Bull Radar

Style Outperformer:

• Small-Cap Growth +1.38%

Sector Outperformers:

• 1) Gaming +1.82% 2) Networking +1.68% 3) Homebuilding +1.58%
  

Stocks Rising on Unusual Volume:

• CROX, HLF, CIT, PII, CMG, WWD, SANM, LEJU, STLD, ARMH, HLX, CNC, WAT, INVN and APA

Stocks With Unusual Call Option Activity:

• 1) GPOR 2) TIBX 3) HLF 4) CMG 5) A
  

Stocks With Most Positive News Mentions:

• 1) CMG 2) APA 3) LMT 4) CMCSA 5) SANM
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:

• Malaysia Air Search Chaos Evokes Korean-Air Crash Cover-Up. The seizing of flight recorders from the downed Malaysian Airlines (MAS) jet by Russia-backed Ukrainian rebels has parallels with the Soviet response to the destruction of another civil airliner more than three decades ago. After Sukhoi Su-15 interceptors used air-to-air missiles to shoot down Korean Air Lines (003490) Flight 007 when the Boeing Co. (BA) 747 strayed into Soviet airspace in 1983, a security clampdown was immediately imposed at the crash site off Sakhalin Island, with the jet’s so-called black boxes spirited away from the scene. 

• Bank of Japan Majority Won’t Be Swayed by Kuroda Ideology. More than a year after securing support at the Bank of Japan for unprecedented monetary stimulus, Governor Haruhiko Kuroda has yet to persuade most board members that they have the power to achieve their inflation target. A majority of the nine members disagree with Kuroda’s view that flooding the economy with cash is sufficient to get stable 2 percent gains in consumer prices, according to people familiar with their thinking. Most conclude it cannot be done without government steps to raise Japan’s growth potential, they said, asking not to be named because the discussions are private. 

• Dubai Haven Status Frays as CDS Follow Iraq Higher: Arab Credit. Dubai is losing the trust of debt investors faster than any nation in the Middle East except Iraq as regional turmoil threatens its haven status. The cost of insuring the emirate’s bonds against non-repayment using credit-default swaps climbed to 165 basis points on July 20, the highest level since May 5, according to prices compiled by CMA. Swaps gained 30 basis points since June 9, compared with an increase of 93 basis points for Iraq, where militants from Islamic State, an al-Qaeda offshoot formerly known as ISIL, have taken control of parts of the country.

• Asia Stocks Gain With Oil Near 3-Week High; Soybeans Fall. Asian stocks rose as Japanese markets resumed after a holiday. Crude oil held near a three-week high and Indonesian rupiah forwards gained, while soybean futures extended declines into a fourth day. The MSCI Asia Pacific Index added 0.2 percent by 10:01 a.m. in Tokyo, rising a second day. Japan’s Topix index, which slid 0.8 percent when it last traded July 18, rose 0.5 percent.

Wall Street Journal: 

• Bodies From Malaysia Airlines Flight Begin Long Trip to Netherlands. Pro-Russian Rebels Agree to Hand Over Flight Data Recorders to Malaysian and Dutch Officials.

• U.S. Calls for Immediate Truce in Gaza as Death Toll Mounts. Palestinian Deaths Reach 571.

• Small-Cap Stocks Run Into Big Trouble. Small-company shares' summer swoon deepened Monday, underscoring investor concern about valuations. The Russell 2000 index of smaller companies, typically those with market values below $1 billion, dropped 0.4% Monday, outpacing a 0.3% decline in the Dow Jones Industrial Average and a 0.2% slide in the S&P 500. Monday's drop comes as...

• Hamas's Civilian Death Strategy. Gazans shelter terrorists and their weapons in their homes, right beside sofas and dirty diapers.

MarketWatch.com:

• Treasury yield curve again flattest in five years. 10-year yield hits lowest point since end of May.

• Johnson & Johnson(JNJ) sets $5 billion share buyback.

CNBC:

• Chipotle(CMG) tops Street forecasts; stock jumps. Fast-casual chain Chipotle Mexican Grill's net income and revenue easily beat Wall Street's expectations on Monday. 

• Which ‘swans’ are on markets’ radar this summer? (video)

Zero Hedge: 

• How RenTec Made More Than $34 Billion In Profits Since 1998: "Fictional Derivatives".

• France Defies US, British Demands To Kill Mistral Sale To Putin... For Now.

• Saxobank: "Be Warned" Of Delayed Market Reaction To "Escalation Of Global Turmoil". (graph)

• Netflix Meets EPS, Beats On International Subs, Guides To Lower Q3 EPS And Domestic Subs. (graph)

• With ISIS Now Controlling 35% Of Syria And Most Of Its Oil Fields, Iraq Issues An Ultimatum To The US.

• The New Scariest Chart In America. (graph)

• Spot The China Liquidity Crisis. (graph)

• Citi: "Asset Markets Are Ill-Prepared For Any Risk-Negative Shock".

Business Insider: 

• Why Putin's Officers Are Directly Responsible For Shooting Down MH17.

• China's Total Debt Surges To 251% Of GDP. (graph)

• BLACKROCK(BLK): 'Investors Should Buckle Up For More Volatility Ahead'.

Reuters:

• Texas Instruments(TXN) expects higher quarterly revenue, says markets OK. Texas Instruments Inc said it expects higher third-quarter revenue following recently improved demand for chips used in cars, industrial equipment and communications gear. 

• Rent-A-Center(RCII) sees weak demand, cuts forecast. Rent-to-own home furniture retailer Rent-A-Center Inc cut its full-year forecast for revenue and profit, saying it expected demand to remain weak, sending its shares down as much as 2 percent in extended trade. 

• Hedge fund exit requests drop to six-month low in July.

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

Telegraph: 

• French economy 'catastrophic’, says business federation. President of France’s equivalent of the CBI calls for an end to the 75pc tax rate and 35-hour working week.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.25% to +1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 104.0 +2.0 basis points.

• Asia Pacific Sovereign CDS Index 72.50 unch.

• FTSE-100 futures +.24%.

• S&P 500 futures +.09%.

• NASDAQ 100 futures  +.11%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RF).21

• (LXK)/.93

• (LMT)/2.66

• (GCI)/.64

• (KMB)/1.50

• (STT)/1.26

• (CIT)/.84

• (DD)/1.17

• (VZ)/.90

• (TRV)/2.07

• (UTX)/1.70

• (CMCSA)/.72

• (HOG)/1.46

• (IR)/1.09

• (MO)/.66

• (KO)/.63

• (AMTD)/.34

• (MCD)/1.44

• (BTU)/-.29

• (MSFT)/.60

• (ISRG)/2.82

• (XLNX)/.61

• (JNPR)/.38

• (LLTC)/.56

• (VMW)/.79

• (AAPL)/1.23

• (BRCM)/.61

• (EA)/-.04

• (SCCO)/.43

• (HTZ)/.45

Economic Releases
8:30 am EST

• The CPI for June is estimated to rise +.3% versus a +.4% gain in May.

• The CPI Ex Food & Energy for June is estimated to rise +.2% versus a +.3% in May.

9:00 am EST

• The FHFA House Price Index for May is estimated to rise +.2% versus unch. in April.

10:00 am EST

• The Richmond Fed Manufacturing Index for July is estimated at 5.0 versus 3.0 in June.

• Existing Home Sales for June are estimated to rise to 4.99M versus 4.89M in May.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Euro Area Govt Debt report, Senate Corp Tax Hearing and the US weekly retail sales reports could impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and real estate 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 Slightly Lower into Final Hour on Russia-Ukraine/Mideast Tensions, European/Emerging Markets Debt Angst, Global Growth Worries, Healthcare/Restaurant Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.75 +5.72%

• Euro/Yen Carry Return Index 143.11 +.02%

• Emerging Markets Currency Volatility(VXY) 5.94 -.34%

• S&P 500 Implied Correlation 51.76 +3.41%

• ISE Sentiment Index 94.0 unch.

• Total Put/Call .88 -2.22%

• NYSE Arms .86 -12.36% 

Credit Investor Angst:

• North American Investment Grade CDS Index 59.56 +1.91%

• European Financial Sector CDS Index 71.0 +2.73%

• Western Europe Sovereign Debt CDS Index 35.46 -2.56%

• Asia Pacific Sovereign Debt CDS Index 72.77 +1.58%

• Emerging Market CDS Index 245.11 +2.94%

• China Blended Corporate Spread Index 306.13 -.48%

• 2-Year Swap Spread 20.0 +.75 basis point

• TED Spread 21.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 unch.

Economic Gauges:

• 3-Month T-Bill Yield .02% +1.0 basis point

• Yield Curve 198.0 -2.0 basis points

• China Import Iron Ore Spot $96.0/Metric Tonne -.62%

• Citi US Economic Surprise Index -18.0 unch.

• Citi Emerging Markets Economic Surprise Index -4.80 unch.

• 10-Year TIPS Spread 2.22 unch.

Overseas Futures:

• Nikkei Futures: Indicating +73 open in Japan

• DAX Futures: Indicating +22 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech/biotech sector longs and index hedges

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:   

• Malaysia Says Accord Reached to Hand Over Bodies of MH17. Malaysian Prime Minister Najib Razak said rebels in eastern Ukraine agreed to hand over bodies of crash victims and grant access to the site where a passenger jetliner was brought down last week near the Russian border. The agreement to transfer the remains of 282 people to the Netherlands was reached with Alexander Borodai, prime minister of the self-proclaimed Donetsk People’s Republic, Najib said today at his official residence in the administrative capital of Putrajaya. The two black boxes will be handed over to a Malaysian team in Donetsk tonight, he said.
• Four Die in Gaza Hospital Shelling as Death Toll Tops 500. Israeli tank shells slammed into a Gaza Strip hospital, killing a patient and three relatives and wounding 50 other people, Gaza health officials said, as U.S. Secretary of State John Kerry headed to the Middle East on a mission to halt two weeks of violence. The Israeli military, which has been fighting to quell rocket fire from Hamas-controlled Gaza and destroy tunnels dug for cross-border raids, said it was looking into the report.
• Junk Sales Soaring 92% as Fed Pledge Spurs Deluge: Mexico Credit. Mexico’s riskiest companies have almost doubled their bond sales abroad this year as surging demand for junk debt sends borrowing costs to a record low. “With rates staying this low, reaching down for yield is the new sport,” Claudio Robertson, the head of fixed-income trading at Investment Placement Group, said by e-mail. “Comparable bonds are very hard to get.”
• Godot Seen Showing Up Sooner Than Stronger Global Growth. IMF could well stand for “It’s Moderating Forecasts” -- so often has the International Monetary Fund downgraded the outlook for world economic growth. The Washington-based lender is poised this week to cut its estimate for global expansion in 2014 from 3.6 percent in April. That was a reduction from the 3.7 percent it anticipated in January and the 4.1 percent in January 2013.
• McDonald’s(MCD), Yum(YUM) Cease Using Chinese Meat Supplier During Probe. McDonald’s Corp. (MCD) and Yum! Brands Inc. (YUM) halted buying meat products from a Shanghai supplier while authorities investigate allegations that the company sold chicken and beef past their expiration date. 
• Alan Krueger Says Europe at Risk of Bank Runs. (video)
• Russia Stocks, Bonds Slide as Putin Faces More Sanctions. Russian stocks fell the most since the nation’s incursion in Crimea, bonds slid and default risk climbed as global indignation over the downing of a Malaysian Air jet spurred speculation new sanctions will be imposed. The Micex Index (INDEXCF) dropped 2.7 percent to 1,384.50 by the close in Moscow, the most since March 3. About $47 billion was erased from the gauge’s market value last week, the most in four months, according to data compiled by Bloomberg. OAO Gazprom, the bourse’s biggest weighted company, dropped 2.3 percent. The yield on ruble debt due 2027 rose 19 basis points to 9.23 percent, a more than two-month high. The cost of insuring against losses on Russia’s sovereign debt rose to the highest level since May.
• European Stocks Drop as Russia Faces Tougher Sanctions. European stocks fell, after posting a weekly gain, as the U.S. and Europe threatened tougher sanctions on Russia over its suspected role in the shooting down of flight MH17 in Ukrainian airspace. Commerzbank AG dropped 1.9 percent after a report that Germany’s financial-markets regulator found high operational risks at the country’s second-biggest lender. Deutsche Post AG lost 1.6 percent after JPMorgan Chase & Co. lowered its earnings and stock-price estimate for Europe’s largest postal company. Julius Baer Group Ltd. jumped the most since at least October 2009 after saying first-half profit rose 56 percent. The Stoxx Europe 600 Index fell 0.5 percent to 337.95 at the close in London.
• Fed’s Junk Loan Bubble-Busting Faces Trouble as Sales Jump. One of the Federal Reserve’s first post-crisis tests of its ability to quash excessive risk-taking using regulatory tools is so far looking like a failure. The Fed’s Board of Governors told Congress last week that it’s engaged in “strong supervisory follow-up” to guidance given to banks in 2013 to improve their underwriting standards for high-yield loans. Despite those efforts, Chair Janet Yellen said she’s still seeing a “marked deterioration” in quality. For the first time, more than half of the junk-rated loans arranged in the U.S. this year lack typical lender protections like limits on the amount of debt borrowers can amass relative to earnings. Yellen’s own easy-money policies are boosting demand for such high-yielding products at the same time that she tests her doctrine that financial bubbles should be constrained by supervisory actions, not a general rise in interest rates.
• Ex-Jefferies Bond Trader Anticipates Junk Swoon. Fiera Quantum, one of the winners of the meltdown in Canada’s asset-backed commercial paper market, is looking for its next trade idea in junk bonds. The Toronto-based hedge fund manager owned by Fiera Capital Corp. (FSZ) started the FQ Income Opportunities Fund in May to take short positions, or bearish bets, balancing bullish investments in U.S. and Canadian high-yield bonds. Fiera Capital oversees C$82 billion ($76 billion) of assets. “If there’s ever a time to get more cautious, it’s now,” said Angus Rogers, who left his job as head of high-yield trading at Jefferies Group LLC in New York in March and moved to Toronto to start the fund with Greg Foss, who started betting on restructured commercial paper four years ago. “Most of the credit rally has happened. Over the next two years, defaults are definitely going higher.” 
• Carmelo Anthony Forms Fund to Invest in Technology Startups. New York Knicks All-Star Carmelo Anthony formed a fund to invest in technology startups.

