Bull Radar

Style Outperformer:

• Small-Cap Value +.19%

Sector Outperformers:

• 1) Airlines +1.59% 2) Computer Services +1.32% 3) Coal +1.14%
  

Stocks Rising on Unusual Volume:

• SONC, GALT, HDS, RAX, NPSP, MKC, NOG and ZLTQ

Stocks With Unusual Call Option Activity:

• 1) ASH 2) TSO 3) FIO 4) WAG 5) LAMR

Stocks With Most Positive News Mentions:

• 1) CCL 2) GOOG 3) RAX 4) WFC 5) AAPL
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:

• Russia Suspended From G-8 as Leaders Warn of Sanctions. The world’s top industrial powers threatened further sanctions to deter Russian President Vladimir Putin from taking over other parts of Ukraine and suspended Russia from participating in the Group of Eight. Meeting for the first time since last week’s annexation of Crimea by Russia, Group of Seven leaders said last night they won’t attend a planned G-8 meeting which was to have to been held in Sochi, site of the Winter Olympics, and will instead hold their own summit in June in Brussels. 
• Goldman Cuts Topix Forecasts on ‘Unanticipated Weakness’. Goldman Sachs (GS) Group Inc. lowered its forecasts for Japanese stocks, citing “the market’s unanticipated weakness and limited near-term catalysts.” The brokerage reduced its three-month target for the Topix index (TPX) to 1,200 from 1,350, Chief Japan Strategist Kathy Matsui wrote in a note dated March 20. The new forecast is 3.1 percent higher than the gauge’s level of 1,163.63 at the trading break in Tokyo today. Goldman Sach cut its six-month Topix forecast to 1,300 from 1,375, while maintaining its 12-month target at 1,450 on expectations that earnings per share will rise 21 percent in the fiscal year starting April. The Topix slumped 11 percent this year through yesterday, trailing all other major developed markets tracked by Bloomberg.
• Short China Stocks to Win From Rising Default Risk, Maglan Says. Investors should avoid China’s bond market after the first onshore default because state intervention and debt restructuring could prompt losses, according to New York-based hedge fund Maglan Capital LP. The best way to make money from distressed companies in the world’s second-largest economy is by betting against listed stocks, according to David Tawil, co-founder of Maglan Capital, which invests in companies struggling to repay their debt. “In China, government involvement is much more pervasive, especially in industries like banking and real estate,” Tawil said in a March 21 phone interview. “The only way to play the distressed cycle is shorting equities.
• China Money Rate Rises a Ninth Straight Day as PBOC Drains Funds. The seven-day repurchase rate, a gauge of funding availability in the interbank market, climbed four basis points to 3.62 percent as of 10:51 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It’s advanced a total of 140 basis points since March 12 and reached 3.68 percent yesterday, the highest in three weeks.
• China Banks Drained by Funds Called Vampires Seek Rules. It has been labeled a “blood-sucking vampire” by a prominent commentator on state-run television. Executives at China’s largest banks have called for regulators to curb its rapid expansion. The focus of this ire is Internet financing, specifically Yu’E Bao, the fund pioneered nine months ago by Alibaba Group Holding Ltd.’s online-payment affiliate Alipay. Its ease of use, involving a few taps on a smartphone, has drawn deposits from 81 million customers, more than the population of Germany, as they chase returns higher than China’s banks can offer. The total exceeded 500 billion yuan ($80 billion) as of Feb. 28, according to the official Xinhua news agency, double the amount reported by Alipay in mid-January. 
• Deutsche Bank Says China Private Stocks Riskier Than SOEs.  John-Paul Smith, the Deutsche Bank AG strategist who’s been writing about the dangers of buying state-owned Chinese stocks since 2010, says private companies are now a bigger risk to investors as valuations surge. Smith’s warnings about government intervention in the world’s second-largest economy foreshadowed a shift by money managers away from state-controlled banks, commodity producers and industrial companies, known as SOEs. Investors have instead been piling into privately-owned firms that sell services and consumer goods, propelling an MSCI Inc. gauge of Chinese technology stocks to valuations seven times more expensive than financial companies this month, the biggest gap since 2001.
• Brazil’s Credit Rating Cut to BBB- by S&P on Sluggish Growth. Brazil’s credit rating was cut by Standard & Poor’s, which said sluggish economic growth and an expansionary fiscal policy are fueling an increase in the country’s debt levels. S&P downgraded the government one level to BBB-, its lowest investment-grade rating, from BBB. The new ranking is in line with countries including Spain and the Philippines and one notch below Russia. Yields on the country’s $2.15 billion of bonds due 2023 have climbed 1.01 percentage point in the past year to 4.26 percent, according to data compiled by Bloomberg.
• Asia Stocks Swing After U.S. Manufacturing Index Falls. Asian stocks swung between gains and losses, after the biggest rally in a month for the regional benchmark index yesterday, as data showed a slowdown in U.S. manufacturing and investors weighed the prospect of a recession in Russia. The MSCI Asia Pacific Index was little changed at 134.29 as of 12:14 p.m. in Tokyo.

