Stocks Higher into Final Hour on China Trade Deal Hopes, Technical Buying, Bargain-Hunting, Biotech/Gaming Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 26.6 -6.1%

• Euro/Yen Carry Return Index 130.53 -.48%

• Emerging Markets Currency Volatility(VXY) 9.73 +.1%

• S&P 500 Implied Correlation 50.26 unch.

• ISE Sentiment Index 65.0 -31.6%
  

• Total Put/Call 1.02 +32.5%

• NYSE Arms 1.33 -22.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 87.79 -.66%
  

• America Energy Sector High-Yield CDS Index 802.0 -.84%

• European Financial Sector CDS Index 109.09 -2.59%

• Italian/German 10Y Yld Spread 250.0 unch.
  

• Asia Pacific Sovereign Debt CDS Index 11.75 unch.

• Emerging Market CDS Index 208.08 -.30%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.80 +.45%

• 2-Year Swap Spread 16.5 +2.0 basis points

• TED Spread 42.75 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 2.50 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.06 +.257%

• 3-Month T-Bill Yield 2.35% -2.0 basis points

• Yield Curve 19.75 -.75 basis point

• China Iron Ore Spot 71.12 USD/Metric Tonne +1.6%

• Citi US Economic Surprise Index -23.8 -5.9 points

• Citi Eurozone Economic Surprise Index -71.8 +1.5 points

• Citi Emerging Markets Economic Surprise Index -10.6 -2.9 points

• 10-Year TIPS Spread 1.71 -3.0 basis points

• 2.0% chance of Fed rate hike at March 20th meeting, 4.0% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -209 open in Japan 

• China A50 Futures: Indicating -15 open in China

• DAX Futures: Indicating n/a open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/retail/medical/industrial sector longs

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.3%

Sector Underperformers:

• 1) Tobacco -1.9% 2) Oil Service -1.2% 3) Homebuilding -1.0%

Stocks Falling on Unusual Volume: 

• BTI, WTW and CWH

Stocks With Unusual Put Option Activity:

• 1) AET 2) DISH 3) DF 4) CLR 5) WTW

Stocks With Most Negative News Mentions:

• 1) IGCC 2) PCG 3) FIT 4) MGI 5) AQUA

Charts:

• ETFs Falling on Unusual Volume
• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth +.9%

Sector Outperformers:

• 1) Medical Equipment +1.4% 2) Biotech +1.3% 3) Networking +1.2%

Stocks Rising on Unusual Volume:

• GOOS, BTO, LMRK, SA, OPRX, ZYME, APU, CRSP, BITA, HRTX, IMKTA, VMW, BST, GLOP, IGV, KRP, TQQQ, VONG, TBPH, TCP, BIP, NTLA, BIB, OKTA, DOMO and KYN

Stocks With Unusual Call Option Activity:

• 1) LEN 2) DXJ 3) USB 4) TWTR 5) SYMC

Stocks With Most Positive News Mentions:

• 1) GOOS 2) IIVI 3) AMZN 4) DIS 5) KORS

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -18.7% Below 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 46.0% of Issues Advancing, 52.0% Declining
• 4 New 52-Week Highs, 40 New Lows
• 11.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.3%
• Vix 26.9 -5.1%
• Total Put/Call .94 +22.1%
• TRIN/Arms 1.74 +1.2%

Monday Watch

Today's Headlines

Bloomberg:      

• Italy's Populists Pass Budget After Weeks of Market Turmoil.   

• Merkel Says Germany to Champion Global Order That's Under Attack.   

• $5 Trillion Got Wiped From Asia Stocks This Year. Here’s How.

• Asian Stocks May Get Relief After Trump, Xi Talk. Asian stocks may get some relief Monday from recent wild swings after U.S. President Donald Trump reported “big progress” in trade talks with his Chinese counterpart. U.S. futures opened higher. Trading will be thin with major markets in Japan and China closed and shortened sessions elsewhere on the last day of 2018. Futures on the S&P 500 Index jumped and Australian shares gained at the start, while Hong Kong futures tipped a firmer open after Trump said in a tweet that negotiations were “moving along very well” toward a comprehensive deal and Chinese state media cited Xi Jinping saying he believed both sides wanted “stable progress.” U.S. stocks halted a two-day rally Friday as thin trading added to already-volatile markets, though the S&P 500 Index held onto its first weekly gain in a month. Treasuries, which rose on Friday, won’t be trading because of the holiday in Japan. Australia’s S&P/ASX 200 Index rose 0.7 percent as of 10:22 a.m. in Sydney. Hong Kong’s Hang Seng Index futures climbed 0.3 percent. S&P 500 futures rose 0.8 percent.

• Eight Social Trends Shaping the U.S. Economy.

• Peter Lynch Stock `PEG’ Hit Crisis-Level Low in Last Week's Rout.  

• El-Erian Says Fed Realizes That It Can’t Put Policy on Autopilot.  

• Treasuries May Have to Wait Until After New Year for Resolutions.

• Key Senator Says Trump Taking Seriously a Shift in Syria Plan.

• Judge Who Ruled Against Obamacare Halts Order Pending Appeal.

Wall Street Journal:

• Amazon(AMZN) Plans to Add Whole Foods Stores.

• Mutual Fund Managers Try a New Role: Activist Investor.

• Shale Drillers Cut Budgets as Oil Prices Drop.

• U.S. Presses China on Details as Trade Talks Continue.

Fox News:

• Police officer’s widow has message for judge who granted appeal to cop-killer Mumia Abu-Jamal.

• Trump att’y Giuliani says rejected law could have prevented officer’s murder.

• Trump att'y Giuliani says Mueller is ‘insurance policy’ FBI officials cited.

CNBC:

• 
  A market bull sees years left in the rally, but if the Dow breaks this level: ‘Watch out’.
  

• The Fed could be a factor in the week ahead as stocks exit the worst year in a decade.

Zero Hedge:      

• S&P Futures Jump Above 2,500 After Trump Tweets China Trade Deal "Moving Very Well".

• NYPD To Deploy Drones For The First Time To Secure New Year's Party.

• NBC's Chuck Todd: "We're Not Going To Give TV Time To Climate Deniers".

• Demographic And Pension Disaster: Illinois Population Drops For Fifth Consecutive Year. 

• The "Disappeared" List: Here Is Who Went Missing In China This Year.

• First Details From US-China Trade Talks Emerge.

• Firm That Warned Americans Of Russian Bots... Was Running An Army Of Fake Russian Bots.

• Goldman Slashes US Growth Forecast, Now Sees Just 1.2 Rate Hikes In 2019.

• France, UK Will Coordinate Effort To Curb Illegal Migrants.

• El-Erian: 1000-Point Swings In The Dow Are The "New Reality".

• Italy Passes Revised 2019 Budget, Marking End Of EU Spending Battle.

• America's Closest Mideast Allies Using Child Mercenaries To Fight In Yemen.

• Putin Tells Trump That Russia Is Open For Dialogue On An "Extensive Agenda".

• Oil Tanker Firms Scrap Most Ships In Three Decades. 

• Retailers Rejecting Customers' Cash As More Ban Paper Money.

• Foreign Hackers "Cripple" US Newspapers, Cause Widespread Delivery Disruptions.

• Animation: 200 Years Of U.S. Immigration.

• Chinese Scientist Who Genetically Modified Babies Is Under House Arrest. 

Business Insider:

• Tesla(TSLA) had a wild 2018 — here's every bizarre thing that happened.

Night Trading

• Asian indices are +.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 96.75 -.75 basis point.

• Asia Pacific Sovereign CDS Index 11.75 unch.

• Bloomberg Emerging Markets Currency Index 66.95 +.10%.

• FTSE 100 futures +.39%.

• S&P 500 futures +.58%.

• NASDAQ 100 futures +.83%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• None of note

After the Close:

• None of note

Economic Releases
10:30 am EST

• The Dallas Fed Manufacturing Activity report for December is estimated to fall to 15.0 versus 17.6 in November.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Manufacturing PMI report could also impact trading today.

BOTTOM LINE: Asian indices are modestly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the week.