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
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

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) and Tesla Motors (TSLA) have dropped as investors have preferred the more defensive consumer-staple sector.

Meanwhile, financial stocks such as JPMorgan Chase (JPM), 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.

Stock quotes in this article: JPM, TSLA, NFLX, TLT 
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.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

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