Wall Street Journal:

• Crisis in Ukraine. Streaming Coverage:
• SEC Is Probing Dealings by Banks and Companies in Loan Securities. The Securities and Exchange Commission is investigating whether a Wall Street boom in complicated bond deals is creating new avenues for fraud, according to people close to the probes.
• NATO's Military Decline. As Russia re-arms, the West increasingly neglects its defenses.

Zero Hedge:

• Algo Activity (And Manipulation) Breaks Record On Friday's Quad Witching Debacle.
• Russia Is Slowly Turning The NatGas Tap Off To Europe.
• Message To The Fed: Here Are A Few Things That You Can't Do.
• In A World Artificially Priced To Perfection, The Imperfections Appear.
• IceCap: "Which Bubble Is Created Next?".
• Despite Late-Day Ramp, Stocks Slide As Yield Curve Flattens To 2009 Lows. (graph)

Business Insider:

• FORMER AMBASSADOR TO RUSSIA: If Putin Invades Eastern Ukraine, There Could Be Guerrilla Warfare For Years.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.99

Financial Times:

• Biotech sell-off heightens fears that sector has reached peak.

Telegraph:

• Capital controls feared in Russia after $70bn flight. Investors are withdrawing money at a rapidly increasing rate amid escalating sanctions from the West.

South China Morning Post:

• China Acts Like Russia in Dispute, Japan Official Says. China's attempt to unilaterally grab disputed islands from Japan are similar to Russia' behavior in seizing Crimea, citing Yasutoshi Nishimura, sr. cabinet office vice minister.

Shanghai Securities News:

• China May Face 'Serious' Cash Flow Problems, Ex-CBRC Head Says. China may face "serious" cash flow problems and needs good management of liquidity for the next two years, according to a transcript of former China Banking Regulatory Commission Chairman Liu Mingkang's remarks published today. Fed tapering may keep impacting China and emerging economies in 2014 and 2015, Liu says. Fed fund rate may rise to about 4% and the liquidity problems behind it can't be underestimated, Liu says. Structural bull market for sovereign bonds of developed countries and Asian emerging nations is over, Liu says.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 134.0 unch.

• Asia Pacific Sovereign CDS Index 95.25 -.5 basis point.

• FTSE-100 futures +.44%.

• S&P 500 futures +.20%.

• NASDAQ 100 futures  +.17%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (GIII)/.49
• (CCL)/-.08
• (MKC)/.58
• (WAG)/.93
• (PVH)/.142
• (SCS)/.17
• (SFD)/.82

Economic Releases
9:00 am EST

• The House Price Index for January is estimated to rise +.6% versus a +.8% gain in December.

10:00 am EST

• Consumer Confidence for March is estimated to rise to 78.5 versus 78.1 in February. 
• The Richmond Manufacturing Index for March is estimated to rise to 4 versus -6 in February.
• New Home Sales for February are estimated to fall to 445K versus 468K in January.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Lockhart speaking, Fed's Plosser speaking, G7 Meeting, UK inflation data, $32B 2Y T-Note auction, (AKAM) investor summit, (PNRA) investor day and the (NVDA) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate 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 50% net long heading into the day.

Stocks Falling into Final Hour on Russia/Ukraine Tensions, Rising Global Growth Fears, Technical Selling, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 15.03 +.2%

• Euro/Yen Carry Return Index 147.61 +.28%

• Emerging Markets Currency Volatility(VXY) 8.93 -.56%

• S&P 500 Implied Correlation 54.97 +1.16%

• ISE Sentiment Index 81.0 -28.32%

• Total Put/Call .96 +7.87%

• NYSE Arms .95 -25.24% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.51 +1.20%

• European Financial Sector CDS Index 100.82 +2.88%

• Western Europe Sovereign Debt CDS Index 47.34 +1.28%

• Asia Pacific Sovereign Debt CDS Index 95.45 -.42%

• Emerging Market CDS Index 312.41 -1.41%

• China Blended Corporate Spread Index 379.91 -.16%

• 2-Year Swap Spread 13.75 unch.

• TED Spread 19.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.0 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .05% unch.

• Yield Curve 229.0 -3.0 basis points

• China Import Iron Ore Spot $110.50/Metric Tonne -.18%

• Citi US Economic Surprise Index -33.80 -1.2 points

• Citi Emerging Markets Economic Surprise Index -4.80 -.6 point

• 10-Year TIPS Spread 2.16 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -110 open in Japan

• DAX Futures: Indicating +45 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/medical/tech sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:  

• World Leaders Discuss Ukraine as Worry Grows Over Russia. World leaders pledged further measures against Russia amid growing concern that it’s building up its forces on the border with Ukraine after annexing the Crimean peninsula. President Barack Obama and the other Group of Seven heads of government hold a meeting in The Hague tonight to decide what steps to take next in the crisis, including suspending Russia from the larger G-8 grouping in the worst standoff between the former Cold War enemies since the Soviet Union collapsed. Ukraine said today it deployed more troops to the frontier. 

• Russia Facing Recession as Sanctions Likely to Intensify. Sanctions imposed by the U.S. and the European Union are pushing Russia toward a recession as the intensity of their economic penalties increases after the annexation of Crimea earlier this month. Banks including state-run VTB Capital say the world’s ninth-biggest economy will shrink for at least two quarters as penalties for annexing Crimea rattle markets, curb investment and raise the cost of borrowing. Sanctions that have so far focused on individuals via visa bans and asset freezes may be expanded to target specific areas of the economy.

• China’s Urbanization Loses Momentum as Growth Slows. The pace of migration of rural Chinese to cities, a dynamic hailed by Premier Li Keqiang as key to the nation’s development, is set to slow by a third in coming years, deepening economic-growth concerns. A government report released this month projected a 6.3 percentage-point rise in the share of people living in cities from 2013 to 2020 -- down from a 9.4-point gain the previous seven years. Nomura Holdings Inc. estimates that slower urbanization will slice as much as half a percentage point from annual gross domestic product growth over the next half decade.

• China Money Rate Completes Longest Rising Streak in Eight Months. China’s benchmark money-market rate rose for an eighth day, the longest stretch since July, after a central bank official said the nation will make “substantial progress” in freeing up interest rates. “While much needed, the deposit-rate reform is likely to raise costs throughout the economy and will be a drag on growth,” said Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong Kong. Lou’s comments are positive for the long-term potential, but may temper market hopes for policy stimulus, he said.

• Turkey Threatens Syria With Further Action After Warplane Downed. Turkey told Syria that it was ready to act again in defense of its borders after the shooting down of a warplane said to have flown into its territory. Foreign Minister Ahmet Davutoglu said today that the incursion should not be repeated, as the military justified yesterday’s action by Turkish combat aircraft against a Syrian MiG-23 that had ignored four warnings and briefly penetrated 1 kilometer (0.6 mile) into Turkish airspace, according to a statement. A Syrian SA-5 surface-to-air missile system locked on a Turkish F-16 for more than four minutes during a border patrol yesterday, the military said, without elaborating. 

• Canada Consumer Sentiment Falls on Quebec Separation Talk. 

• European Stocks Decline Most in Two Weeks; KPN Retreats. European stocks fell, after posting their biggest weekly advance in more than a month, as world leaders pledged further measures against Russia, and manufacturing gauges slipped in China, Germany and the U.S. Royal KPN NV lost 4.2 percent after Citigroup Inc. downgraded the stock. Stada Arzneimittel AG slumped 15 percent after cutting its 2014 forecast. CEZ AS, the largest Czech utility, climbed 5.1 percent after the nation’s finance minister said the government is seeking a 100 percent dividend payout. The Stoxx Europe 600 Index fell 1.1 percent to 324.39 at the close of trading in London.

• Gold Drops Most in 13 Weeks; Palladium Extends Rally. Gold futures for June delivery fell 1.9 percent to settle at $1,311.10 an ounce at 1:45 p.m. on the Comex in New York, the biggest drop since Dec. 19. Earlier, the price touched $1,308.40, the lowest for a most-active contract since Feb. 20. Trading was 54 percent above the average for the past 100 days for this time, data compiled by Bloomberg showed.

• Record U.S. Small-Caps Rally Sends Valuation 26% Above 1990s. In one corner of the U.S. equity market, investor enthusiasm is exceeding the frenzy of the Internet bubble. Small-cap shares tracked by the Russell 2000 Index have rallied for seven straight quarters, the longest stretch ever, sending valuations 26 percent above levels at the height of the 1990s rally. Gains in stocks from LogMeIn (LOGM:US) Inc. to Athenahealth Inc. have pushed the gauge up 248 percent since the bull market began five years ago, leaving price-earnings ratios about three times as high as for shares in the Standard & Poor’s 500 Index.

• Banker Deaths Leave Industry Concerned as Coroners Probe. Coroners in London are preparing to investigate two apparent suicides as unexpected deaths by finance workers around the world have raised concerns about mental health and stress levels in the industry.

Wall Street Journal:

• Malaysian Airlines Flight 370: Streaming Coverage. 

• Cisco(CSCO)) Joins Race to Offer Cloud Services. Firm to Spend $1 Billion in Next Two Years to Enter Market.

Fox News:

• Malaysia PM says satellite data indicates missing jetliner went down in Indian Ocean. A new analysis of satellite data in the search for Malaysia Airlines Flight 370 indicates that the plane went down in the southern Indian Ocean, Malaysia Prime Minister Najib Razak said Monday.

MarketWatch:

• El-Erian: Markets should be worrying about Ukraine. Markets have been lulled to complacency by geopolitical tensions in recent years, says to Mohamed El-Erian, who’s still typing up a storm after his departure from Pimco. But, he says, beware of Ukraine.

CNBC: 

• Momentum names like Tesla, Netflix hit hard. (video) 

ZeroHedge:  

• Ukraine Leader In New Leaked Recording: 8 Million Russians In Ukraine "Must Be Killed With Nuclear Weapons". Just like that Putin has his provocation carte blanche, as the second something, anything happens to any ethnic Russian in east Ukraine, Putin can point to precisely this conversation as proof of how Ukraine's "government" feels toward the ethnic minorities in the east, and why "they deserve to be protected" the Russian bearhug. Which has been precisely Putin's plan all along.

• US PMI Tumbles From Record High, Biggest Miss In 13 Months. (graph)

• Furious Chinese Demand Money Back As Housing Bubble Pops.

• Russian Politician Suggests Dividing Ukraine Along Lines Of Nazi-Soviet Pact, Proposes West Ukraine Referendum.

• Carl Icahn's Next No-Brainer? "A Major Sell-Down Of Market Is Coming".

• Obama Demands Russia Leave G-8; June Summit Cancelled While Ukraine Deploys Army Along Borders.

Business Insider:

• Russian Economy Grinding To A Halt As Ukraine Crisis Takes Heavy Toll.

• GRANTHAM: 'The Next Bust Will Be Unlike Any Other'. 

• More Than 100 People Are Missing After Giant Mudslide In Washington.

• High-Beta Stocks Are Getting Smoked.

• Here's What Nuclear Weapons Have To Do With The Ukraine Crisis.

• Over 500 Muslim Brotherhood Members Sentenced To Death In Egypt.

Washington Post:

• Fed's Williams Sees QE's End in 2014, Rate Rise in 2H 2015.

Financial Times:

• Fed’s growing repo role risks backfiring. Don’t fight the Fed is an oft-quoted adage among investors. Now the dictum may extend to the “shadow banking” world as the US central bank muscles into the murky realm of funding and leveraging between established banks and other financial players.

Bear Radar

Style Underperformer:

• Small-Cap Growth -2.42%

Sector Underperformers:

• 1) Gold & Silver -4.51% 2) Biotech -3.72% 3) Alt Energy -3.57%

Stocks Falling on Unusual Volume:

• NFLX, SCTY, SKYY, QQEW, ARWR, BIB, UGLD, IBB, HQH, HAE, HQL, BCEI, DATA, KPTI, QRE, TKMR, BOFI, SHO, LCI, KONG, DQ, MRTX, PNQI, KWEB, SRNE, TRIB, CLDX, RGP, BBCN, ZIO, JAZZ, DISH, SHO, DRTX, FMI, TIF, PCLN, WDAY, FNSR, DXCM, KBH, ILMN, PCYC, QRE, UCTT, ALKS, GTAT, ALXN, SUSS, N, INCY, ENDP, DATA, ARRS, HAE, FEYE, KS, HZNP, NPSP, P, RCPT, LCI, SGMO, UBNT, SPLK, OHRP and ARWR

Stocks With Unusual Put Option Activity:

• 1) PBI 2) ADBE 3) GPS 4) WDC 5) MON
  

Stocks With Most Negative News Mentions:

• 1) FB 2) GM 3) INTC 4) NFLX 5) NTAP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.62%

Sector Outperformers:

• 1) Utilities -.08% 2) Computer Services -.12% 3) Ag -.13%
  

Stocks Rising on Unusual Volume:

• NUS, BIS and HLF

Stocks With Unusual Call Option Activity:

• 1) EA 2) NEE 3) CLDX 4) STSI 5) IDRA

Stocks With Most Positive News Mentions:

• 1) CMCSA 2) NUS 3) AAPL 4) WMT 5) YELP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume