This Day On The Street
Continue to site right-arrow
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
TheStreet Open House

Global Macro: Banks, Bonds Weak After Fed

NEW YORK ( TheStreet) - Markets fell Thursday, as many analysts believe equities have reached a near-term peak.

Bonds, equities and precious metals were bid higher throughout October as investors believed the Federal Reserve would keep bond purchases intact.

The Fed did say on Wednesday that it will keep its policy in place, but it still ignited a sharp selloff as its comments were more hawkish than investors had expected. The Fed, however, made little to no reference to slowing down its bond purchases soon.

Equity indexes have been strong since the government shutdown ended; nonetheless, the move to record highs has come alongside a move to less risky stocks not as sensitive to general economic conditions. High-beta momentum stocks such as Netflix (NFLX - Get Report) and Tesla Motors (TSLA - Get Report) have dropped as investors have preferred the more defensive consumer-staple sector.

Meanwhile, financial stocks such as JPMorgan Chase (JPM - Get Report), picture below, have remained weak.

Although JPMorgan has its own massive legal issues, the bank's weakness is no less bearish for the broader market. The stock made a large head-and-shoulders pattern on its hourly chart throughout October.

It has broken the support level of the pattern over the past few days and doesn't look to be pulling back until its price reaches the $50 range. With high-beta and financial stocks weighing on markets, a correction to lower levels over the next few weeks may be in the cards.

The next chart is of Shares Barclays 20+ Year Treasury Bond (TLT). Many investors believed that bonds would rally if the Fed kept stimulus in place.

The Fed kept its policy intact, but bond prices still fell. The selloff has caused many to turn bearish on the long bond, although that may be premature.

On the chart below, the Fibonacci indicator is placed over price action. The indicator highlights potential points of retracement based on the previous move from base to peak. The pullback to the 38.2% level signals a bullish continuation is still possible.

Until bonds break out of the current pattern to the upside or downside, there is no reason to give up hope on bonds and thus lower interest rates just yet.

The perception of hawkish behavior from the Fed looks to be purely speculation since stimulus is still in place.

If equity markets do push markedly lower, Treasuries may be the safe-haven asset investors turn toward.

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.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
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!
JPM $59.54 0.00%
NFLX $418.25 -0.00%
TSLA $190.41 0.00%
TLT $129.45 0.00%
AAPL $124.24 0.00%


DOW 17,678.23 -40.31 -0.23%
S&P 500 2,056.15 -4.90 -0.24%
NASDAQ 4,863.3620 -13.1570 -0.27%

Partners Compare Online Brokers

Free Reports

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