Bull Radar

Style Outperformer:

• Large-Cap Value +.17%

Sector Outperformers:

• 1) Computer Hardware +1.04% 2) Utilities +.79% 3) Internet +.72%
  

Stocks Rising on Unusual Volume:

• MOVE, TK, AMAG, VIMC, EBAY, CTAS, CENX and INVN

Stocks With Unusual Call Option Activity:

• 1) MTH 2) CORN 3) OWW 4) EBAY 5) DHR

Stocks With Most Positive News Mentions:

• 1) JNJ 2) CNP 3) MOVE 4) AAPL 5) GOOG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• Hong Kong Protesters Block Roads as Leaders Set Deadline. Tens of thousands of protesters filled streets in Hong Kong through the night to press for open elections and the resignation of Chief Executive Leung Chun-ying, as student leaders set an Oct. 1 deadline for their demands to be met. While their numbers had thinned this morning, demonstrators remained in the main protest area near government headquarters in the Admiralty district, as well as in Causeway Bay and Mong Kok. Main roads through the central business district remain closed and some bus routes have been suspended, the government said in a statement late yesterday.

• Islamic State Shells Hit Turkey Amid Syria Border Fight. Turkish tanks deployed along the border with Syria as shells fired by Islamic State militants landed inside Turkey, injuring five people including two soldiers. One of the mortar shells hit near the border crossing of Mursitpinar, close to a group of journalists and Turkish security forces, CNN-Turk said. Another shell landed near a refugee camp, about a kilometer inside Turkey. Regular explosions and gunfire could be heard from Turkish territory as Turkish troops returned fire, state-run Anadolu Agency said. 

• China Factory Gauge Falls From Initial Reading as Growth Slows. A Chinese manufacturing gauge fell from an initial reading a week ago as a property slump weighs on the world’s second-largest economy. The Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics for September was at 50.2, lower than the flash reading of 50.5 and unchanged from August. Numbers above 50 signal expansion.

• Japan’s Output Unexpectedly Slumps as Retail Sales Rise. Japan’s output unexpectedly fell while stronger retail sales and an improving job market showed resilience in the world’s third-biggest economy as Prime Minister Shinzo Abe weighs another sales-tax increase. Industrial production declined 1.5 percent in August from July, compared with the median estimate of 31 economists surveyed by Bloomberg News for a 0.2 percent gain. Retail sales increased 1.9 percent from the previous month, as the jobless rate slid to 3.5 percent.

• Asian Stocks Slide on Hong Kong as Kiwi Drops With Crude. Asian stocks fell, with the regional index headed for its biggest monthly drop since May last year amid concern over tensions in Hong Kong and after an unexpected decline in Japanese factory output. New Zealand’s dollar dropped to near a one-year low as crude oil declined. The MSCI Asia Pacific Index slipped 0.6 percent by 10:01 a.m. in Tokyo, pushing it down 5.1 percent in September. Japan’s Topix (TPX) index lost 0.9 percent, trimming its quarterly gain.

• Iron Ore Heads for Record Run of Quarterly Losses as Glut Builds. Iron ore will complete a third straight quarterly decline today to post the longest losing run on record as a slowdown in China’s economy curbs demand growth in the largest buyer and worsens a global surplus. Ore with 62 percent content delivered to Qingdao, China lost 17 percent this quarter to $77.97 a dry metric ton, the lowest price since September 2009, according to data from Metal Bulletin Ltd. That follows a 19 percent drop between April and June and 13 percent retreat in the first three months. Thesteel-making ingredient is headed for the longest stretch of quarterly losses since the data series began in 2009.

• Gluts Spur Investor Exit Signaling Prolonged Price Slumps. Investors are betting that the worst isn’t over for commodity prices that already are the lowest in five years. About $873 billion was pulled from U.S. exchange-traded products backed by raw materials this month, the most since April, data compiled by Bloomberg show. Expanding surpluses, a surging dollar and slowing growth in China helped send the Bloomberg Commodity Index to the lowest since 2009, reversing first-half gains fueled by a polar vortex and dead pigs in the U.S., and escalating tensions in Ukraine and the Middle East.

Wall Street Journal:  

• China President Xi Jinping Faces Stark Choices Over Hong Kong Protests. Beijing Wary of Conjuring Memories of Tiananmen Square. Massive democracy rallies in Hong Kong have offered Chinese President Xi Jinping stark choices between concession and crackdown, either of which pose problems for his government—and his own political standing. Throughout the weekend and into Monday, protesters, mostly students, confronted police and halted business activity in parts of Hong Kong, and as dawn broke Tuesday remained spread along major thoroughfares. Police fired tear gas and pepper spray to disperse the thousands of students gathered outside government headquarters on Sunday, but the protesters regrouped and re-emerged in greater numbers, choking off roadways in the heart of the city.

• Iraqi Christians' Dilemma: Stay or Go? With ISIS Threat, Thousands of Chaldeans Face an Agonizing Decision.

• Fed Rate Policies Aid Foreign Banks. Lenders Pocket a Spread by Borrowing Cheaply, Parking Funds at Central Bank.

• Pimco Is in a Race to Keep Investors After Bill Gross Exits. Traders Look to Profit and Rivals Look to Poach Amid Turmoil at Bond Fund.

• The Obama-Military Divide. What should senior officers do if experience tells them that the president's plan to defeat ISIS is unworkable without U.S. combat troops?

• Head Off a Tiananmen Massacre in Hong Kong. Tear gas and pepper spray hint at worse to come. The White House must issue a clear warning to Beijing.

CNBC:

• Ford(F) shares screeching on investor-day news.

Zero Hedge:

• The Last Time Traders Were This Short 2Y Notes, Rates Collapsed. (graph)

• China Housing Bubble Bursts: Q3 Land Sales Crater 50%. (graph)

• The Goldman(GS) Tapes And Why The Delusion Of Macro-Prudential Regulation Means The Next Crash Is Nigh.

• The Hong Kong Protest: What It's All About.

Business Insider: 

• Even With Sanctions, Putin Is Still Getting Exactly What He Wants In Ukraine.

• Now It Sounds Like Japanese Giant SoftBank Won't Buy DreamWorks After All.

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -1.25% to unch. on average.

• Asia Ex-Japan Investment Grade CDS Index 101.50 +2.5 basis points.

• Asia Pacific Sovereign CDS Index 73.25 +4.0 basis points.

• FTSE-100 futures -.02%.

• S&P 500 futures -.03%.

• NASDAQ 100 futures  -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (WAG)/.74

Economic Releases
9:00 am EST

• ISM Milwaukee for September is estimated to rise to 61.0 versus 59.63 in August.

• S&P/CS 20 City MoM for July is estimated unch. versus a -.2% drop in June. 

9:45 am EST

• Chicago Purchasing Manager for September is estimated to fall to 62.0 versus 64.3 in August.

10:00 am EST

• Consumer Confidence for September is estimated to rise to 92.5 versus 92.4 in August.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Manufacturing PMI, German Unemployment Change, weekly US retail sales reports, (INTU) investor day, (MCO) investor day and the (TK) investor day could also impact trading today.

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

Stocks Slightly Lower into Final Hour on Growing Hong Kong Unrest, Fed Rate Hike Worries, Global Growth Fears, Commodity/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.33 +9.97%

• Euro/Yen Carry Return Index 144.99 +.19%

• Emerging Markets Currency Volatility(VXY) 8.26 +6.44%

• S&P 500 Implied Correlation 56.62 +9.35%

• ISE Sentiment Index 79.0 -3.66%

• Total Put/Call .87 -22.32%

• NYSE Arms 1.93 +166.32% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.75 +3.72%

• European Financial Sector CDS Index 67.08 +6.28%

• Western Europe Sovereign Debt CDS Index 30.44 +8.40%
• Asia Pacific Sovereign Debt CDS Index 71.99 +4.14%

• Emerging Market CDS Index 279.16 +5.93%

• China Blended Corporate Spread Index 311.26 +.13%
• 2-Year Swap Spread 24.75 +2.25 basis points

• TED Spread 22.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -1.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 192.0 -3.0 basis points

• China Import Iron Ore Spot $77.70/Metric Tonne -1.15%

• Citi US Economic Surprise Index 24.90 -2.0 basis points

• Citi Emerging Markets Economic Surprise Index -14.30 +2.9 points

• 10-Year TIPS Spread 1.95 -6.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating -25 open in Japan

• DAX Futures: Indicating -1 open in Germany

Portfolio: 

• Slightly Higher: On gains in my tech sector longs, index hedges and emerging markets shorts

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

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• HK Protesters Vow More to Come Unless Leader Leung Quits. Pro-democracy protesters vowed to press ahead with demonstrations unless Hong Kong’s top official steps down, with thousands of people surrounding government offices after violent clashes paralyzed the city center. Protesters dressed in black have gathered in the Admiralty district to demand free elections, while blocking a main road into the central business area. Rallies in the shopping neighborhoods of Causeway Bay and Mong Kok are picking up after a lull in the morning, leading banks to shut branches and deterring tourists.

