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Global Macro: Dual Focus on Syria, Fed

NEW YORK (TheStreet) -- Trading this week looks to be dominated by Syria and the Federal Reserve as investors await a U.S. monetary policy decision later this month.

A gradual recovery is already priced into traders' minds, and now the pace of growth dominates investor sentiment. Until economic indicators begin to outperform mild expectations, as opposed to simply meeting them, the market will continue to rely on monetary stimulus for support.

Meanwhile, Syrian President Bashar al-Assad went on record this past weekend to say that Syria hasn't used chemical attacks and that the West shouldn't interfere with Syrian issues. Further involvement from the U.S. and other Western powers would scare investors out of the market and be another excuse for a U.S. equity market correction.

The first chart below is of SPDR S&P 500 (SPY). A more technical view of markets may give investors guidance as well.

The 167 level on the chart stood as the major resistance point that pushed the market lower in May. More recently, it held as resistance in mid-August, causing the S&P 500 to break out lower out of its head-and-shoulders reversal pattern.

Chinese data this week could stand as a catalyst for support or a push lower after a flurry of data was released from the U.S. last week.

Leading into the mid-September Fed meeting, investors will continue to trade on perceptions of what policy makers will do.

The next chart is of iShares Barclays 20+ Year Treasury Bond (TLT). The long Treasury bond has been heavily sold off since May. The issue is no longer whether the Fed will taper, but by how much.

The expectation level sits at about a $10 billion cut from current monthly bond purchases. What will move markets is the amount of the cuts. If the Fed doesn't cut enough, then bond prices will rally, and if the Fed cuts more than expected, then interest rates will go up even higher.

Syria continues to affect the daily movement of bonds, pushing them higher as more fear enters markets. The small move above its downward trend line in late August was influenced by such fear. The trend lower looks to remain intact, and heading into the Fed's next meeting, it's hard to imagine bond yields being pushed lower by very much.

At the time of publication the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Andrew Sachais' focus is on analyzing markets with global macro-based strategies. Sachais is a chief investment strategist and portfolio manager at the start-up fund, Satch Kapital Investments. The fund uses ETF's traded on the U.S. stock market to gain exposure to both domestic and foreign assets. His strategy takes into consideration global equity, commodity, currency and debt markets. Sachais is a graduate of Georgetown University, where he earned a degree in Economics.

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