Weekly Outlook

U.S. Week Ahead by MarketWatch (video). 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on global growth fears, China-Japan/Mideast tensions, rising Eurozone debt angst, profit-taking, technical selling and more shorting. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,517.93 +.31%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,517.93 +.31%

• DJIA 13,992.97 -.12%

• NASDAQ 3,193.87 +.46%

• Russell 2000 913.67 +.27%

• Value Line Geometric(broad market) 396.22 +.28%

• Russell 1000 Growth 696.13 +.44%

• Russell 1000 Value 771.36 +.31%

• Morgan Stanley Consumer 905.61 +.41%

• Morgan Stanley Cyclical 1,123.38 +.01%

• Morgan Stanley Technology 729.56 +.16%

• Transports 5,911.33 +.92%

• Utilities 474.46 -.01%

• Bloomberg European Bank/Financial Services 96.82 -.25%

• MSCI Emerging Markets 43.77 -1.28%

• Lyxor L/S Equity Long Bias 1,118.80 +.53%

• Lyxor L/S Equity Variable Bias 832.97 +.39%

Sentiment/Internals

• NYSE Cumulative A/D Line 171,892 +.83%

• Bloomberg New Highs-Lows Index 462 +46

• Bloomberg Crude Oil % Bulls 32.4 -22.7%

• CFTC Oil Net Speculative Position 266,904 -.44%

• CFTC Oil Total Open Interest 1,594,844 +2.65%

• Total Put/Call .90 unch.

• OEX Put/Call 2.78 +131.67%

• ISE Sentiment 137.0 +26.8%

• NYSE Arms 1.07 +25.9%

• Volatility(VIX) 13.0 +.93%

• S&P 500 Implied Correlation 57.61 -4.65%

• G7 Currency Volatility (VXY) 9.26 +5.0%

• Smart Money Flow Index 11,344.37 +.41%

• Money Mkt Mutual Fund Assets $2.691 Trillion -.1%

• AAII % Bulls 42.8 -11.0%

• AAII % Bears 29.6 +21.6%

Futures Spot Prices

• CRB Index 301.06 -1.31%

• Crude Oil 95.72 -1.94%

• Reformulated Gasoline 305.88 +.39%

• Natural Gas 3.27 -1.24%

• Heating Oil 323.84 +2.49%

• Gold 1,666.90 -.05%

• Bloomberg Base Metals Index 220.61 +.43%

• Copper 375.95 -.64%

• US No. 1 Heavy Melt Scrap Steel 349.33 USD/Ton unch.

• China Iron Ore Spot 155.10 USD/Ton +1.24%

• Lumber 387.80 +6.92%

• UBS-Bloomberg Agriculture 1,556.41 -2.73%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 8.9% +60 basis points

• Philly Fed ADS Real-Time Business Conditions Index .4991 unch.

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 113.06 +.19%

• Citi US Economic Surprise Index -12.5 +15.6 points

• Fed Fund Futures imply 52.0% chance of no change, 48.0% chance of 25 basis point cut on 3/20

• US Dollar Index 80.21 +1.27%

• Yield Curve 170.0 -5 basis points

• 10-Year US Treasury Yield 1.95% -6 basis points

• Federal Reserve's Balance Sheet $2.997 Trillion +.19%

• U.S. Sovereign Debt Credit Default Swap 40.22 -5.35%

• Illinois Municipal Debt Credit Default Swap 156.0 -2.93%

• Western Europe Sovereign Debt Credit Default Swap Index 105.19 +2.76%
  

• Emerging Markets Sovereign Debt CDS Index 171.36 -.29%
  

• Israel Sovereign Debt Credit Default Swap 123.99 -2.94%

• Iraq Sovereign Debt Credit Default Swap 411.18 -18.78%

• China Blended Corporate Spread Index 393.0 +4 basis points

• 10-Year TIPS Spread 2.53% -4 basis points

• TED Spread 22.5 -.5 basis point

• 2-Year Swap Spread 15.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.25 -4.0 basis points

• N. America Investment Grade Credit Default Swap Index 89.04 +2.56%
  

• European Financial Sector Credit Default Swap Index 155.13 +6.70%
  

• Emerging Markets Credit Default Swap Index 226.99 -.05%
  

• CMBS Super Senior AAA 10-Year Treasury Spread 90.0 unch.

• M1 Money Supply $2.481 Trillion +.41%

• Commercial Paper Outstanding 1,111.80 -1.2%

• 4-Week Moving Average of Jobless Claims 350,500 -1,500

• Continuing Claims Unemployment Rate 2.5% unch.

• Average 30-Year Mortgage Rate 3.53% unch.

• Weekly Mortgage Applications 849.80 +3.37%

• Bloomberg Consumer Comfort -36.3 +1.2 points

• Weekly Retail Sales +1.8% -10 basis points

• Nationwide Gas $3.57/gallon +.11/gallon

• Baltic Dry Index 749.0 -.13%

• China (Export) Containerized Freight Index 1,144.55 +.19%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 17.50-12.5%

• Rail Freight Carloads 249,231 +4.37%

Best Performing Style

• Mid-Cap Value +.86%

Worst Performing Style

• Small-Cap Value +.13%

Leading Sectors

• HMOs +4.6%
• Defense +2.5%
• Airlines +2.1%
• Computer Hardware +1.7%
• Networking +1.5%

Lagging Sectors

• Computer Services -1.3% 
• Software -1.5%
• Steel -1.6%
• Coal -2.1%
• Homebuilders -2.3%

Weekly High-Volume Stock Gainers (28)

• VSAT, GDP, SFLY, APKT, TRLG, GEOS, TTWO, HPTX, DV, ADNC, MEI, POWI, VMED, TVL, MUSA, PIKE, MGI, OMCL, ABAX, NBIX, AMWD, VSH, BCEI, CPLA, ITG, RRTS, WYN and TBI

Weekly High-Volume Stock Losers (19)

• WXS, CFX, CPSI, IRG, TDC, BRE, NOV, HOLX, ABCO, JIVE, CHRW, BG, HTSI, RTEC, VOCS, AKAM, MCO, LTM and MHP

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Rising into Final Hour on Diminished Global Growth Fears, Short-Covering, Tech/Healthcare Sector Strength

Today's Market Take:

Broad Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• VIX 13.19 -2.3%
  

• ISE Sentiment Index 134.0 +38.1%

• Total Put/Call .90 -11.76%

• NYSE Arms 1.22 -10.95%

Credit Investor Angst:

• North American Investment Grade CDS Index 89.49 -.43%

• European Financial Sector CDS Index 155.11 -2.11%

• Western Europe Sovereign Debt CDS Index 105.19 -1.39%

• Emerging Market CDS Index 227.05 -1.13%

• 2-Year Swap Spread 15.75 +.25 bp

• TED Spread 22.5 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -18.25 -.25 bp

Economic Gauges:

• 3-Month T-Bill Yield .06% unch.

• Yield Curve 170.0 unch.

• China Import Iron Ore Spot $155.10/Metric Tonne unch.

• Citi US Economic Surprise Index -12.5 +17.5 points

• 10-Year TIPS Spread 2.54 -1 bp

Overseas Futures:

• Nikkei Futures: Indicating +22 open in Japan

• DAX Futures: Indicating -4 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Europe Leaders Bow to Cameron Push, Deepen Spending Cuts. European Union leaders agreed to a seven-year budget that cuts spending for the first time, bowing to U.K. Prime Minister David Cameron’s insistence on thrift. The deal, struck after 25 1/2 hours of talks in Brussels, set the budget for 2014-2020 at 960 billion euros ($1.3 trillion), down from an original proposal of 1.047 trillion euros and less than the 994 billion euros spent in the current budget cycle. “We simply could not ignore the extremely difficult economic realities across Europe,” EU PresidentHerman Van Rompuy told reporters. “It’s perhaps nobody’s perfect budget, but there’s a lot of it for everybody. This budget is future- oriented, it is realistic and it is driven by pressing concerns.” 
• European Stocks Post Weekly Drop on Debt-Crisis Concern. European stocks posted a second weekly decline as political uncertainty in Italy and Spain revived concern that the nations’ austerity programs may falter and the euro-area debt crisis may deepen. UniCredit SpA, Italy’s biggest lender, dropped 5.4 percent as a gauge of European bank shares fell for a second week. Royal Imtech NV plunged 47 percent as the Dutch technical-service provider after predicting writedowns exceeding 100 million euros ($136 million) in Poland. Hargreaves Lansdown Plc jumped 15 percent after the retail stockbroker posted first-half profit that exceeded analysts’ estimates.
• Aso Says Pace of Yen Decline Too Fast With G-20 Set to Meet.Japanese Finance Minister Taro Aso said the pace of the yen’s weakening has been too fast, speaking a week before a meeting of global finance chiefs where Japan’s currency stance is forecast to be an issue. Aso’s comment to reporters in Tokyo today came after he earlier told lawmakers the government hadn’t anticipated a rapid move to around 90 per dollar. 
• Honda Counters Weak Yen Criticism After U.S. Objections. Honda Motor Co., targeting record U.S. sales this year, said the weaker yen isn’t giving the Japanese company an advantage after a group representing U.S. automakers called for government intervention.
• Huntsman Warns of Risk of China-Japan Clashes in Disputed Areas. Jon Huntsman, a former U.S. ambassador to China, said he worries about the danger that a military “incident” between China and Japan may escalate into an unintended conflict. “The tensions are real,” he said, citing their territorial dispute over islands in the East China Sea. The increasing pace of military activities such as surveillance flights in the region by other nations, including South Korea and Russia, also raise risks, he said. “I worry about the military maneuvers in crowded airspaces and sea lanes” where an incident can escalate to something “beyond anyone’s ability to then de-escalate it,” Huntsman said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend.
• Egyptians Rally as Tunisia Opposition Leader Death Stirs Unrest. Egypt’s army put up barbed wire and surrounded the gates of the Presidential Palace in Cairo as protesters pelted government buildings with rocks during rallies against President Mohamed Mursi and his Muslim Brotherhood. Protesters in Cairo marched from the Mostafa Mahmoud Mosque to Tahrir Square, and from the Nour Mosque to the palace today. Demonstrators blocked the subway in the city at Sadat station in the direction of the southern Helwan suburb, state-run Ahram Gate said on its website.
• The price-earnings ratio for the S&P 500 has risen 25% to 14.9 since October 2011.
• McDonald’s(MCD) January Store Sales Drop in Asia U.S Gains. McDonald’s Corp., the world’s largest restaurant chain, posted a surprise gain in U.S. same-store sales last month while demand slumped in the Asia Pacific region. Sales in the U.S. increased 0.9 percent in January, the Oak Brook, Illinois-based company said today in a statement. Analysts projected a drop of 0.3 percent, the average of 14 estimates compiled by Consensus Metrix. Sales in Asia Pacific, the Middle East and Africa plunged 9.5 percent while analysts anticipated a decline of 5.8 percent.

Wall Street Journal:

• Germany, Italy Data Show Divergence. Record German export statistics released Friday contrast sharply with Italy's feeble industrial performance, highlighting the two countries' economic divergence at a time when a strengthening euro is threatening to hurt foreign trade. Italian industrial production hit a 22-year low last year, as output dropped 6.7% from 2011, Italy's statistics institute Istat said Friday, as the economy remains mired in recession. "This was a year of suffering for Italian industry," Istat said.