Wall Street Journal:

• Israel Says Seven More Officers, Troops Killed in Gaza Ground Operation. Palestinian Death Toll in Two-Week-Old Offensive Reaches 550, Health Ministry Says.
• Why Putin Is Willing to Take Big Risks in Ukraine. A Look at Differing Fates of Poland, Ukraine Gives Clues.
• Rick Perry to Deploy National Guard at U.S.-Mexico Border. Governor Poised to Activate 1,000 Troops in South Texas.

MarketWatch.com:

• Yellen encourages ‘fully-fledged equity bubble,’ says Jeremy Grantham. Jeremy Grantham blasts Janet Yellen and her predecessors at the Federal Reserve in his latest quarterly letter. The Fed chairwoman is “sticking faithfully” to the “clearly wrong” policies of Alan Greenspan and Ben Bernanke, writes Grantham, who is the founder of Boston-based money manager GMO and has a reputation for sniffing out market bubbles early. He says: 
• A junk-bond warning: Investors exit as yields rise. Investors pull most money from high-yield bond funds since last summer. 
• China’s meaningless GDP figures. Opinion: Bloated Chinese economy needs austerity diet.

CNBC: 

• Obama 'timid' in response to plane crash, GOP says. (video) Republicans this weekend roasted President Barack Obama over what they called his "timid" and ineffectual reaction to the Malaysia Airlines flight that was shot down over eastern Ukraine last week, killing all 298 aboard.
• Pershing Square's Ackman: Why I think Herbalife(HLF) is going to collapse.
• China: Don’t rush to blame Russia for MH17. (video) While the West ramps up pressure on Russia and its President Vladimir Putin over the downing of a Malaysia Airlines jetliner over eastern Ukraine, Moscow is finding some support from the East.
• New college grads hit by slow wage growth: Fed study.

ZeroHedge: 

• Russian Sanctions Leading To Economic Contraction... In Germany?
• China Sends Surveillance Ship To Hawaii In Retaliation To US Navy Build Up In Its Back Yard.
• As Bearish Russell 2000 Bets Hit 3 Year High, Here Is How Hedge Funds Are Doing In 2014. (graph)
• They Call Them Junk Bonds For A Reason...(graph)
• Putin Makes First Official Statement; Russia To Cut IBM, Microsoft Dependence: Complete Ukraine Situation Summary.

ValueWalk: 

• What Family Offices Are After When Investing With Hedge Funds.

Business Insider: 

• 15 Astounding Technologies DARPA Is Creating Right Now.
• Everything We Know About The Huge Spy Base In Cuba That Russia Is Reopening.

Telegraph:

• Global industry stalls as Europe's slowdown threatens recovery. Europe's recovery "runs out of steam" as broker Macquarie warns that China alone can't support global industrial output. 
• Have central banks been breaking the law? Quantitative easing has had a reverse Robin Hood-type effect by robbing from the poor and giving to the rich.

Bear Radar

Style Underperformer:

• Small-Cap Value -1.02%

Sector Underperformers:

• 1) Coal -2.1% 2) Restaurants -1.31% 3) Hospitals -1.13%

Stocks Falling on Unusual Volume:

• SIX, DVA, WERN, HAS, ADMS, XRS, YUM, ABBV, SHPG, BBT, RKT, MAT, ITRI, CE, CSCD, BGS, NTI, CTRL, TCS, LO, MAN, CHE, PRSC, BTU and MTRN

Stocks With Unusual Put Option Activity:

• 1) UTX 2) LEN 3) GE 4) TXN 5) JNK
  

Stocks With Most Negative News Mentions:

• 1) DVA 2) AIG 3) RKT 4) ITRI 5) MNST
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.61%

Sector Outperformers:

• 1) Semis -.08% 2) Oil Service -.11% 3) Alt Energy -.21%
  

Stocks Rising on Unusual Volume:

• KNDI, STLD, ANAC and CBSO

Stocks With Unusual Call Option Activity:

• 1) OREX 2) FL 3) EMC 4) PLUG 5) RFMD
  

Stocks With Most Positive News Mentions:

• 1) STLD 2) HAL 3) EMC 4) HURC 5) AGN
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume