This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Global Macro: Gridlock Redux

NEW YORK (TheStreet) - As the trading week comes to an end, politicians in Washington have yet to complete a concrete deal to raise the debt ceiling and reopen the government.

The political squabbling is reminiscent of the summer of 2011 when markets consolidated at yearly highs and then sold off sharply due to the gridlock in Washington.

The chart below of the SPDR S&P 500 (SPY) shows the similarities between now and then.

Prices never move in the exact same manner they did in the past, but the market operates in waves. Any trajectory will have intermediate up and down moves.

To help analyze what phase of the move we are in -- either an intermediate advance or decline -- the MACD indicator below the price section on the chart is used. MACD stands for Moving Average Convergence-Divergence indicator. It represents specified moving averages and whether they are showing a bullish or bearish signal

In 2011, the indicator began to break down as equities reached a top in the spring. It continued to fall as prices developed a head-and-shoulders reversal pattern within the consolidation.

The breaking point was when polarization in Washington reached its peak and the debt-ceiling debate prompted a credit downgrade. Standard and Poor's downgraded the U.S. credit rating, which sent shock waves through markets. The correction was swift, and it took almost a full calendar year to return to those August highs.

The government remains just as polarized this year, but politicians look even more disinterested in financial market consequences this time around.

The MACD oscillator began to break down at the beginning of the summer and U.S. equities have begun to consolidate. Although the set-up does not guarantee a repeat of the 2011 correction, the pattern resemblance is something to consider.

Monetary policy remains accommodative, which is a positive, but with fiscal policy acting more as a detriment than an aide at this point, a correction may be justified.

In 2011, market participants blamed politicians for the drop in prices, and this time, blame also lies on Washington.

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.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs