Bull Radar

Style Outperformer:

• Small-Cap Growth +.63%

Sector Outperformers:

• 1) Gold & Silver +2.29% 2) Hospitals +2.23% 3) Biotech +1.73%
  

Stocks Rising on Unusual Volume:

• ABGB, ACT, SUNE, TERP, POT, AMBA and GNRC

Stocks With Unusual Call Option Activity:

• 1) MOS 2) TJX 3) SUNE 4) AVP 5) DNKN

Stocks With Most Positive News Mentions:

• 1) REV  2) NOC 3) THOR 4) DISCA 5) MDT
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• EU Skips Wider Russia Sanctions While Targeting Rebels. European Union governments held off on further economic sanctions against the Kremlin for fomenting rebellion in eastern Ukraine, while agreeing to blacklist more pro-Russia separatists there. EU foreign ministers decided to impose additional travel bans and asset freezes in response to the Nov. 2 elections in the rebel-held regions of Donetsk and Luhansk. The names will be released by the end of the month.
• Disappointment Becomes Norm for Global Growth as Japan Contracts. Group of 20 leaders pledged over the weekend to do everything they can to boost the global recovery. Japan’s descent into a recession is the latest reminder of how elusive that goal is proving to be. Less than 24 hours after heads of state gathering in Brisbane, Australia, agreed to take measures that would boost their economies by a collective $2 trillion by 2018, the Cabinet Office delivered news in Tokyo that Japan’s gross domestic product unexpectedly shrank an annualized 1.6 percent in the three months through September, the second straight contraction.

• Abe Set to Call Election, Delay Tax Hike Amid Recession. Japanese Prime Minister Shinzo Abe is set to call early elections as part of a trio of measures today in a gambit to secure his political future and fortify the “three arrows” of his economic policy after the nation sank into recession. Abe will postpone an unpopular sales tax increase, scheduled for October 2015, for 18 months, people familiar with the discussions said last week. He’ll probably call an early election for Dec. 14, according to people with knowledge of the ruling party strategy. Abe will announce both steps at a press conference today, public broadcaster NHK said, well as ordering new stimulus measures.

• Beijing Home Prices Drop for First Time in 2 Years on Discounts. Beijing home prices fell for the first time in almost two years as China’s property slowdown deepened, prompting developers to offer discounts to cut inventories. New-home prices dropped in October in 67 cities of 70 tracked by the government from a year earlier, and in 69 from September, the National Bureau of Statistics said today. Prices in Beijing declined 1.3 percent, the first annual decrease since November 2012 and a reversal from the 14.7 percent jump in January from the previous year. 

• Lopsided Link Shows Chinese Rejection of Hong Kong Stocks. Chinese investors failed to show up for some of Hong Kong’s foremost companies on the first day of the exchange link with the mainland, confounding the predictions of Deutsche Bank AG, BNP Paribas SA and Goldman Sachs Group Inc. 

• China Stocks Drop for Fourth Day as Data Shows Home-Price Slump. Chinese stocks dropped, with the benchmark index declining for a fourth day, as falling home prices added to concerns that an economic slowdown will deepen and enthusiasm toward an exchange link with Hong Kong faded. Poly Real Estate Group Co. (600048) and China State Construction Engineering Corp. slumped at least 1.8 percent. New-home prices decreased in all but one city monitored by the government last month as developers offered discounts to cut inventories. Hong Kong Exchanges and Clearing Ltd. slid 2.8 percent, extending yesterday’s 4.5 percent drop, as mainland investors used less than 4 percent of their 10.5 billion yuan ($1.7 billion) quota in Hong Kong this morning. The Shanghai Composite Index (SHCOMP) fell 0.4 percent to 2,463.76 at the noon-time break, while the Hang Seng China Enterprises Index slid 1 percent.

• Asian Stocks Rise as Abe Poised to Add Stimulus, Call Election. Asian stocks rose as investors await a decision by Japanese Prime Minister Shinzo Abe to put off a sales-tax increase, add stimulus and call an election, after data yesterday showed the economy entered recession. The MSCI Asia Pacific Index (MXAP) gained 0.4 percent to 140.29 as of 9:00 a.m. in Tokyo, after slumping by the most in more than a month yesterday.

• Goldman Cuts Copper Price Forecast on Rising Dollar, Falling Oil. Copper prices will fall next year as a strengthening U.S. dollar and weaker oil prices push down marginal production costs, according to Goldman Sachs Group Inc. The bank lowered its 2015 price outlook to $6,217 a metric ton from $6,400, analysts including Max Layton said in a report yesterday. Marginal production cost will fall to between $5,600 and $6,300 a ton next year, according to the report.

Wall Street Journal: 

• President Orders Review of U.S. Hostage Policies. Move Follows Criticism Surrounding Beheading Cases In Syria. The Obama administration is undertaking a review of how it handles cases of U.S. citizens held captive by extremists abroad, according to a letter from a top Pentagon official made public Monday, a move that follows criticism from some relatives of slain Americans.

• Small Towns Go to Bat for Wall Street Banks. Fed Bid to Limit Banks’ Commodities Activities Imperils Local Gas Contracts, Mayors Argue. A Federal Reserve plan that could stop big banks from owning oil pipelines, metals warehouses and other physical-commodity assets is sounding alarm bells hundreds of miles from Wall Street.

• Federal Private-Pension Safety Net Running $62 Billion Deficit. Pension Benefit Guaranty Corp. Report Warns of Problems with Multiemployer Pension Plans. The federal government’s safety-net program for private pensions is running a near $62 billion long-term deficit, largely due to long-standing problems in a type of pension plan that is common in transportation, construction and some other industries, according to a new report. The problems are likely to bankrupt the federal safety-net program for so-called multiemployer pension plans within the next decade, perhaps in the next few...

• Falling Commodity Prices Hammer Malaysia. Economy of Asia’s Largest Oil-and-Gas Exporter Hit.

• The Fed Needs Governors Who Aren’t Wall Street Insiders by Elizabeth Warren and Joe Manchin. With two vacancies to fill, Obama should pick nominees who will look out for Main Street, not the big banks.

• A Mystifying Obama Climate Slap at a U.S. Ally. In Brisbane, the president went out of his way to undermine Australian Prime Minister Tony Abbott. Why?
  

Fox News:

• Controversial economist Gruber has earned millions from taxpayers at federal, state levels. (video) “My job was just to see if the numbers added up,” Dr. Jonathan Gruber, the controversial architect of ObamaCare, told PBS two years ago. And add up the numbers did – at least in terms of Gruber’s consulting fees. A Fox News review of state and federal websites, as well as published reports, finds the MIT economist and his firm have secured millions in federal and state contracts stretching back over the last fifteen years.

CNBC:

• Japan proves QE doesn't work: Expert. (video)

• Why a Santa rally might not be in the cards. (video) Many traders expect stocks to rally into the year-end, but the current complacency may be signaling that a late year Santa rally is not in the cards. "We're a little concerned by the fact that investors' memories have become so short that volatility has just completely collapsed to multiyear lows a month away from an incredibly frightening roller-coaster ride. The bearish readings have slipped," said Julian Emanuel, equity strategist at UBS.

Zero Hedge:

• Carl Icahn: "One Day You'll See A Break Like A Few Weeks Ago But The Market Won't Come Back".

• GruberGate: "Senator" Obama Vs "President" Obama. (video)

• "Godfather" Of Abenomics Admits Japanese Policy "Is A Ponzi Game... Taxpayers May Revolt".

• The Fed's "Baffle 'Em With Bullshit" Strategy In 1 Simple Chart. (graph)

• What The Fed Has Wrought. (graph)

• Anti-HFT Revulsion Grows: IEX Ties For Fourth In Dark Pool Trading Thanks To World's Largest Wealth Fund. (graph)

• Missouri Governor Declares State Of Emergency, Activates National Guard Ahead Of Michael Brown Shooting Verdict.

• Polar Vortex 2.0 Arrives - All 50 States Will Freeze Tonight.

• Illinois Pension Debt Soars To $111 Billion.

• Fed Inflation Barometer Tumbles To Lowest Since 2008. (graph)

Business Insider:

• ELON MUSK: You Have No Idea How Close We Are To Killer Robots.

• As ISIS Continues To Gain Ground, Here's What The Militants Have In Their Arsenal.

• Russia And China Outmaneuvered Obama In Asia.

Reuters: 

• Urban Outfitters(URBN) profit falls due to increased markdowns. Apparel retailer Urban Outfitters Inc reported a lower-than-expected quarterly profit, hurt by increased markdowns and expenses related to marketing and technology. The company's shares fell 4.9 percent in extended trading.

Obama takes on coal with first-ever carbon limits
Read more at http://www.philly.com/philly/news/politics/20130919_ap_0f857b20e0c144a5a1e1b9dddc9f9d72.html#YRThyDOhArykUeYy.9Brazil cuts 2014 GDP growth forecast, keeps fiscal goaFed's Williams: Can't wait too long to raise rateTripAdvisor profit sags as costs jump; shares slid

Evening Recommendations

• None of note

Night Trading

• Asian equity indices are -.50% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 106.50 -.5 basis point.

• Asia Pacific Sovereign CDS Index 63.75 unch.

• FTSE-100 futures n/a.

• S&P 500 futures -.03%.

• NASDAQ 100 futures  +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DKS)/.41

• (HD)/1.13

• (MDT)/.96

• (TJX)/.85

• (JACK)/.53

• (PETM)/.95

Economic Releases
8:30 am EST

• PPI Final Demand for October is estimated to fall -.1% versus a -.1% decline in September.

• PPI Ex Food and Energy for October is estimated to rise +.1% versus unch. in September.

10:00 am EST

• The NAHB Housing Market Index for November is estimated to rise to 55.0 versus 54.0 in October..

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kocherlakota speaking, UK CPI report, Net Long-Term TIC Flows for September, US weekly retail sales reports, Stifel Healthcare Conference, UBS Tech Conference, Morgan Stanley Consumer/Retail Conference, (NOV) analyst day, (SYNA) investor meeting and the (ZTS) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology 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 Higher into Final Hour on Central Bank Hopes, Yen Weakness, Short-Covering, Healthcare/Utility Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.05 +5.56%

• Euro/Yen Carry Return Index 151.44 -.44%

• Emerging Markets Currency Volatility(VXY) 8.12 -.25%

• S&P 500 Implied Correlation 38.54 -4.51%

• ISE Sentiment Index 109.0 -30.57%

• Total Put/Call .83 -7.78%

• NYSE Arms .85 +3.46% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.34 +1.27%

• European Financial Sector CDS Index 66.83 -.58%

• Western Europe Sovereign Debt CDS Index 31.51 +.32%
• Asia Pacific Sovereign Debt CDS Index 64.25 +.97%

• Emerging Market CDS Index 288.32 +2.35%

• China Blended Corporate Spread Index 323.75 -.06%
• 2-Year Swap Spread 21.25 -.5 basis point

• TED Spread 22.75 unch.

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

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 183.0 +2.0 basis points

• China Import Iron Ore Spot $75.08/Metric Tonne -.52%

• Citi US Economic Surprise Index 8.40 -7.0 points
• Citi Eurozone Economic Surprise Index -24.0 +2.4 points

• Citi Emerging Markets Economic Surprise Index -2.90 +2.2 points

• 10-Year TIPS Spread 1.87 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +226 open in Japan

• DAX Futures: Indicating +14 open in Germany

Portfolio: 

• Higher: On gains in my biotech/medical sector longs and emerging markets shorts

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Putin Warns He Won’t Let Ukraine Defeat Eastern Rebels. Russian President Vladimir Putin warned he won’t allow rebels in eastern Ukraine to be defeated by government forces as European Union ministers met to consider imposing more sanctions on the separatists. “You want the Ukrainian central authorities to annihilate everyone there, all of their political foes and opponents,” Putin said in an interview yesterday with Germany’s ARD television. “Is that what you want? We certainly don’t. And we won’t let it happen.” German Chancellor Angela Merkel said yesterday the EU will keep its economic sanctions on Russia “for as long as they are needed.” EU foreign ministers convened today in Brussels to discuss adding to sanctions that have limited access to capital markets for some Russian banks and companies and blacklisted officials involved in the conflict. New measures will likely target pro-Russian separatist leaders, the EU said.

• EU Weighs More Russian Sanctions Amid Ukraine Cease-Fire. European Union governments are meeting to consider triggering tougher sanctions against Russia as neighboring Finland pressed the Kremlin to do more to end the conflict in eastern Ukraine. The talks in Brussels among the 28 member nations follow the EU’s abrupt decision this week to put on hold for at least a “few days” a second package of economic penalties against Russia over its encroachment in Ukraine. The delay offered more time to assess the viability of Russian President Vladimir Putin’s truce in Ukraine without risking further trade retaliation by Russia.

• Cameron Sees ‘Red Warning Lights’ Flashing on Global Economy. U.K. Prime Minister David Cameron said he can see “red warning lights” flashing “on the dashboard of the global economy,” arguing that trade deals and continued spending restraint are essential to growth. In an article for today’s Guardian newspaper, the premier listed a possible recession in the euro area, a slowdown in emerging markets, the Ebola outbreak and conflicts in the Middle East and Ukraine as “adding a dangerous backdrop of instability and uncertainty.”

• Recession Gloom Trumps Tax Delay Optimism in Japanese Stocks. Stock investors weighing the pros and cons of a surprise contraction in Japan’s economy decided it’s a reason to sell. Bulls see the 1.6 percent annualized slide in gross domestic product as raising the chances Prime Minister Shinzo Abe will push back a sales-tax increase that could further hurt growth. Bears say it also sends the world’s third-largest economy into recession and calls into question the success of Abe’s policies to revive Japan. Those looking on the bright side are being drowned out today: the Topix index plunged 2.5 percent, the most in six weeks. The Nikkei 225 Stock Average sank 3 percent. 

• Emerging-Market Stocks Drop as China’s New Equity Link. Emerging-market stocks fell for a third day as technology companies retreated and Chinese shares in Hong Kong tumbled on the first day of the city’s exchange link with Shanghai. Bank of China Ltd. led a 1.9 percent decline in the Hang Seng China Enterprises Index (HSCEI) after mainland investors left more than 80 percent of an equity-buying quota for Hong Kong shares unfilled. The Ibovespa declined as the Brazilian state-run oil producer Petroleo Brasileiro SA retreated to the lowest level since March. Rupiah forwards increased after Indonesian President Joko Widodo raised subsidized fuel prices. The MSCI Emerging Markets Index slipped 0.5 percent to 986 at 10:24 a.m. in New York.

ZeroHedge:

• Here Is Your "Global Recovery" In 24 Charts. (graph)

• The Market's Dodging Boomerangs, Not Bullets. (graph)

• If Everything's So Awesome, Why Is This Happening? (graph)

• The Cruel Injustice Of The Fed's Bubbles In Housing.

• CDS Liquidity Set To Tumble As Deutsche Bank Exits IG, HY Trading.

• European Bond Risk Plunges As Draghi Hints At Sovereign QE (Again). (grraph)

• Industrial Production Drops; Auto Manufacturing Slumps 3rd Month In A Row - Worst Run In 5 Years. (graph)

• Empire Fed Manufacturing Misses 2nd Month In A Row, Workweek Plunges. (graph) 

AFP:

• Ukraine Minister Urges EU to Send 'Clear Message' to Russia. EU should speak collectively to Russia on Ukraine, be ready to send "clear message" that it will impose more sanctions if necessary, citing interview with Ukrainian Foreign Minister Pavlo Klimkin.

Bild:

• Poroshenko Says Ukraine 'Most Dangerous Place on Earth'. The situation in Ukraine is more dangerous than the threat by Islamic State, citing President Petro Prorshenko. In Ukraine there are currently thousands of Russian soldiers, hundreds of tanks, heavy artillery, he said. One of the world's largest armies is threatening Ukraine and Europe, Poroshenko said.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.73%

Sector Underperformers:

• 1) Social Media -2.65% 2) Alt Energy -1.55% 3) Gaming -1.12%

Stocks Falling on Unusual Volume:

• HAL, WLH, LGIH, DWA, CMGE, LXFT, ZEN, SYKE, TUBE, MCEP, JD, AAXJ, HGR, HP, CRUS, CSH, CWEI, FUEL, COUP, WHZ, CAF, CSLT, EIGI, JACK, WTS, INO and DNR

• 1) BEAV 2) HES 3) HIG 4) DKS 5) SPLS

Stocks With Most Negative News Mentions:

• 1) HAL 2) LNKD 3) SHLD 4) JACK 5) DNR
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value -.13%

Sector Outperformers:

• 1) Hospitals +1.82% 2) HMOs +1.39% 3) Utilities +.69%
  

Stocks Rising on Unusual Volume:

• BHI, ABGB, AGN, CLDX, EXH, ESPR, Z, HAS, TSN and TRLA

Stocks With Unusual Call Option Activity:

• 1) GME 2) CLDX 3) VRX 4) DATA 5) BHI

Stocks With Most Positive News Mentions:

• 1) TSN  2) VRX 3) CLDX 4) AGN 5) BHI
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume