Bull Radar

Style Outperformer:

• Mid-Cap Growth +.26%

Sector Outperformers:

• 1) Biotech +1.34% 2) Airlines +1.21% 3) Homebuilders +1.06%
  

Stocks Rising on Unusual Volume:

• TKMR and CEMP

Stocks With Unusual Call Option Activity:

• 1) ATLS 2) CVEO 3) INFN 4) LOCO 5) BYD
  

Stocks With Most Positive News Mentions:

• 1) GRUB 2) ANFI 3) OVAS 4) MSFG 5) MRCY
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Wednesday Watch

Evening Headlines 
Bloomberg: 

• Ruble Sees Worst Annual Drop Since 1998 as Oil, Sanctions Weigh. The ruble had its worst annual slide since its 1998 default as a slew of government interventions failed to support the currency. Russia’s currency lost 41 percent this year, the most in the world after Ukraine’s hryvnia. Government bonds fell the most in emerging markets in 2014, with the five-year yield climbing 822 basis points to 15.44 percent. The Micex Index posted the first decline in three years. The ruble rose 5 percent to 55.5495 a dollar by 7:01 p.m. in London after dropping 7.4 percent yesterday.

• China Needs Its Lehman Moment. The travails of Abenomics should be a warning to President Xi Jinping of China, whose nation increasingly seems at risk of a Japan-like lost decade. Although speculation has focused on the "why" and the "how" of the Japanization of China's economy, the year ahead will provide clues to the question of "when." China in 2015 is likely to look a lot like Japan in 1998. when the zombification of its economy truly began. The Japanese government had recently allowed Yamaichi Securities to crash, an epochal moment for a government that had spent the preceding decade resisting any kind of reform. The collapse of Yamaichi, a 100-year old institution founded at the height of the Meiji Restoration, was Japan's Lehman Moment, and suggested a new political will to force banks to write down bad loans from the 1980s. Then Japan lost its nerve. When Long-Term Credit Bank of Japan and other institutions teetered on the edge in 1998, the government rescued them. Many weak institutions and irresponsible bankers were propped up in subsequent years. Rather than fix a financial system suffocating under liabilities and beset by complacent executives, the Japanese government chose to treat the symptoms of the dysfunction with zero interest rates and fiscal handouts. Abe's government is the latest to follow this tired strategy.

• Emerging Fund Outflows Biggest Since June 2013, IIF Says. Global investors pulled the most funds out of emerging markets this month since June 2013 as oil plunged and concern grew the U.S. Federal Reserve will soon raise interest rates. Net outflows from developing funds totaled $11.5 billion in December, with $7.8 billion withdrawn from debt and $3.7 billion taken out of equities, the International Institute of Finance said in a statement dated yesterday.

• Oil Falls in Worst Year Since 2008 as Asian Stocks Gain. Crude oil resumed its slump, heading for its worst year since 2008 amid speculation U.S. stockpiles data today will fuel concern over a global supply glut. Asian stocks climbed while gold and nickel gained. West Texas Intermediate crude fell 0.5 percent to $53.83 a barrel by 11:00 a.m. in Hong Kong, slipping for the fourth time in five days to trade near a five-year low. Gold added 0.2 percent while nickel rose 0.5 percent. The MSCI Asia Pacific excluding Japan Index increased 0.2 percent.

• OPEC Resolve on Supply Promises No Calm for Oil Markets: Energy. Oil’s biggest price swings in three years are poised to continue as OPEC cedes no ground to competing suppliers. Oil traders’ expectations for future swings, known as implied volatility, surged since Saudi Arabia and fellow members of the Organization of Petroleum Exporting Countries decided Nov. 27 to keep pumping crude despite a supply glut. That will mean prices fluctuating in the next several years by even more than the $57-a-barrel move in 2014, Bank of America Corp. says.

• Iron Ore to Cap Annual Loss. Iron ore is poised to cap the biggest annual decline in at least five years as surging supplies from the world’s biggest producers outstrips demand growth in China, with the raw material dropping for four straight quarters in 2014. Ore with 62 percent content delivered to Qingdao, China, lost 47 percent this year to $71.15 a dry metric ton yesterday, according Metal Bulletin Ltd. The commodity fell to $66.84 on Dec. 23, the lowest level since June 2009.

• Copper Poised for Worst Year Since 2011 as China’s Economy Cools. Copper headed for the biggest annual loss in three years amid signs of a sustained economic slowdown this year in China, the world’s largest metals consumer. The final reading this month for the manufacturing Purchasing Managers’ Index for China from HSBC Holdings Plc and Markit Economics came in at 49.6, the lowest in seven months. A figure below 50 signifies contraction. China is on course for the slowest year of economic growth since 1990, a separate survey shows. Copper for delivery in three months on the London Metal Exchange was little changed at $6,328 a metric ton by 10:20 a.m. in Hong Kong. The metal is poised to fall for a second month andis headed for a 14 percent decline this year, the second-worst performer among the six main base metals on the LME.

• Five Charts Show Why IBM(IBM) Is Worst Dow Performer for Second Year. Since Ginni Rometty became chief executive officer in January of 2012, the shares have fallen 16 percent -- 14 percent of that this year alone. Investors have dumped the stock as Rometty struggles to re-imagine International Business Machines Corp. as a contender in cloud computing, data analytics and mobile technology. So far, those new areas haven’t made up for a decline in sales of legacy hardware and technology consulting services.

• More Cops Getting Killed on the Job, With 56% Rise in Gun Fatalities, Advocacy Group Says. 

• Play-Doh Enrages Parents With a Penis-Shaped Baking Toy.

Wall Street Journal:

• Dollar’s Surge Pummels Companies in Emerging Markets. From Brazil to Thailand, Firms That Sold Bonds in Dollars Now Face Steep, Even Staggering Costs. The soaring U.S. dollar is squeezing companies in emerging markets from Brazil to Thailand that now face higher costs on roughly $1 trillion in bonds sold to investors before the greenback’s surge.

• Seattle Police Chafe Under New Marching Orders. City Reins in Prosecution for Minor Crimes, Sends Some Offenders to Social Services Instead of Criminal Courts.

• 2014 Year in Review: The Events That Shaped a Turbulent Year. From the Rise of Islamic State to Republicans’ Sweep of the Midterms, the Past Year Brought a Number of Game-Changing Developments.

• For Hedge Funds, a Year of Highs and Lows. 

• Progressives and Disorder. The next two years may be the most dangerous since the Cold War ended.

Fox News:

• As families mourn, attention turns to cause of AirAsia disaster. (video) While authorities desperately rushed to recover bodies from the crash site of AirAsia Flight 8501 on Wednesday, focus shifted from locating the plane’s wreckage to determining the causes behind the disaster that likely killed all 162 aboard.

MarketWatch.com: 

• President Obama gives himself A-plus for 2014.

CNBC:

• Everyone involved in oil will be squeezed: Pro. (video) Oil will continue to fall and everybody involved is going to get squeezed, energy pro John Kilduff told CNBC on Tuesday. That includes the so-called picks and shovels companies that aren't directly involved in oil production.

• This market trend could be 'very negative'. Both mutual and exchange-traded funds saw their biggest weekly inflows in history last week. ETFs alone have witnessed their largest-ever three-month run, according to data analysis firm TrimTabs. U.S. funds took in a combined $36.5 billion over the most recent reporting week, according to Thomson Reuters Lipper. That comes as part of a run that has seen $81.3 billion alone come into the $2 trillion ETF space since October, according to TrimTabs. That's the largest three-month flow ever, topping the influx from July through September 2008. TrimTabs CEO David Santschi said the strong flows are "very negative from a contrarian perspective."

Zero Hedge:

• The Rigging Triangle Exposed: The JPMorgan-British Petroleum-Bank Of England Cartel Full Frontal.

• NYPD Boycotts de Blasio: New York City Arrests And Citations Plummet As Cops Stage "Virtual Work Stoppage".

• The Last Time This Many 'Investors' Chased Chinese Stocks, They Crashed. (graph)

• Commodity Prices Are Cliff-Diving Due To The Fracturing Monetary Supernova - The Case Of Iron Ore.

• Should I Buy A House In 2015? (graph)

• China Manufacturing PMI Confirms Contraction, Employment Drops For 14th Month In A Row. (graph)

• Japan Is Writing History As A Prime Boom And Bust Case. (graph)

Business Insider:

• The Oil Crash Has Claimed Its First Casualty.

• These Are The Most Egregious Examples Of Government Waste In 2014.

• UN Security Council Rejects Palestinian Draft Resolution.

Reuters: 

• FOREX-Dollar index on track for best annual gain in 9 years. The dollar was on track to end 2014 with a gain of 12 percent against a basket of major currencies, and anticipated U.S. interest rake hikes may strengthen its appeal in the new year. This year's gain will be the dollar's largest since 2005, when it climbed nearly 13 percent.

• Investors eye 2015 with big appetite for hedge funds -report. Wealthy investors are poised to put at least $90 billion into hedge funds next year, even after returns have largely been lackluster this year, research firm eVestment said on Tuesday.

Telegraph:

• How the world fell back into economic meltdown: 2014 in charts. From Russia's economic collapse, the threat of deflation, and another year of record low interest rates, here's how crisis beset the world economy once again.  

de Volkskrant:

• ECB's Knot Says There's No Proposal for QE Yet. ECB Governing Council member Klaas Knot says policy makers will have a discussion next month on the necessity of quantitative easing and whether it will help, citing an interview. "As long as Europe isn't politically willing to share more risks within the eurozone, it's not up to us to take such a decision ourselves via the back door." Economic and monetary cooperation without further political cooperation is unstable, he said. Population in northern Europe has "deep distrust" of willingness of southern European countries to make "painful, internal reform measures". Sees a threat of a transfer union whereby money flows structurally from north to south. Knot is also president of the Dutch central bank.

Rheinische Post:

• Greek exit from euro zone conceivable if Syriza wins elections, Michael Fuchs, deputy chairman of German Chancellor Angela Merkel's party, says in interview. If Syriza cuts back reform, austerity measures, Troika can cut back loans to Greece.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 106.0 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 67.0 +3.25 basis points.

• S&P 500 futures +.08%.

• NASDAQ 100 futures  +.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
8:30 am EST

• Initial Jobless Claims are estimated to rise to 290K versus 280K the prior week.

• Continuing Claims are estimated to fall to 2368K versus 2403K prior.

9:45 am EST

• Chicago Purchasing Manager for December is estimated to fall to 60.0 versus 60.8 in November.

10:00 am EST

• Pending Home Sales for November are estimated to rise +.5% versus a -1.1% decline in October.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +133,330 barrels versus a +7,267,000 barrel gain the prior week. Gasoline inventories are estimated to rise by +1,677,780 barrels versus a +4,083,000 barrel gain the prior week. Distillate supplies are estimated to rise by +1,694,440 barrels versus a +2,303,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.19% versus unch. prior.

Upcoming Splits

• (GNTX) 2-for-1

Other Potential Market Movers

• The China Official PMI, weekly Bloomberg Consumer Comfort Index and weekly MBA mortgage applications report could also impact trading today.

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

Stocks Lower into Final Hour on Rising European/Emerging Markets Debt Angst, Yen Strength, Profit-Taking, Utilities/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line:  Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.01 +6.31%

• Euro/Yen Carry Return Index 151.72 -.93%

• Emerging Markets Currency Volatility(VXY) 10.85 +.28%

• S&P 500 Implied Correlation 66.79 +2.61%

• ISE Sentiment Index 74.0 +25.42%

• Total Put/Call 1.0 +19.05%

• NYSE Arms 1.14 +36.14% 

Credit Investor Angst:

• North American Investment Grade CDS Index 66.12 +.72% 
• America Energy Sector High-Yield CDS Index 634.0 -.08%

• European Financial Sector CDS Index 66.46 +4.88%

• Western Europe Sovereign Debt CDS Index 27.86 +1.13%
• Asia Pacific Sovereign Debt CDS Index 66.41 +4.39%

• Emerging Market CDS Index 335.45 +1.46%

• China Blended Corporate Spread Index 341.76 +.32%
• 2-Year Swap Spread 20.25 +1.0 basis point

• TED Spread 25.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% +1.0 basis point

• Yield Curve 150.0 unch.

• China Import Iron Ore Spot $71.15/Metric Tonne +3.55%

• Citi US Economic Surprise Index 38.40 -1.6 points
• Citi Eurozone Economic Surprise Index 9.20 +4.1 points

• Citi Emerging Markets Economic Surprise Index -13.0 +.5 point

• 10-Year TIPS Spread 1.64 -1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating -25 open in Japan

• DAX Futures: Indicating -15 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech/tech sector longs 

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.62%

Sector Underperformers:

• 1) Utilities -1.90% 2) Coal -1.50% 3) Biotech -1.03%

Stocks Falling on Unusual Volume:

• WGP, SWN, LFC, WBAI, ARDX, SSL, TEG, CLH, VNR, NVGS, CCLP, TOT, HCLP, BTI, CLMT, CSGP, EXP, VNCE, EMES, XONE, KNOP, PKX, GGAL, VET and TGH

Stocks With Unusual Put Option Activity:

• 1) XLP 2) EMR 3) WFM 4) MNST 5) XLY

Stocks With Most Negative News Mentions:

• 1) COP 2) CVEO 3) MGM 4) CAVM 5) GMCR
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Value -.30%

Sector Outperformers:

• 1) Gold & Silver +4.10% 2) Steel +.97% 3) Airlines +.93%
  

Stocks Rising on Unusual Volume:

• RPRX, RIGP and GG

Stocks With Unusual Call Option Activity:

• 1) ARCP 2) MCP 3) GSAT 4) WEN 5) ACT
  

Stocks With Most Positive News Mentions:

• 1) LTM 2) GEO 3) QCOM 4) UPS 5) HTGC
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg:

• Russian ADRs Drop on First GDP Contraction Since 2009. Russian stocks traded in New York fell to the lowest level in a week as the economy shrank for the first time in five years and a court hastened the scheduled reading of a verdict in the case against opposition leader Alexey Navalny. The Bloomberg Russia-US Equity Index dropped 4.5 percent to 50.41 in New York. The Market Vectors Russia ETF, the biggest exchange-traded fund tracking the country’s stocks, sank percent 8.7 percent to $14.61. The ruble tumbled 7.4 percent against the dollar. 

• French Connection Bodes Ill for Japan Stocks: Chart of the Day. French investors are piling into Japanese stocks again, a sign to Nomura Holdings Inc. that the market is poised to fall. 

• China, U.S. Join the Search for AirAsia QZ8501 in Waters Near Borneo. Chinese and U.S. military ships are heading to seas south and west of Borneo where a AirAsia Bhd. (AIRA) passenger jet is suspected of crashing as the search enters its third day. The USS Sampson will arrive today in the area where flight QZ8501 vanished Dec. 28 carrying 162 people, the U.S. Seventh Fleet said in an e-mailed statement. China will send a navy frigate and aircraft, the official Xinhua news agency said.

• ‘Cartel’ Chat Room Tied to BP Gave FX Tips From Banks to Client. Halfway down a muddy, secluded road on marshland in suburban Essex sits Wharf Pool, a lake stocked with some of the biggest freshwater fish you will ever see. A white sign with red lettering reads: “Private Syndicate: Strictly Members Only.” A metal gate, a barbed-wire fence and two CCTV cameras bar the way. Anglers hoping to spend time on the lake’s carefully tended banks must join a waiting list. Those who make it to the top pay a membership fee that buys them the chance to catch a carp that weighs more than a Jack Russell. There are hundreds of them swimming beneath the surface. It’s close to shooting fish in a barrel.

• Asian Stocks Extend 2014 Drop as Yuan Weakens; Oil Gains. Asian stocks fell amid shrinking volumes, with the regional index heading for its first annual drop since 2011. The yuan slipped to the weakest level since June, while oil climbed from a five-year low. The MSCI Asia Pacific Index lost 0.4 percent at 11:32 a.m. in Tokyo, extending this year’s retreat to 2.5 percent. Trading on Japanese, Chinese and Korean bourses was at least 16 percent lower than the 30-dayaverage. 

Fox News:

• ObamaCare fines rising in 2015, IRS prepares to collect. Don't have health insurance? Get ready to pay up.  The ObamaCare-mandated fines for not having insurance are rising in 2015 -- and for the first time, will be collected by the Internal Revenue Service.

CNBC:

• Petrobras(PBR) deadline prompts some bondholders to push for default. Petrobras, Brazil's state-run oil company, could be declared in technical default on some of its foreign debt as early as Tuesday if bondholders pursue efforts to force it to speed up its assessment of losses in a giant corruption scandal.

Zero Hedge:

• Gold Held In NY Fed Vault Drops To Lowest In 21st Century After Biggest Monthly Withdrawal Since 2001. (graph)

• The Most Important US Events Of 2014, According To Twitter. (graph)

• Inflation Watch: It Has Never Been More Expensive To Live The 1% Life. (graph)

• There "Is" Blood: Energy Services Firm Civeo Cuts Headcount 45% & Guidance By 30%, Suspends Dividend. (graph)

• 25 Years After The "Top" In Japan, Have We Learned Anything? (graph)

• WTI Hits $52 Handle As US Rig Count Tumbles To 8-Month Lows. (graph)

• Faith In Abenomics Falters: Foreign Investor Flows Collapse 94% In 2014. (graph)

• China Leading Index Plunges To Worst Since Feb 2009 Sending Yuan To Lower Trading Band Extreme. (graph)

Business Insider:

• FINANCIAL ADVISOR INSIGHTS: What's Happening In Russia Is A Big Wake-Up Call For Emerging Market Investors.

Reuters:

• Mysterious FX cycle may challenge yen bears in 2015.

Telegraph:

• Greece comes back to haunt eurozone as anti-Troika rebels scent power. Greece's finance minister warns ECB could “strangle the Greek economy in a split second” if it cuts off life-support for banks. 

Wen Wei Po:

• Microsoft(MSFT) to Close 2 China Factories in 1Q. Microsoft will shut down factories in Beijing and Dongguan and move manufacturing to Hanoi in Vietnam. More than 3,000 workers may lose jobs.

China Securities Journal:

• Some Chinese Banks May See Drop in 2015 Results. Some banks may see zero increase or even decline in 2015 performance, citing an industry participant. Bank performance affected by accelerating interest rate liberalization, regulatory scrutiny of interbank businesses and deteriorating asset quality.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 103.0 -.5 basis point.

• Asia Pacific Sovereign CDS Index 63.75 -.75 basis point.

• S&P 500 futures +.10%.

• NASDAQ 100 futures  +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (HGR)/.44

Economic Releases
9:00 am EST

• The S&P/CS Composite-20 YoY for October is estimated to rise +.4% versus a +.34% gain in September.

10:00 am EST

• Consumer Confidence for December is estimated to rise to 94.0 versus 88.7 in November.

Upcoming Splits

• (GNTX) 2-for-1

Other Potential Market Movers

• The UK Housing Price report, China Manufacturing PMI and US weekly retail sales reports could also impact trading today.

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