Bull Radar

Style Outperformer:

• Large-Cap Value -.66%

Sector Outperformers:

• 1) Steel +3.38% 2) Oil Service +3.11% 3) Oil Tankers +.58%
  

Stocks Rising on Unusual Volume:

• SALE, CHUY, NLS, GLNG, BCO, ABMD, KMT, EL, IDTI, MIC, TDW, LPX, DO, SDRL, GVA, NLNK, MIC and AMAG

Stocks With Unusual Call Option Activity:

• 1) CAG 2) ZU 3) SE 4) CVC 5) LC
  

Stocks With Most Positive News Mentions:

• 1) DOW 2) CHUY 3) V 4) NFLX 5) N
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 7.1% Above 100-day average
• 2 Sectors Rising, 8 Sectors Declining
• 31.2% of Issues Advancing, 66.2% Declining
• 39 New 52-Week Highs, 31 New Lows
• 57.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.3
• Vix 13.46
• Total Put/Call .90
• TRIN/Arms .56

Tuesday Watch

Evening Headlines 
Bloomberg:

• Forget Tanks. It’s Russia’s Ruble That’s Conquering East Ukraine. As a wobbly cease-fire keeps eastern Ukraine’s warring factions apart, Russia’s ruble is conquering new territory across the breakaway republics. In Donetsk, the conflict zone’s biggest city, supermarkets have opened ruble-only checkout counters to serve the fighters in camouflage lining up along pensioners. Bus and tram tickets come with a conversion from Ukraine’s hryvnia to the Russian currency. Gas-station workers are paid in rubles because that’s what their rebel customers use to fuel their armored jeeps.

• Global Bondholders Caught in China’s Cement Consolidation Push. A push by authorities in China to shrink the nation’s cement industry has caught global bond investors in the middle.

• These Chinese Stocks Are Trouncing the Market on Soccer Stimulus. Xi Jinping’s plan to make China a soccer superpower is winning over fans in an unlikely place: the nation’s $7.7 trillion stock market. Nine listed companies with ties to the country’s soccer league have surged an average 158 percent since the Chinese president first signaled plans in March 2014 to revive a sport plagued by match-fixing and an 82 ranking in FIFA’s international league.  

• China’s Stocks Drop as Best-Performing Phone Shares Lead Decline. China’s stocks fell amid concern recent gains were excessive relative to the outlook for economic growth. Phone companies, the best performers over the past month, led declines. China United Network Communications Ltd. slid 4.1 percent after jumping 60 percent since last month. Everyday Network Co. and Nanfeng Ventilator Co. plunged more than 5 percent, dragging down the ChiNext index of small companies. Energy companies provided some market support, with China Oilfield Services Ltd. and Offshore Oil Engineering Co. jumping 10 percent on industry reform speculation, according to Zheshang Securities Co. The Shanghai Composite Index dropped 0.7 percent to 4,449.43 at 10:09 a.m. local time. The CSI 300 Index fell 1 percent.

• Asian Stocks Follow U.S. Shares Higher as Investors Await RBA. Asian stocks outside of Japan rose for a second day following a rally in U.S. equities and as investors await an interest-rate decision by Australia’s central bank. Australia & New Zealand Banking Group Ltd. jumped 3.8 percent in Sydney after the lender posted a record first-half cash profit. Fortescue Metals Group Ltd. rose 3.1 percent in Sydney after Vale SA signaled that it may be willing to moderate supply growth amid a glut in iron ore. Alibaba Pictures Group Ltd. declined 7.3 percent in Hong Kong after actress Zhao Wei and her husband Huang Youlong sold shares in the film-making unit of China’s biggest Internet company The MSCI Asia Pacific excluding Japan Index rose 0.2 percent to 515.88 as of 9:32 a.m. in Hong Kong. Markets in Japan, South Korea and Thailand are closed Tuesday for holidays.

• In Land of Negative Yields, Junk Bonds Are The New Haven Assets. The new fixed-income haven is, of all things, the market for junk bonds. With government bonds in Germany to Japan and Slovakia yielding less than nothing, money is pouring into exchange- traded funds that buy speculative-grade debt, traditionally the riskiest of fixed-income assets. The pace is staggering. So far this year, about $9 billion has flowed into the funds globally, a significant chunk for the $44.4 billion market in junk-debt ETFs. In the land of negative yields, even the most conservative firms such as Zurich Insurance Group AG and Assicurazioni Generali SpA, the biggest Swiss and Italian insurers, are planning to invest in sub-investment grade debt for the first time.