CNBC:

• Subprime Is Back: Will This End Badly? The subprime market for risky mortgage backed securities is hot again and its revival is exceeding many people's expectations, the chief market strategist at Rosenblatt Securities said. However, he expects it will end badly. "The subprime market's revival is proving to be even stronger than we had anticipated," Brian Reynolds said, in a research note. "This is just a credit cycle, and it will eventually end badly like the others." Rosenblatt Securities has been worried before. It showed outrage when General Motors bought AmeriCredit car loans firm in 2010. The deal repeated the excesses of the last credit cycle, it said at the time, when GM had to hive off its financial subsidiaries which then needed taxpayers' money to survive. And it has noticed another huge development this week. The Wall Street Journal reported that a joint venture between AIG and Fortress will be issuing a securitization of personal loans. "The average coupon on some of these loans is 25 percent, as some of them have no collateral. The A-rated tranche is expected to yield a whopping (for this environment) 2.5 percent, and we're pretty sure the enhanced cash and cash-plus pseudo-money market funds will gobble this up." This search for yield has angered Reynolds, who thought he would never see subprime personal loans again. He said the situation was now reminiscent of the structured finance boom that began in 1994. "We're tempted to go check the attic to see if we have some old Beanie Babies that we could securitize," he said.

Zero Hedge:

• US Trade Deficit Drops To Lowest Since January 2010 As Crude Imports Plunge To 1997 Levels. 
• An Italian "Hung Parliament" - Europe's Biggest Political Risk.
• High-Yield Bond ETF Outflows Spike To Record. (graph) 
• Friday Farce: 16 Year Old Outperforms 99% Of Hedge Funds: "Oh My Gosh, That's So Easy, I Have To Do This". (video) 
• Farage Demolishes Europe's "Troll Patrol". (video)

Business Insider:

• Everything You Need To Know About The Enormous Snowstorm Headed For The Northeast. 
• Two Chilling Developments Suggest Asia May Be One Step Away From War. 
• An Explanation Of The Derivatives Scandal That Could End Up Reshaping The Italian Election. 
• South Korea Talks Of A Pre-Emptive Strike On North Korea's Nukes. 
• Six States With Embarrassingly Low Credit Ratings. 
• Actually, It Looks Like GoDaddy Lost Up To $7 Million On That Disgusting Superbowl Ad.
• There's Going To Be A 'Brutal Reallocation Of Risk', And Then We'll See Where All The Hidden Leverage Is. 
• FINANCIAL ADVISOR INSIGHTS: Investment Newsletter Writers Haven't Been This Bullish On Stocks In 13 Years.

4-Traders.com:

• Bond ETFs inflows strong to start 2013. (video)

Reuters: 

• U.S. Treasury in no rush to exit Ally Financial stake -source. The U.S. Treasury, under pressure to quickly wind down its crisis-era bailouts, believes it will take time to shed auto lender Ally Financial because the company's mortgage lending unit is in a messy bankruptcy, a person familiar with the matter told Reuters. Ally is one of Treasury's largest remaining holdings, but the lender will be hard to exit as long as it is working through the bankruptcy of its Residential Capital unit and is also selling its international operations, the person said.
• Canada hit with surprise jobs loss, weak housing starts. Canada's economy unexpectedly shed jobs in January, while housing starts plunged, suggesting global uncertainty, weak prices for Canadian oil, and a government clampdown on the property market will drag on growth in early 2013.

AP: 

• Iraq bombs kill 36, Sunnis stage protest rallies. Car bombs struck two outdoor markets and a group of taxi vans in Shiite areas across Iraq on Friday, killing at least 36 people and wounding nearly 100 in the bloodiest day in more than two months, as minority Sunnis staged large anti-government protests.

Bear Radar

Style Underperformer:

• Large-Cap Value +.12%

Sector Underperformers:

• 1) Education -1.1% 2) Gold & Silver -.63% 3) Construction -.60%
  

Stocks Falling on Unusual Volume:

• SKUL, TVL, SD, HK, NUAN, CXW, RVBD, WHZ, MCO, CSTR, CTRX, VSAT, NSP, RSG, KEYW, INTU, VPFG, TSRA, LBTYK, HTWR, VECO, IVC, EFX, TCK, PTP, BR, LH, SSD, MHP and VPFG

Stocks With Unusual Put Option Activity:

• 1) NUAN 2) CCL 3) XLP 4) TGT 5) LNKD
  

Stocks With Most Negative News Mentions:

• 1) TCK 2) ETR 3) LPL 4) RL 5) BAC
  

Charts:

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