Weekly Outlook

U.S. Week Ahead by MarketWatch. 
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 increasing Mideast unrest, rising energy prices, technical selling, more emerging markets debt angst and rising long-term rates. 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 1,655.83 -2.10%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,655.83 -2.10%

• DJIA 15,081.41 -2.23%

• NASDAQ 3,602.77 -1.57%

• Russell 2000 1,024.30 -2.30%

• S&P 500 High Beta 26.23 -1.60%

• Value Line Geometric(broad market) 437.15 -2.10%

• Russell 1000 Growth 756.73 -2.20%

• Russell 1000 Value 845.73 -2.14%

• Morgan Stanley Consumer 1,013.84 -2.70%

• Morgan Stanley Cyclical 1,261.46 -1.39%

• Morgan Stanley Technology 787.63 -1.34%

• Transports 6,374.27 -1.63%

• Utilities 481.68 -4.25%

• Bloomberg European Bank/Financial Services 102.65 +1.55%

• MSCI Emerging Markets 39.55 +.67%

• HFRX Equity Hedge 1,111.77 -1.12%

• HFRX Equity Market Neutral 935.82 -.87%

Sentiment/Internals

• NYSE Cumulative A/D Line 185,490 -2.40%

• Bloomberg New Highs-Lows Index -265 -548

• Bloomberg Crude Oil % Bulls 31.4 +22.6%

• CFTC Oil Net Speculative Position 350,475 -1.97%

• CFTC Oil Total Open Interest 1,934,417 +2.94%

• Total Put/Call .91 +1.11%

• OEX Put/Call 1.70 -23.77%

• ISE Sentiment 78.0 -10.34%

• NYSE Arms 1.10 -23.60%

• Volatility(VIX) 14.37 +7.16%

• S&P 500 Implied Correlation 50.44 -1.06%

• G7 Currency Volatility (VXY) 9.26 +1.42%

• Emerging Markets Currency Volatility (EM-VXY) 9.64 +7.2%

• Smart Money Flow Index 11,453.93 -.92%

• Money Mkt Mutual Fund Assets $2.622 Trillion +.09%

• AAII % Bulls 34.5 -12.6%

• AAII % Bears 28.2 +5.7%

Futures Spot Prices

• CRB Index 292.49 +2.49%

• Crude Oil 107.46 +1.34%

• Reformulated Gasoline 296.75 +2.02%

• Natural Gas 3.37 +4.66%

• Heating Oil 308.31 +3.03%

• Gold 1,371.0 +4.33%

• Bloomberg Base Metals Index 196.54 +2.17%

• Copper 336.30 +1.63%

• US No. 1 Heavy Melt Scrap Steel 338.53 USD/Ton +4.38%

• China Iron Ore Spot 137.90 USD/Ton +3.60%

• Lumber 318.60 +3.64%

• UBS-Bloomberg Agriculture 1,412.68 +2.16%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 4.7% -60 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.0511 +1.54%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 117.52 +.20%

• Citi US Economic Surprise Index 36.60 -.3 point

• Citi Emerging Markets Economic Surprise Index -29.50 +.3 point

• Fed Fund Futures imply 40.0% chance of no change, 60.0% chance of 25 basis point cut on 9/18

• US Dollar Index 81.26 +.16%

• Euro/Yen Carry Return Index 135.67 +1.36%

• Yield Curve 248.0 +21 basis points

• 10-Year US Treasury Yield 2.83% +25 basis points

• Federal Reserve's Balance Sheet $3.603 Trillion +1.73%

• U.S. Sovereign Debt Credit Default Swap 21.89 +1.24%

• Illinois Municipal Debt Credit Default Swap 172.0 +1.94%

• Western Europe Sovereign Debt Credit Default Swap Index 82.28 -1.15%
  

• Emerging Markets Sovereign Debt CDS Index 239.78 +3.80%
  

• Israel Sovereign Debt Credit Default Swap 122.50 +6.52%

• Egypt Sovereign Debt Credit Default Swap 810.0 +5.88%

• China Blended Corporate Spread Index 383.0 -1 basis point

• 10-Year TIPS Spread 2.17% -9 basis points

• TED Spread 22.75 +1.25 basis points

• 2-Year Swap Spread 18.75 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -.75 basis point

• N. America Investment Grade Credit Default Swap Index 80.03 +5.23%
  

• European Financial Sector Credit Default Swap Index 139.43 +2.04%
  

• Emerging Markets Credit Default Swap Index 318.52 +7.36%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 105.0 -5 basis points

• M1 Money Supply $2.572 Trillion -.07%

• Commercial Paper Outstanding 1,004.1 +1.60%

• 4-Week Moving Average of Jobless Claims 332,000 -3,500

• Continuing Claims Unemployment Rate 2.3% unch.

• Average 30-Year Mortgage Rate 4.40% unch.

• Weekly Mortgage Applications 471.90 -4.74%

• Bloomberg Consumer Comfort -26.60 -3.1 points

• Weekly Retail Sales +3.70% +50 basis points

• Nationwide Gas $3.54/gallon -.04/gallon

• Baltic Dry Index 1,102 +10.0%

• China (Export) Containerized Freight Index 1,132.01 +2.69%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 20.0 -11.11%

• Rail Freight Carloads 257,969 +1.15%

Best Performing Style

• Large-Cap Value -2.1%

Worst Performing Style

• Mid-Cap Growth -2.7%

Leading Sectors

• Gold & Silver +11.9%

• Homebuilders +.2%

• Agriculture -.3%

• Gaming -.4%

• Steel -.6%

Lagging Sectors

• Utilities -4.2% 

• Airlines -4.4%

• Alt Energy -4.5%

• Disk Drives -5.9%

• REITs -6.7%

Weekly High-Volume Stock Gainers (17)

• OSIR, VLTR, INSY, ANAC, TREE, DGIT, ECOM, TASR, OLED, LVB, UBNT, WWWW, RPTP, WAGE, DTLK, FSS and DOLE

Weekly High-Volume Stock Losers (16)

• FF, SEAS, BIOS, MAIN, MIDD, RRTS, PMT, UAL, LPI, VAL, MPW, AMRI, LCC, PGEM, MODN and CREE

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Slightly Lower into Final Hour on Rising Rates, Mideast Unrest, Emerging Markets Debt Angst, REIT/Metals & Mining Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.51 -1.49%
• Euro/Yen Carry Return Index 135.63 -.12%
• Emerging Markets Currency Volatility(VXY) 9.65 +2.66%
• S&P 500 Implied Correlation 50.58 -2.84%

• ISE Sentiment Index 81.0 -4.71%

• Total Put/Call .96 unch.

• NYSE Arms 1.03 +.89% 

Credit Investor Angst:

• North American Investment Grade CDS Index 81.0 +4.14%

• European Financial Sector CDS Index 139.44 -.33%

• Western Europe Sovereign Debt CDS Index 82.29 -.26%

• Emerging Market CDS Index 318.80 +3.29%

• 2-Year Swap Spread 18.75 +1.0 bp

• TED Spread 22.75  +1 bp

• 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -.75 bp

Economic Gauges:

• 3-Month T-Bill Yield .04% -1 bp

• Yield Curve 248.0 +5 bps

• China Import Iron Ore Spot $137.90/Metric Tonne -2.34%

• Citi US Economic Surprise Index 36.60 -4.0 points
• Citi Emerging Markets Economic Surprise Index -29.50 +.2 point

• 10-Year TIPS Spread 2.17 -1 bp

Overseas Futures:

• Nikkei Futures: Indicating -5 open in Japan

• DAX Futures: Indicating -4 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and then covered some of them
• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Egypt Clashes Resume as Mursi Backers Rally Against Killings. Thousands of Egyptians poured into the streets after Friday prayers to protest this week’s deadly crackdown on Islamists, sparking clashes across the country. Troops backed by tanks and helicopters surrounded Ramsis Square, a focal point of rallies in central Cairo. The Muslim Brotherhood, which called the protests, put the death toll at 60, while state-run Ahram Online said 27 people died, seven in the capital. Security forces and demonstrators also clashed in the provinces of Giza, Alexandria, Fayoum Ismailiya, Damietta, Port Said and Gharbiya. The rallies were being held to protest the Aug. 14 killing of about 578 people when police stormed sit-ins by supporters of ousted President Mohamed Mursi and in the clashes that erupted across the country.

• Syrian Refugees ‘Streaming’ Into Northern Iraq, UN Says. More than 5,000 Syrians crossed into Iraq’s Kurdistan region yesterday in a “sudden, massive movement,” the United Nations refugee agency said. About 750 people initially crossed the Tigris River at Peshkhabour crossing, followed by a wave of 5,000 to 7,000 people, Adrian Edwards, spokesman for the UN High Commissioner for Refugees, told reporters in Geneva today, according to an agency e-mail summarizing his comments. Most of the Syrians were women, children and elderly people from embattled Aleppo and other regions near Syria’s border with Iraq, Edwards said, citing UN field officers at the scene.

• Crude Caps Longest Streak of Gains Since April. West Texas Intermediate crude capped the longest streak of gains since April as clashes in Egypt raised concern that Middle East supply will be cut. WTI for September delivery settled at $107.46 a barrel on the New York Mercantile Exchange, the highest level since Aug. 1. The volume of all futures traded was 1.5 percent below the 100-day average at 2:52 p.m. Futures advanced 1.4 percent this week and are up 17 percent this year.

• Emerging Stocks Fall as India’s Sensex Leads World Losses. Emerging stocks fell as Indian shares plunged the most among global indexes, the rupee sank to a record and a trading error roiled Chinese markets. Egypt’s bond yields soared after a crackdown left hundreds dead. The MSCI Emerging Markets Index slid 0.2 percent to 958.20 at 11:23 a.m. in New York. The S&P BSE Sensex Index dropped the most among among the 94 world gauges tracked by Bloomberg and the rupee weakened as much as 0.9 percent. A trading error at Everbright Securities Co. drove Chinese shares to the biggest swings since the global financial crisis, threatening to erode confidence in the second-worst performing stock market after Greece during the past four years. Indian stocks plunged amid concern that government efforts to stem the rupee’s slide to a record low will curb economic growth. Egypt’s default risk soared to the highest in more than a month. India’s S&P BSE Sensex Index dropped 4 percent in Mumbai as State Bank of India tumbled to the lowest level in four years. ICICI Bank Ltd. slumped 5.2 percent. The rupee touched an unprecedented 62.0050 per dollar today before closing 0.3 percent weaker from Aug. 14 at 61.6550 in Mumbai, according to prices from local banks compiled by Bloomberg. 

• China Stocks Roiled as Bad Trades Spur Shanghai Swings. China’s stocks were roiled by a trading error at Everbright Securities Co. (601788) that spurred a 53 percent surge in volumes and sent the Shanghai Composite Index to its biggest intraday gain since March 2009. The Shanghai gauge jumped from a loss of as much as 1 percent to a gain of 5.6 percent in two minutes during the morning session as 16 of the measure’s 20 biggest companies by weighting rose by the 10 percent daily limit. The index fell 0.6 percent at the close. Everbright’s trades were the main reason for the jump, the China Securities Regulatory Commission said in a statement. The exchange said trades will be settled as normal. 

• Gold Rises as Silver Caps Biggest Weekly Gain Since 2008. Gold rose to the highest in almost two months and silver capped the biggest weekly rally since 2008 on signs of higher physical demand for precious metals. Gold futures for December delivery added 0.7 percent to settle at $1,371 an ounce at 1:48 p.m. on the Comex in New York. Prices reached $1,379.20 after the close of regular trading, the highest since June 18. The precious metal gained 4.5 percent this week, the most since July 12.

• Europe Stocks Rise for Third Week as Growth Tops Forecast. European stocks advanced for a third straight week as data showing the euro area emerged from the longest recession on record outweighed speculation the Federal Reserve will trim monetary stimulus. Italian banks led gains as Banca Monte dei Paschi di Siena SpA and Unione di Banche Italiane SCPA rallied at least 12 percent. GAM Holding AG jumped the most in almost four years as the asset manager said first-half profit more than tripled. Fresnillo (FRES) Plc and Randgold Resources Ltd. increased at least 9 percent as prices for gold and silver rallied. The benchmark Stoxx Europe 600 Index increased 0.1 percent to 306.36 this week, extending its 2013 advance to 9.5 percent.

• Europe Credit Prices 25% Risk of Sovereign Shock: Morgan Stanley. Return of sovereign risk is the real threat to European credit, and investors should buy CDS protection as there's a 25% chance of another shock this year, Morgan Stanley analysts Andrew Sheets and Phanikiran Naraparaju wrote in a client note. Morgan Stanley less concerned with effects of higher U.S. rates or EM slowdown, re-escalation of euro-zone risks remains damaging to current portfolio positioning, as they're overweight financials and peripheral corporates.

• Samsung Said to Unveil Wristwatch-Like Smartphone Next Month. Samsung Electronics Co. (005930) will introduce a wristwatch-like device named the Galaxy Gear next month that can make phone calls, surf the Web and handle e-mails, according to two people familiar with the matter.

• AOL(AOL) Is Said to Be Cutting About 500 Jobs at Patch. AOL Inc. (AOL) is eliminating about 500 positions at its struggling Patch local-news business, or close to half of the division’s more than 1,000 employees, according to a person with knowledge of the decision.

• BofA(BAC) Will Dissolve Merrill Lynch Unit While Keeping Name. Merrill Lynch & Co., the 99-year-old firm known for its “thundering herd” of brokers pitching stocks to Main Street, may cease to exist as a legal entity more than four years after being acquired by Bank of America Corp.

Wall Street Journal:

• Deadly Showdown at Cairo Square. Protests Merge at Ramses Square, Spurring Gunfire, Teargas and a Grim Accounting; Dozens Seen Dead. Thousands of Islamist demonstrators who massed on central Cairo's Ramses Square met with deadly force Friday afternoon, turning a nearby mosque into a makeshift morgue where medics tried to revive shot protesters and people clambered up bloodstained steps to view at least 31 bodies that were laid out inside. Skirmishes continued in the afternoon around the square, where Muslim Brotherhood supporters converged in what they called a Day of Rage to mourn those killed on Wednesday, when a government crackdown on supporters of ousted President Mohammed Morsi sparked violence that left more than 600 people dead around the country.

• Fannie Could Curb Low-Down-Payment Loan Purchases. Fannie Mae is in discussions to curb its purchases of mortgages that require a minimum down-payment of 3%, according to people familiar with the discussions. Fannie never stopped accepting purchases of loans with 3% down payments, even after lending standards were ratcheted up following the housing bust. But many lenders stopped offering them, in part because they weren’t able to obtain mortgage insurance for those loans, which Fannie requires. In recent months, however, a series of changes in the mortgage market have led to an uptick in low-down-payment loans available for sale to Fannie. That prompted a review of the company’s lending policies, and officials are said to be working on a plan to limit the company’s purchases of these loans.

Zero Hedge:

• Live Feed From Egypt.

• JPMorgan(JPM) Advises To... Buy Gold?

• Consumer Confidence Misses Expectations By Most On Record. (graph)

• The Fed's "2016" Problem, Or Why The Taper (Non) Announcement May Just Be A Sideshow. 

• Selling Spurt Takes 10 Year Treasury Yield To Fresh Two Year High. (graph)

• Larry Summers' Fed Chair Odds Surge Again, Cross 70%; Yellen In The Dust. (graph)

Business Insider:

• The Trend In The Stock Market Has Turned Down.

• REPORT: SAC Investors Want Their Money Back Now, And That's Not OK With Steve Cohen.

• Upwards Of 60 Killed In Egypt As 'Day Of Rage' Leads To Violent Clashes [Photos]. 

• The CIA Has Finally Confirmed That Area 51 Exists.

• Fears Over Al Qaeda 'Breast Implant Bomb' Causing Long Lines At London's Heathrow Airport.

• India Faces Its Worst Economic Crisis Since 1991 When It Had To Airlift 67 Tons Of Its Gold For A Loan.

• People Were Jumping Off A Bridge In Egypt to Avoid Gunfire From 'Day of Rage' Clashes [VIDEO].

Reuters:

• Sensex slumps 770 points on capital control, U.S. stimulus fears. The Nifty slumped 4 percent on Friday, marking its biggest daily drop in almost two years, as blue chips including HDFC Bank were hit across the board on fears U.S. stimulus tapering would trigger foreign selling and as the rupee hit a record low. The Reserve Bank of India's measures late on Wednesday to restrict how much its citizens and companies can invest abroad also raised fears of outright capital controls that would further undermine the confidence of foreign investors, hitting the rupee. The volatility index which measures the cost of protection via options and is seen by some investors as a "fear" gauge gained 26.4 percent, marking its biggest single day percentage gain since June 17, 2009. The outlook remains weak as Indian shares marked their fourth consecutive weekly fall, totalling a decline of 7.7 percent, as the rupee has tumbled despite various measures undertaken to prop up the currency.

• Brazil real hits new low despite central bank intervention. The Brazilian real fell to its weakest in over four years on Friday even as the central bank started rolling over some $5 billion in traditional currency swaps, derivatives that emulate a sale of dollars in the futures market.

The Guardian:

• Barack Obama's lost youth. The president's approval rating is falling faster among young people than any other group. Will Republicans capitalise on it?

FAZ:

• Merkel Rejects Debt Cut for Greece. Debt cut for Greece could create uncertainty elsewhere in Europe, Merkel said in an interview.

Bear Radar

Style Underperformer:

• Large-Cap Value -.71%

Sector Underperformers:

• 1) Coal -2.77% 2) REITs -2.31% 3) Utilities -1.52%

Stocks Falling on Unusual Volume:

• IBN, SBRA, HDB, PBR, PTR, DK, IOC, ING, CMCSK, TTM, POWR, PRGO, JWN, JOSB, SFUN, RYAAY, DTSI, DFP, K, GIS, AEH, IPI, AU, BYI, DXYN, UVV, ITC, ITUB, DDS, M, VTR and MPW

Stocks With Unusual Put Option Activity:

• 1) ITB 2) HOT 3) JWN 4) EEM 5) LEN
  

Stocks With Most Negative News Mentions:

• 1) GIS 2) RIG 3) GM 4) AOL 5) SPG
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume