Hawkish tone from the FED has sent the VIX screaming higher over the past few weeks as fear has finally entered the market in a meaningful way. The VIX has made a series of higher high waves in a megaphone pattern ending at 29.51 for the week, breaking firmly into the fear zone. This has typically been a buy the dip zone and that is exactly what happened with indices displaying bullish hammer candlesticks.
Market participants expect 4 rate hikes in 2022 with some commercial banks like Bank of America calling for 7 hikes. JPOWs strategy has been to give the market plenty of time to price in hikes in his attempt to “thread the needle” for an attempted soft landing. It remains to be seen if they will follow through on their threats, with no firm action expected until the next FOMC meeting in March.