• Goldman: Expansion in Stock Valuations Will End When the Fed Raises Rates. They expect interest rates to go up in September. The second-longest expansion in U.S. stock-market valuations in more than three decades is coming to an end, according to Goldman Sachs Group Inc. Stock valuations have surged 62 percent since September 2011, the longest period of multiple expansion since the height of the Internet bubble in December 1999, when the S&P 500’s forward price-to-earnings ratio had climbed for 61 straight months, according to Goldman. The current run is 42 months old and Goldman predicts it will end when the Federal Reserve lifts interest rates, which the strategists believe will happen in September.

Wall Street Journal: 

• Hillary Clinton Takes Hit in WSJ Poll, but Holds Edge Over GOP Rivals. Democratic front-runner sees those with negative view jump to 42%; Bush draws most support on GOP side.

• India’s Debt Pile Up Complicates Growth Plans. Infrastructure companies key to India’s prospects already loaded down with heavy debt loads.

• Panera(PNRA) to Drop at Least 150 Artificial Ingredients From Menu. Chain is latest to respond to consumer shift toward foods seen as more healthful.

• Sorry, Charlie Hebdo. Western writers abandon their support for free speech.

Fox News: 

• New offensive frees captives from Boko Haram; exposes group's bloodlust. A major offensive by Nigerian forces has freed nearly 700 captives from Boko Haram in the last week, while also further exposing the Islamist terror group's bottomless propensity for evil. As many as 10 girls were stoned to death last week as rescuers closed in on the terrorist group's stronghold in the Sambisa forest in the northern Borno state. Survivors told of their harrowing escape from the terror group, which claims to be aligned with ISIS.

Zero Hedge: 

• Federal Reserve 1 - 0 Saudi Arabia. (graph)

• How The Shanghai Composite Can Rise 461% From Here. (graph)

• Stephen Roach Derides Central Bankers' Mass Delusion. (graph)

• Peak Oil Optimism. (graph)

• Ira Sohn Conference Picks And Pans Summary.

• Two-Thirds Of US Millionaires Fear "They Will Lose It All" If The Market Crashes.

• Fed Admits Yellen "Met With" FOMC Leaker In 2012, DOJ Probe Begins.

• Volumeless Stocks Test Record Highs On Downbeat Data. (graph)

• One Man's Message To Americans - "Start Giving A Damn!".

• How Chinese Oligarchs Used Fake Trade Invoices To Launder Almost $1 Trillion Globally.

Business Insider:

• New York police officer dies after being shot in the head.

• BREMMER: There was a time when geopolitics was dangerous, yet stable — not anymore.

Financial Times:

• China’s ‘migrant miracle’ nears an end as cheap labour dwindles. China’s labour force is shrinking and the “migrant miracle” that powered its industrial rise is mostly exhausted, removing the factors that propelled the country’s meteoric development, according to leading economists.

Telegraph: 

• Liquidity drought could spark market bloodbath, warns IIF. Evaporating liquidity and higher US interest rates will cause huge market swings with potentially catastrophic consequences, Institute of International Finance warns.

Securities Times:

• China May Raise Stamp Tax in 3Q, Brokerage Says. China may raise the stamp tax on stock trading to boost fiscal revenue as recent market volume keeps surging, citing a research not of Changjiang Securities.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -1.0% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 105.0 unch.

• Asia Pacific Sovereign CDS Index 60.0 -.5 basis point.

• S&P 500 futures -.11%.

• NASDAQ 100 futures -.15%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ADM)/.71

• (DTV)/1.52

• (DISCA)/.35

• (EMR)/.76

• (EL)/.51

•  (HCA)/1.35

• (HCP)/.78

• (H)/.19

• (ICE)/2.96

• (K)/.92

• (KLIC)/.12

• (LPX)/-.19

• (MDC)/.16

• (NBL)/.04

• (ODP)/.13

• (TRW)/1.87

• (VSH)/.20

• (VMC)/-.15

• (DIS)/1.11

• (ZTS)/.37

• (AGU)/.32

• (ALL)/1.42

• (EA)/.26

• (FOSL)/.69

• (HLF)/1.01

• (MYL)/.69

• (PZZA)/.54

• (PXD)/.06

• (SCTY)/-1.60

Economic Releases
8:30 AM EST

• The Trade Deficit for March is estimated at -$41.7B versus -$35.4B in February.

9:45 am EST

• Final Markit US Services PMI for April is estimated at 57.8 versus a prior estimate of 57.8.

10:00 am EST

• The IBD/TIPP Economic Optimism Index for May is estimated to fall to 50.0 versus 51.3 in April.

• ISM Non-Manufacturing for April is estimated to fall to 56.2 versus 56.5 in March.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Kocherlakota speaking, Eurozone PPI report, China HSBC Services PMI, US weekly retail sales reports, Robert Baird Growth Stock Conference, Wells Fargo Industrial/Construction Conference, (LXK) analyst meeting and the (CUDA) investor meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate 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 Higher into Final Hour on Central Bank Hopes, Short-Covering, Technical Buying, Healthcare/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.96 +2.05%

• Euro/Yen Carry Return Index 139.84 -.54%

• Emerging Markets Currency Volatility(VXY) 10.41 +1.36%

• S&P 500 Implied Correlation 64.63 -.51%

• ISE Sentiment Index 92.0 -20.0%

• Total Put/Call .94 -2.06%

• NYSE Arms .87 +51.79% 

Credit Investor Angst:

• North American Investment Grade CDS Index 62.80 -.16%

• America Energy Sector High-Yield CDS Index 1,085.0 +.19%

• European Financial Sector CDS Index 70.42 unch.

• Western Europe Sovereign Debt CDS Index 22.74 -.29%

• Asia Pacific Sovereign Debt CDS Index 60.08 -.72%

• Emerging Market CDS Index 299.85 -.15%
  

• iBoxx Offshore RMB China Corporates High Yield Index 117.95 -.08%

• 2-Year Swap Spread 25.75 -.25 basis point

• TED Spread 28.0 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 unch.

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 153.0 +2.0 basis points

• China Import Iron Ore Spot $56.18/Metric Tonne n/a

• Citi US Economic Surprise Index -56.10 +6.2 points

• Citi Eurozone Economic Surprise Index 6.50 -4.3 points

• Citi Emerging Markets Economic Surprise Index -18.20 -2.2 points

• 10-Year TIPS Spread 1.92 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +254 open in Japan

• DAX Futures: Indicating +16 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech/medical/retail/tech sector longs

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bloomberg: 

• Greek Talks Drag On as New EU Forecasts Set to Underscore Crisis. (video) Greece’s talks with international creditors dragged on as the European Commission prepares new forecasts that are likely to underscore the scale of the crisis facing the country’s government. While officials on all sides have reported progress, six days of talks have yet to provide the breakthrough that Greece needs to guarantee the flow of liquidity to its banks. The prolonged cash squeeze is threatening the country’s fragile recovery, with a person familiar with the talks saying that the Commission is likely to slash its growth and budget estimates when it releases new figures on Tuesday.
• Greek Jobless Legacy Adds to Danger for Tsipras as Funds Dwindle. (video) Evidence that Greece’s cash squeeze is hurting the economy may heap more pressure on Prime Minister Alexis Tsipras to seal a deal with creditors as haggling over reforms drags on. Unemployment data on Wednesday will highlight that more than a quarter of Greeks remain out of work, according to economists. The figures will come a day after the European Commission gives its latest assessment of the country, when it will probably cut its 2015 growth forecast. 
• China's Crazy Stock Market, Charted. (graph) 
• Europe Stocks Climb After Weekly Drop as Syngenta Gains With DAX. European stocks rebounded after their biggest weekly loss since December, as data showed manufacturers raised prices for the first time in eight months. The Stoxx Europe 600 Index added 0.6 percent to 396.82 at the close of trading.
• Investors In This Homebuilder ETF Are Heading for the Exits. Investors in homebuilding shares are heading for the door. Speculators in the SPDR S&P Homebuilders exchange-traded fund have pulled a record amount of cash in April, abandoning the ETF known by its ticker XHB after it reached an eight-year high in February. The fund has retreated 4.8 percent since then.
• Corporate America’s Unleash-the-Drones Plea Puts the Heat on FAA. As U.S. regulators study how to govern commercial drones, corporate America is plunging ahead on using unmanned aircraft in a bid to speed the process and win concessions on proposed restrictions. Large companies including American International Group Inc., Chevron Corp. and BNSF Railway Co. are planning flight trials to inspect storm damage, pipelines and railroad tracks. Union Pacific Corp. will employ its 7-pound drones to monitor derailments of hazardous materials.
• ‘I Gotta Pay Our Bills,’ Bill Clinton Says of Six-Figure Talks. Former President Bill Clinton had one reaction when asked if he would continue to collect fees on the order of $500,000 for speeches during his wife’s presidential bid: “Oh, yeah. I gotta pay our bills.” Clinton defended speaking fees that often are hundreds of thousands of dollars, saying there were no conflicts of interest, in an interview with NBC News broadcast Monday.

MarketWatch.com: 

• Sohn Conference live blog: Einhorn takes aim at frackers.

Fox News:

• Texas officer saved lives in shooting outside Muhammad cartoon contest, police say. (video) A Texas traffic cop saved untold lives Sunday night when he took down two heavily armed men bent on storming a building where a 'Draw the Prophet' Muhammad contest was taking place, killing both before they could make their way inside. The police officer, who has not been identified by Garland Police Department officials, "probably saved lives," said police spokesman Joe Harn, who added that "his reaction, and his shooting with a pistol, he did a good job."

CNBC: 

• Tech valuations in the private sector are too high: Fred Wilson. (video)

ZeroHedge:

• Bill Gross: "This Is All Ending".
• US Shale Sector Crashes After David Einhorn Repeats What Everyone Knows Already. (graph)
• Has The ECB Run Out Of Willing Bonds Sellers On The Long End? (graph)
• Billionaires Horde $100 Million Homes At Record Pace: "Beats Gold, Because You Can Boast".
• Junk Bonds "Even More Dangerous" Than Stocks, Icahn Says. (video)
• US Factory Orders Drop YoY For 5th Consecutive Month. (graph)
• Dow Fires 1,750 After Boosting Share Buyback Program To $10 Billion. (graph)
• Buyback Bonanza, Margin Madness Behind US Equity Rally. (graph)
• Bund-Battering Continues - It's Different This Time. (graph)
• No Really, Who Is Buying? (graph)
• "Nor Any Drop To Drink," Citi Maps The Liquidity Paradox. (graph)

Business Insider:

• McDonald's(MCD) CEO reveals his massive plan to save the business.
• Cisco's(CSCO) new CEO choice is a shocker.
• We haven't heard Carl Icahn this bearish in a long time.
• Tesla(TSLA) is facing stiff competition in its plan to generate new revenue through batteries.
• We're witnessing a big shift in how investors think about inflation. (graph)

Telegraph:

• 'Warning lights' flash over Greece and France as manufacturing stumbles. France and Greece remain the eurozone's laggards, with the former "locked in reverse gear" as manufacturing remains mired in contraction in April. Markit's French manufacturing purchasing managers' index (PMI) fell to 48 in April, from 48.8 in March. This was lower than a flash estimate of 48.4 and well below the 50 level that divides growth from contraction. Greece's PMI contracted to 46.5, from a previous reading of 48.9.

Het Financieele Dagblad:

• Constancio Sees Risk Search for Yield Runs Out of Control. ECB Vice President Vitor Constancio says risk that the search for yield runs out of control needs to be monitored, citing interview.

Bear Radar

Style Underperformer:

• Mid-Cap Growth +.12%

Sector Underperformers:

• 1) Airlines -1.03% 2) Oil Service -1.01% 3) Road & Rail -.53%

Stocks Falling on Unusual Volume:

• ONCE, SYT, HYH, PDCO, LNKD, EMES, DCI, CEVA, SC, AGTC, GMCR, PXD, TUES, BLUE, BFR, BIS, GTLS, PRE, AAVL, CLMT, MFLX, SCTY, THG, WLK, CMGE, AAVL and TUES

Stocks With Unusual Put Option Activity:

• 1) MRO 2) CIEN 3) XOP 4) EOG 5) PXD
  

Stocks With Most Negative News Mentions:

• 1) SCTY 2) TSO 3) DAL 4) PXD 5) WLL
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume