of the February-March bearish range.

These are key technical hurdles that SPY needs to overcome first in order to rise above March highs at $407 and then trying to assault the 78.6% Fibonacci retracement of the February bearish trend. The daily momentum indicator (14-day RSI) rose above the 50 mark for the first time since March 6.

How Could SPY React To March FOMC Call?

The FOMC meeting on Wednesday will be a critical event in dictating the SPY's upcoming path.

Markets have nearly completely discounted a 25bps hike, but what the Fed plans to do beyond March will be crucial to monitor.

If the Fed pushes back against market pricing, which anticipates a terminal rate of 4.9% in May and two rate cuts before the end of the year, and reiterates its commitment to battle inflation, stocks may see a return of volatility, with SPY attempting to find support around $392 (50dma).

If the Fed reinforces the need for liquidity in the financial system and temporarily halts efforts to fight inflation, this would likely feed investor confidence in stocks, and SPY may attempt to hit March highs of $407.

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