The S&P 500 (SPX) started Wednesday sharply higher as bears continued to cover profitable short positions ahead of the Federal Reserve’s rate setting committee meeting, states Jon Markman, editor of Strategic Advantage.

Although traders expected a quarter-point increase, many were anxious about guidance moving forward.

Following the meeting, the Fed effectively set a dovish course by indicating that as many as six additional rate hikes are likely.

That news sent bears, who expected a much more hawkish statement, into full panic mode. The benchmark S&P 500 closed at 4,357, a gain of 2.25%. It was also the best level of the session.

Bears should now concede a rally to 4,460, the 200-day moving average. Every near-term decline ahead of the test of that key resistance level is a buying opportunity, though I would not expect a really lasting rebound for at least a week or two if typical seasonal patterns play out.

Short term support for the S&P 500 is 4,310, then 4,115, the February 24 intraday low, which has now been successfully tested.

The Upshot

The Nasdaq advanced 3.8% to 13,436.55 and the Dow climbed 1.6% to 34,063.10.

Breadth favored advancers seven-one and there were 70 new highs vs 361 new lows. Big caps on the new high list included Berkshire Hathaway (BRK-B), AbbVie, Inc. (ABBV), Centene (CNC), McKesson, and Travelers (TRV).

Consumer discretionary shares led the way with energy and utilities the only losing sectors.…West Texas Intermediate crude oil fell 1.6% to $94.91 a barrel, and Gold (CL=F) for April delivery dropped 0.2% to $1,926.80 per troy ounce. The 10-year US Treasury Note (TNX) yield climbed three basis points to 2.19%.

The US economy is "very strong" amid heightened inflation and a tight labor market, Federal Reserve Chair Jerome Powell said during a press conference, after the Fed raised the federal funds rate to a range of 0.25% to 0.5%, in line with market expectations.

The Fed indicated the rate increase would mark the start of a series of hikes, with policymakers projecting rate increases at each of the six remaining meetings this year.

The latest round of talks between Ukraine and Russia made significant progress on a tentative peace plan that included a ceasefire and Russian withdrawal if Ukraine declares neutrality and agrees to limits on its armed forces, the Financial Times reported, citing five people "briefed on the talks." Ukrainian President Volodymyr Zelensky spoke to members of the US Congress in a virtual address, appealing for help on Wednesday, while President Joe Biden shortly after pledged an additional $800 million in security assistance to Ukraine in a speech of his own.

On the Nasdaq, the biggest gainers included Pinduoduo (PDD), (JD), and Baidu (BIDU), with gains ranging from 39% to 56% after the Chinese government unveiled economic stimulus measured including support for continued US market listings by Chinese companies.

Subscribe to Jon Markman's Strategic Advantage here…