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The first week of May could be turbulent for markets, with the Federal Reserve due to release its interest rate decision on Wednesday and the release of jobs data on Friday.
Last Thursday, the Bureau of Economic Analysis reported that gross domestic product in the United States grew at an annualized rate of 1.1% during the first quarter, coming in below the 2% estimate and below the 2, 6% that had been reported for the fourth quarter of 2022. The GDP price index was slightly higher than expected, however, showing that price pressures are continuing.
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The news led to expectations for the Fed to implement an interest rate hike of 0.25% on Wednesday.
With the decision looming, the SPDR S&P 500 (NYSE:SPY), Bitcoin (CRYPTO:BTC) and spot gold could trade muted, which will likely be followed by wild near-term volatility before leaders in the crypto, general market, and commodities sector are only picking one direction.
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From a technical analysis perspective, here’s what to watch ahead of the week.
The SPY Chart: The SPY reacted positively to the GDP data, jumping 2.2% from Thursday’s open price to Friday’s market close. On Friday, the market ETF printed a bullish Marubozu candlestick, indicating that prices could rise further on Monday.
The second most likely scenario is for the SPY to trade sideways into Wednesday’s Fed decision, possibly forming a series of inside bars. If this happens, the trend is bullish to continue. If the Fed, however, issues a surprise rate hike of 0.5%, the market could experience a bearish reaction and fall.
Although the SPY reversed its daily downtrend on Friday by printing a higher high above the April 24 lower high of $413.07, the ETF has yet to confirm a new uptrend by printing a lower high. above $403.78. If an uptrend is looming on the horizon, the SPY will eventually pull back, which could provide a solid entry for bullish traders not yet in position.
The SPY has resistance above at $420.76 and $426.56 and support below at $414.89 and $408.
The Bitcoin Chart: Bitcoin is a wild card when it comes to the federal government’s decision. The cryptocurrency sometimes trades alongside the SPY and sometimes in tandem with gold.
Since Friday, Bitcoin has been trading in an inside three-bar pattern, with all the price action taking place within Thursday’s trading range. The pattern is bullish, but traders and investors can watch the crypto break or fall from the parent bar to above-average volume to gauge future direction.
If Bitcoin breaks below Thursday’s range, bullish traders want to see the crypto hold above the 50-day simple moving average (SMA). If Bitcoin falls into this zone, a longer-term downtrend could be in the cards.
Bitcoin has upper resistance at $31,418 and $35,593 and lower support at $28,690 and $25,772.
The Spot Gold Chart: Spot gold is the most likely of the three to react bullishly to continued moves in the Fed’s hawkish policy. The commodity historically experiences bull markets during economic downturns.
From a technical standpoint, gold is trading in a triangle pattern and is expected to top the formation on Wednesday. Both bullish and bearish traders can watch the gold breakout or decline of the triangle on above average volume to indicate future direction.
Spot gold has resistance above $2,038.23 and $2,075.14 and support below at $1,980.84 and $1,943.81.
Read next:Economist says stock market will see biggest crash since 1929 as US dollar soars
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