Stocks Slightly Lower into Final Hour on China Trade Tensions, Emerging Markets Debt Angst, Less Dovish FOMC Commentary, Metals & Mining/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 17.6 +3.5%

• Euro/Yen Carry Return Index 122.27 +.32%

• Emerging Markets Currency Volatility(VXY) 8.12 +1.37%

• S&P 500 Implied Correlation 42.54 +1.09%

• ISE Sentiment Index 82.0 +12.3%
  

• Total Put/Call .95 -5.34%

• NYSE Arms 1.28 +39.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.78 -.11%
  

• America Energy Sector High-Yield CDS Index 492.0 -.71%

• European Financial Sector CDS Index 67.68 -.90%

• Italian/German 10Y Yld Spread 142.75 +1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 78.47 -.63%
  

• Emerging Market CDS Index 213.35 +1.87%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.21 +.07%

• 2-Year Swap Spread 2.75 unch.

• TED Spread 34.0 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -23.75 +3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.67 +.29%
• 3-Month T-Bill Yield 1.70% +1.0 basis point

• Yield Curve .13 +1.0 basis point

• China Iron Ore Spot 88.60 USD/Metric Tonne +.12%

• Citi US Economic Surprise Index 20.90 -2.3 points

• Citi Eurozone Economic Surprise Index -77.70 -1.0 point

• Citi Emerging Markets Economic Surprise Index -10.80 -1.4 points

• 10-Year TIPS Spread 1.51 +1.0 basis point
• 88.5% chance of Fed rate cut at Dec. 11th meeting, 95.1% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +140 open in Japan 
• China A50 Futures: Indicating -54 open in China

• DAX Futures: Indicating -16 open in Germany

Portfolio:

• Slightly Higher: On gains in my biotech/tech sector longs and emerging market shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.2%

Sector Underperformers:

• 1) Gold & Silver -.9% 2) Social Media -.5% 3) Video Gaming -.4%

Stocks Falling on Unusual Volume: 

• SPWR, FSLR, RTLR, CYRX, AXNX, SRPT, RDUS and XENT

Stocks With Unusual Put Option Activity:

• 1) ARNC 2) CBS 3) CHK 4) OPK 5) COST

Stocks With Most Negative News Mentions:

• 1) ZENT 2) TRGP 3) FSLR 4) NKTR 5) GVA

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.2%

Sector Outperformers:

• 1) Shipping +1.6% 2) Oil Service +.6% 3) Airlines +.6%

Stocks Rising on Unusual Volume:

• AKCA, LVGO, AVYA, RNG, GTS, PCG, HRTX, REZI, CHRS, DOCU, SFIX and ARMK

Stocks With Unusual Call Option Activity:

• 1) DPZ 2) AVYA 3) ADI 4) AMTD 5) CERN

Stocks With Most Positive News Mentions:

• 1) AVYA 2) RNG 3) LVGO 4) SIMO 5) COP

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -24.5% Below 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 46.7% of Issues Advancing, 50.0% Declining
• 45 New 52-Week Highs, 24 New Lows
• 51.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.3%
• Vix 17.2 +.9%
• Total Put/Call 1.04 unch.
• TRIN/Arms .77 -16.3%

Monday Watch

Today's Headlines

Bloomberg:   

• China Narrows Scope for Trade Deal With U.S. Ahead of Talks.     

• Brexit Deal Prospects Fade as Talks Stall, EU Signals Pessimism.

• Violence Flares in Hong Kong as Emergency Rule Spurs Backlash.

• HSBC to Cut Up to 10,000 Jobs to Slash Costs, FT Reports.

• Emerging-Market Calm Set to Fray as Trade and Fed Angst Deepen.

• Yen Edges Up, Yuan Slips as Focus Returns to Trade. The yen edged up and yuan slipped in early trading Monday after a report that China may be increasingly reluctant to agree to a broad trade deal ahead of talks with the U.S. this week. Japanese futures pared gains stemming from a solid close on Wall Street Friday. Trading in the region may be muted with Hong Kong and Chinese markets shut and Sydney on holiday. Senior Chinese officials have indicated the range of topics they’re willing to discuss has narrowed considerably, according to people familiar with the matter. U.S. stocks closed higher Friday, along with Treasuries, after solid hiring data quelled recession fears without crushing the odds of future Federal Reserve easing. Nikkei 225 futures rose 0.9%.

• Whatever the Future Holds, Stocks Are Not Priced for a Recession.  

• Fed’s George Sees No Need to Cut Rates Unless Slowdown Deepens.

• Unilever to Halve Use of New Plastic as Uproar Over Waste Grows.

Wall Street Journal:   

• Chinese Troops Warn Hong Kong Protesters as Emergency Law Triggers Backlash.

• Doctors, Once GOP Stalwarts, Now More Likely to Be Democrats.

• Norm Violations Are Now the Norm. 

• Can Democrats Take Impeachment Seriously?

• Vaping’s Black Market Complicates Efforts to Combat Crises.

• Fear Overtakes Greed in IPO Market.

• Arrests for Low-Level Crimes Are Plummeting, and the Experts Are Flummoxed.

• Dim Earnings Outlook Imperils Stocks.

MarketWatch.com:

• Silicon Valley’s final frontier for payments: ‘The neoliberal takeover of the human body’.

Fox News:

• House Dems believe they have enough votes to pass articles of impeachment, senior member reveals.

• Graham vows to force public testimony if Dems press on with Trump impeachment.

• Chris Wallace challenges Dem on not holding official impeachment vote.

CNBC:

• China is reportedly reluctant to agree to a broad US trade deal with talks set to restart.

• US small businesses are fighting an uphill battle against counterfeiters in China: ‘It’s like whack-a-mole’.

• Tech ‘break-up value’ analysis seeks to make the stocks look cheap, even if they stay together. 

• UAW says GM labor talks ‘have taken a turn for the worse’. 

• ‘Joker’ has highest October opening weekend of all-time, hauls in $93.5 million in the US.

Zero Hedge:    

• Futures, Yuan Tumble After China Balks At Pursuing "Broad Trade Deal".

• Hong Kong Violence Sends Home Prices Tumbling Over 20%, Puts HSBC In The Crosshairs.

• As Hong Kong ATMs Run Out Of Cash, Central Bank Steps In To Prevent "Panic Among The Public".

• Second Ukraine Whistleblower Comes Forward With "Firsthand Knowledge".

• In Huge Blow, Iran Confirms China Has Exited Crucial $5 Billlion Gas Project.

• ECB "Whistleblowers" Emerge: Former Central Bankers Cry Out Against Draghi's Monetary Insanity.

• These Are The Top American Cities For Starting A Small Business.

• Mish: "Escape Illinois: Get The Hell Out Now, We Are".

• Hong Kong Protesters Build Makeshift Catapult On Third Day Of Unrest Over 'Anti-Mask' Law.

• Bannon Says Concept Of "Deep" State Is 'Conspiracy Theory For Nutcases' Because "It's Right In Your Face".

• Inside The Life Of Hunter Biden: The WaPo Reveals A 'Troubling Tale Of Privilege'.

Business Insider:

• Cars with high-tech emergency brakes still hit child-size dummies in 89% of street-crossing tests, a new study has found.

• A Chinese hog farmer is breeding giant, polar bear-sized pigs that weigh over 1,100 pounds, while the country contends with pork shortages.

• Inside the science behind Elon Musk’s crazy plan to put chips in people’s brains and create human-AI hybrids.

• German authorities say Mercedes may have manipulated emissions readings on hundreds of thousands of vans.

Telegraph:

• Europe is again facing catastrophe, and they do not even yet know it.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 78.75 -.25 basis point.

• China Sovereign CDS 49.0 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 65.65 +.01%.

• FTSE 100 futures -.14%.

• S&P 500 futures -.48%.

• NASDAQ 100 futures -.51%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• None of note

After the Close:

• None of note

Economic Releases

3:00 pm EST

• Consumer Credit for Aug. is estimated at $15.0B versus $23.294B in July.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Japan Trade Data report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon.  The Portfolio is 50% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters.
• Global Economy Week by Bloomberg. 
• The Week Ahead by Yahoo. (video)
• Stocks to Watch Next Week by Seeking Alpha.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on impeachment talk, technical selling, China trade tensions, global growth concerns, European/Emerging Markets/US High Yield debt angst and yen strength. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.