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S&P 500 ahead of the key period – what can happen?

The coming weeks will be crucial for the markets. Tapering means that by the end of March 2022 the quantitative easing will stop and that the markets will not get any newly printed money from the Fed.

There are however other important events ahead. For instance, the inflation in US is the highest in 40 years and Fed will need to address this problem. That is also a reason why has Fed started to announce the interest rate hikes at the end of 2021.

According to the Fed, we can see at least three interest rate hikes by the end of 2022. There are also huge economic and political pressures to make this happen immediately after the end of tapering in March 2022. March can thus be crucial for the markets and the whole year 2022. One thus needs to ask, what can this mean for the charts?

S&P 500 on 4h chart

S&P 500 is one of the most important charts in the financial markets, which is a reason why we will take a closer look at it. In general, it can be said that indices and stocks do not perform well when it comes to interest rate hikes, and they rarely rise on this news. Most of the time they move downwards or sideways at best.

If we look at the 4 hour chart of S&P 500, we can see a huge rising wedge. The target in this wedge is a level of 4 858 – 4 890. We can also say that if we do not get under the support of 4 587 – 4 609, there is no need to worry about correction.

Yet, rising wedge is considered to be a reversing pattern and thus is viewed as a pattern that changes trends. One can then speculate whether this also about to happen with S&P 500.

4h chart of S&P 500 4H chart of S&P 500

Daily view - a reason to worry?

Just a brief comment on the daily chart. We can see that ever since Covid-19 happened, S&P 500 has been doing incredibely well. And that is what I am afraid of. The rise we have seen was extraordinary and might be due for a correction.

1D view of S&P 500 1D view of S&P 500

Conclusion

The first quarter of this year will be important for the whole 2022. Fed can no longer ignore the rising inflation and needs to adjust the interest rates accordingly.

Jakub is a crypto trader and founder of Trader 2.0 project, which helps hundreds of traders from central Europe to understand cryptocurrency trading and its challenges. Jakub not o...

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