• Merkel Says EU, U.S. May Be Facing Long Ukraine Crisis. Chancellor Angela Merkel invoked the 40-year history of communist East Germany as showing that the European Union and the U.S. may be in for a long haul in their face-off with Russia over its actions in Ukraine. “I don’t see any change at the moment regarding Russia’s position,” Merkel said at a joint news conference with Finland’s Prime Minister Alexander Stubb today in Berlin. “I’m from former East Germany. Weneeded 40 years to overcome East Germany. Sometimes in history one has to be prepared for the long haul, and not ask after four months if it still makes sense to keep up our demands.”

• Ukraine Army Sees Worst Day Since Truce as Battles Flare. Ukraine’s army endured its deadliest day since signing a cease-fire with pro-Russian militants 3 1/2 weeks ago, threatening to unravel a truce that calmed the six-month conflict in the nation’s east. Nine Ukrainian servicemen were killed in attacks during the last 24 hours, including an assault by a separatist tank on a government armored personnel carrier near the airport of Donetsk, the combat zone’s largest city, military spokesman Andriy Lysenko said today. Twenty-seven soldiers were wounded as troops repelled two “powerful” storming attempts by rebel fighters, killing 50 militants, he said. The rebels do not release casualty figures.

• Russia’s RTS Slides Into Bear Market as Sistema Tumbles. Russia’s dollar-denominated RTS (RTSI$) Index entered a bear market as a court ruling restricting AFK Sistema from receiving dividend payments from its OAO Bashneft unit wiped a quarter off the holding’s value. The RTS dropped 2.6 percent to 1,126.21 by the close in Moscow, the lowest since April 25 and taking its decline from a June 24 high to 21 percent. The benchmark Micex Index (INDEXCF) fell 1.8 percent to 1,408.28. Sistema, controlled by the billionaire placed under house arrest in a probe into alleged money laundering, tumbled 25 percent to 12.68 rubles. The stock has lost 65 percent since Vladimir Evtushenkov’s Sept. 16 detention.

• Ibovespa Leads World Losses as Real Tumbles After Poll. The Ibovespa plunged the most among global stock benchmarks while the real slumped to a 13-month low after a poll showed increased support for President Dilma Rousseff’s re-election bid. The Ibovespa declined 3.4 percent to 55,283.69 at 12:52 p.m. in Sao Paulo, set for the biggest decline since July 2013. State-controlled oil producer Petroleo Brasileiro SA contributed the most to the gauge’s decline, tumbling as much as 8.9 percent. The real fell 1.1 percent to 2.4466 per U.S. dollar, the most among 31 major currencies tracked by Bloomberg. Traders are paring bets on the chances a new government will be elected next month and jump-start economic growth after the country fell into a recession in the first half of the year.

• Europe Stocks Fall as Banks Drop Amid Hong Kong Protests. A decline in bank shares led European stocks lower, with HSBC Holdings Plc weighing on the benchmark index amid pro-democracy protests in Hong Kong. HSBC and Standard Chartered Plc slid more than 1.5 percent each as they shuttered some Hong Kong branches as protesters stayed on the streets after clashes with police. Commerzbank AG fell 4.2 percent after a person with knowledge of the matter said the lender faces a U.S. inquiry into whether it broke anti-money-laundering laws. Balfour Beatty (BBY) Plc slid to its lowest price in more than 10 years after signaling the outlook for construction earnings has worsened. The Stoxx Europe 600 Index slid 0.4 percent to 340.99 at the close of trading, paring losses of as much as 0.9 percent.

• Nickel Poised for Bear Market as Prices Head for Quarterly Loss. Nickel was poised to fall into a bear market after prices tumbled this quarter on signs an ore-export ban by the world’s biggest producer hasn’t depleted supplies as fast as forecast. The metal in London retreated as much as 2.5 percent today and is down 12 percent this quarter. Indonesia introduced restrictions on shipments in January, sending prices to the highest in more than two years. Nickel has since plunged as analysts from Credit Suisse Group AG to Citigroup Inc. said the shortfall will be less than expected. London Metal Exchange stockpiles are at the highest in records going back to 1979. 

• Bond Warnings Rise as ’94 Parallels Seen in Fed-CPI Split. For bond investors who are convinced a lack of inflation will keep the Federal Reserve from upending Treasuries when it begins to raise interest rates, there’s one parallel in history that suggests they still have cause for concern. The last time consumer-price increases were slowing before the Fed started increasing borrowing costs was in 1994 -- when Treasuries lost 3.3 percent in what was then the biggest selloff on record. At the time, Fed Chairman Alan Greenspan shocked the financial world by doubling the benchmark rate to 6 percent, even though inflation was at a seven-year low of 2.5 percent.

• Hedge Funds Score With Small-Cap Shorts in Russell Drop. Hedge funds are finally getting something right in the equity market. Large speculators tracked by the Commodity Futures Trading Commission have pushed short sales on the Russell 2000 Index (RTY) of the smallest shares to the highest in more than three years, just as the gauge is poised for its worst quarterly return since 2011. Bearish bets rose since March in the index, whose companies have a median value that’s 4 percent the size of Standard & Poor’s 500 Index stocks.

• California College Students Must Now Consent Before Sex. Colleges in California that receive state funding must bolster policies on campus sexual assault under laws signed yesterday, the first in the U.S. requiring students give consent before they have sex. The bill, signed by Governor Jerry Brown, requires public universities and private colleges that get financial grants to mandate students agree verbally or through some other affirmative signal before having sex.

CNBC:

• Markets remain 'vulnerable,' says Cashin. (video)

ZeroHedge:

• "This Is What We Do" Warns 2nd Oklahoman ISIS-Supporter Arrested For Threatening To Behead Co-Worker.

• "Hong Kong Risks Losing Its Role As A Financial Capital," Deutsche Bank Chief Economist Warns.

• Can The US Economy Handle A Meaningful Downturn In Financial Asset Prices?

• Stunning Drone Clip Reveals Massive Size Of Hong Kong Protest. (video)

• Pending Home Sales Drop In August (After Record Surge In New Home Sales). (graph)

• Stocks Tumble; High-Yield Credit Risk Spikes To 1-Year Highs. (graph)

• Despite 2nd Slowest Income Growth In 2014, Spending Rises Most Since March Driven By Subprime, Car Sales. (graph)

• New Global Crisis Imminent Due To “Poisonous Combination Of Record Debt And Slowing Growth", CEPR Report Warns.

Business Insider:

• Obama Throws America's Spies Under The Bus.

• The Chilling Quote That Shows You Just How Bad The Hong Kong Protests Could Get.

• NETANYAHU: 'We Must Remove The Cancer' Of 'Militant Islam ... Before It's Too Late'.

• DEAR GOPRO(GPRO) SPECULATORS: Here's What Will Have To Happen To Justify Today's Stock Price ...

• ISIS Seems To Be Getting Closer And Closer To Baghdad.

Telegraph:

• Mass default looms as world sinks beneath a sea of debt. Global debt is still rising strongly, crimping growth and threatening defaults around the world. 

• Morgan Stanley(MS) warns on Asian debt shock as dollar soars. Foreign debt in emerging Asia has soared from $300bn to $2.5 trillion over the last decade.

Nikkei:

• Keidanren Says Further Yen Weakening Would Hurt Japan. Sadayuki Sakakibara, head of Japan's business lobby Keidanren, said further weakening of the yen would have a negative impact on the Japanese economy. Sakakibara said a weak yen would increase gasoline and raw materials prices boosting costs for households and small businesses.

Bear Radar

Style Underperformer:

• Small-Cap Value -.80%

Sector Underperformers:

• 1) Gaming -2.41% 2) Steel -1.92% 3) I-Banks -1.32%

Stocks Falling on Unusual Volume:

• CVEO, TXTR, PTY, JNS, ELGX, PGP, CMTL, ADHD, SBRA, POWL, ATW, SGEN, PBR, BHP, CSWC, MDP, CTRP, BGC, GDOT, CMCM, AVY, CM, PHI, INVN, AME, RUBI, WMS, RPTP and XLS

Stocks With Unusual Put Option Activity:

• 1) DHI 2) OPK 3) ADSK 4) TXN 5) ADBE
  

Stocks With Most Negative News Mentions:

• 1) MDC 2) AIG 3) WFC 4) TXTR 5) RDC
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth -.01%

Sector Outperformers:

• 1) Hospitals +.46% 2) Utilities +.24% 3) Biotech +.21%
  

Stocks Rising on Unusual Volume:

• BAGL, ATHL, TIBX, AMAG, DWA, AGIO, NI, CLVS, GPRO, CONN, AMBA and LPI

Stocks With Unusual Call Option Activity:

• 1) TSN 2) TIBX 3) RUSL 4) ARIA 5) AGN

Stocks With Most Positive News Mentions:

• 1) ECA 2) NI 3) ATHL 4) TIBX 5) DWA
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume