Monday Watch

Today's Headlines 
Bloomberg: 

• Greece Remains Defiant as It Seeks Creditor Deal This Week. Greece’s government said it won’t back down on election pledges to end austerity even while seeking to agree on a deal with creditors as soon as this week to unblock financing and avert a default. “We’re striving for a mutually beneficial agreement by Friday,” Nikos Filis, spokesman for the parliamentary group of Prime Minister Alexis Tsipras’s Syriza party, said Sunday in comments broadcast on Mega TV. “Our mandate from the Greek people is to reach an agreement where we stay in the euro area without harsh austerity measures,” he said, adding that “tough negotiations” will take place before a summit meeting of European Union leaders in Riga, Latvia, on May 21-22.
• China Calls On Banks to Support State Projects as Economy Slows. China urged banks to continue funding local government projects under construction and refrain from calling in loans as the country works through an economic downturn. Banks shouldn’t refuse funds to projects approved before the end of 2014 even if borrowing agencies are unable to meet payments, the State Council said Friday in joint announcement with Finance Ministry, central bank and regulator. The council, China’s Cabinet, also urged local governments to use fiscal support as short-term working capital for ongoing projects to prevent or reduce risk. The message raises contradictory signals from a government that’s sought to trim local debt to more manageable levels by recapitalizing banks, overhauling local finances and removing implicit guarantees for corporate borrowing that once helped struggling companies. 
• Iranian Aid Ship Nears Yemen, Raising Risk of Saudi Showdown. An Iranian aid ship is approaching Yemen’s coastline, raising the risk of a showdown with the Saudi-led military coalition blockading Yemeni ports as it battles the country’s Shiite Houthi rebels. The ship carrying food and medicine entered the Gulf of Aden on Sunday, according to Iranian media. Iran’s navy has vowed to protect the vessel, and the government said it won’t allow any country that’s part of Yemen’s war to inspect the cargo. The vessel will arrive at Yemen’s Red Sea port of Hodeidah on May 21, according to a state TV reporter on board.  
• Euro Wreaks Havoc on Carry Trades in Rally Almost No One Foresaw. It was supposed to be so easy. Borrow in euros as the European Central Bank kept interest rates near zero and use the proceeds to invest in the economies where rates are higher, pocketing the difference and generating huge profits. For a while it worked -- that was, until about a month ago when global markets began to go haywire and the euro, instead of falling as most every strategist surveyed by Bloomberg predicted, began to rally. Investors who embraced the carry strategy have seen losses of 3.5 percent since March, according to a UBS Group AG index.
• China Home Prices Fall in 69 Cities on Year. (video)
• China’s Stocks Retreat for Second Day as IPOs Suck Up Liquidity. China’s stocks fell for a second day, led by commodity and financial companies, amid concern a flood of new share sales will lure funds from existing equities. Aluminum Corp. of China Ltd. retreated 4.9 percent after surging 23 percent last week. China Merchants Securities Co. headed for its biggest loss in four months as brokerages slid. The ChiNext index of smaller companies rallied 2.7 percent in Shenzhen. The Shanghai Composite Index dropped 0.6 percent to 4,283.29 at 9:37 a.m., adding to Friday’s 1.6 percent decline.
• Dollar Gains After Loss Streak as China Stocks Fall With Nickel. The dollar climbed against most peers, snapping a four day losing streak. Asian stocks outside Japan slipped with U.S. equity-index futures, and nickel fell. The yen slid 0.4 percent versus the greenback by 11:04 a.m. and New Zealand’s dollar slumped 0.8 percent. The MSCI Asia Pacific Index was little changed with gains in Japan offsetting losses in Hong Kong and China. BHP Billiton Ltd., the world’s biggest miner, tumbled the most in six years before the company’s metals’ spinoff started trading. Standard & Poor’s 500 Index futures fell 0.2 percent. Asian bonds climbed, tracking gains in the U.S. and Europe. Nickel lost 1 percent.
• Hedge Funds Lose Faith in Oil Rally as OPEC Seen Boosting Supply. Speculators are losing faith in the oil rally, judging that OPEC will keep increasing supply from the highest level since 2012. Their net-long position in West Texas Intermediate crude dropped 2.1 percent, as long wagers fell the most in two months and short bets declined to the lowest since August, U.S. Commodity Futures Trading Commission data show.

Wall Street Journal:

• Islamic State Seizes Control of Iraqi City of Ramadi. Takeover is a crushing setback to U.S.-backed efforts to halt the spread of the extremist group. Islamic State seized control of the capital of Iraq’s largest province, killing hundreds of government forces and dealing a crushing setback to U.S.-backed efforts to halt the spread of the extremist group. The fall of the western city of Ramadi, once home to nearly half a million people, represents Islamic State’s biggest military victory this year, gaining it another major Iraqi city among the territory it controls in Iraq...
• Human Stock Pickers Gain Against Indexes. So far this year, actively managed U.S. stock mutual funds have outperformed funds trying to clone the market’s overall performance.'
• Oil Investors Take a Closer Look at Production. A spotlight has landed on a previously overlooked metric as oil traders drill deeper for clues on price movement. 
• Greece’s Debt Battle Exposes Deeper Eurozone Flaws — Horizons. Blame lies with the monetary union’s flawed political structure, where a highly integrated financial system coexists with fragmented and unpredictable governance. That structure means it’s dangerous to assume that bigger eurozone economies such as Spain or Italy won’t also see a revival of investor concerns about their own debt levels when the European Central Bank ends its monetary support for the region’s bond markets.
• Much More Is Needed to Stop Iran From Getting the Bomb. Obama will reluctantly sign a bill giving Congress more say over a final deal. Here’s what we should be looking for.

CNBC:

• Tom Brady isn't the only one that should fear deflation—the economy should too. The specter of deflation is haunting more than New England Patriots quarterback Tom Brady. The whole U.S. economy is now grappling with its effects. As growth splutters, the world's largest economy is facing the real possibility of a spiral in prices.

Zero Hedge:

• How Japan Became The Benchmark For America's Fraudulent "Jobs Recovery". (graph)
• Saudi Arabia To Execute & Display Beheaded Body Of Political Activist In Public "Crucifixion".
• One Gauge Of Investor Sentiment Just Hit A 6-Year High. (graph)
• What Goldman(GS) Is Telling Its Clients: Sell In May And Don't Come Back For One Year. (graph)
• Chinese Hacker Spies Take Over Penn State Engineering Department, School Says.
• Central Planning Goes Global As UN Unveils Major Sustainable Development Agenda "For The Good Of The Planet".
• This Is What Keynesian "Success" Looks Like: Soaring Part-Time Jobs, Record Low Real Wages. (graph)
• Is This The Chart Of A Healthy Stock Market? (graph)
• Final Pillar Of Bull Market Showing Cracks? (graph)
• Presenting The $77 Billion P2P Bubble. (graph)
• How China Covered The World In "Liquidity Swap Lines".

Business Insider:

• How Goldman Sachs(GS) makes money on its top traders — after they quit.
• Pope calls Palestinian leader Abbas 'angel of peace'.
• Greece must choose between 2 catastrophes.
• Britain could leave the EU as early as next year.
• Don't be fooled: ISIS isn't losing.
• ISIS seizes key Iraqi army base, prime minister to send in Shi'ite fighters.
• Lapdogs, Redux: How The Press Tried To Discredit Seymour Hersh’s Last Bombshell Report.

New York Times:

• Hedge Funds Close Doors, Facing Low Returns and Investor Scrutiny. For decades, nearly everything that the billionaire Julian Robertson touched turned to gold. Mr. Robertson, founder of the hedge fund Tiger Management, seeded a network of hugely successful “Tiger Cubs” — companies that in turn seeded more talent. It became the closest thing the hedge fund industry had to a dynasty. Since the start of this year, however, the managers of three firms spun out of that gilded empire have called it quits after volatile performances and sometimes steep losses. They will return money to investors and focus on managing their own wealth.

AFR:

• ASIC Warns Property Prices May Be Near Bubble Territory. ASIC Chairman Greg Medcraft says he's worried about Sydney and Melbourne property markets, in interview. "History shows that people don't know when they are in a bubble until it's over," Medcraft says.

Weekend Recommendations

• None of note

Night Trading

• Asian indices are -.50% to +.25% on average.

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

• Asia Pacific Sovereign CDS Index 59.5 +.25 basis point.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (JASO)/.07
• (A)/.39
• (URBN)/.30
• (TTWO)/.28
• (LF)/-.17

Economic Releases
10:00 am EST

• The NAHB Housing Market Index for May is estimated to rise to 57.0 versus 56.0 in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Evans speaking, RBA rate decision, UBS Oil & Gas Conference, UBS Healthcare Conference, JPMorgan Tech/Media/Telecom Conference and the (BAX) investor conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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 week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on global growth fears, Fed rate hike worries, earnings concerns, rising Eurozone/Emerging Markets debt angst, technical selling and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Today's Headlines

Bloomberg:

• Greece Aid Accord Looks Elusive as Tsipras Sticks to Red Lines. An agreement between Greece and its international creditors to unblock financing and avert a default looked elusive after Greek Prime Minister Alexis Tsipras said he won’t strike a deal at any cost. “There’s no doubt that an agreement must be reached,” Tsipras said late Friday at a conference in Athens. “But those who think that the Greek side’s resistance can be tested or that its red lines will fade as time passes, would do well to forget it.”
• U.S. Concerned With Pace, Scope of China Reclamation in Sea. Secretary of State John Kerry expressed U.S. concerns Saturday that China is seeking to establish de facto control of the South China Sea by expanding shoals and islets in disputed waters. In a meeting today with counterpart Wang Yi, Kerry said he urged China “to take actions that will join with everybody in helping to reduce tensions and increase the prospect of a diplomatic solution,” to conflicting territorial claims within the strategic international waterway. 
• German Bonds’ Worst Run Since 2012 Makes Inflation Data Critical. A rekindling of the inflation outlook that helped trigger German government bonds’ worst weekly run since 2012 faces scrutiny next week with the release of final data on euro-area consumer prices for April. Bonds across the euro-area fell this week, extending a slump that wiped as much as 344 billion euros ($393 billion) off the market capitalization of the Bloomberg Eurozone Sovereign Bond Index. That’s after the securities surged in the first quarter, when the European Central Bank began its bond-buying plan to support waning price growth in the region.
• Clintons Report Earnings of at Least $30 Million Since 2014. The Democratic presidential candidate and her husband have a net worth between $11 million and $53 million, according to new financial disclosures – not including real estate and personal items.
  Bill and Hillary Clinton earned at least $30 million in income from speeches last year and in the first four months of 2015, the couple's financial disclosures filed Friday with the Federal Elections Commission show. That's based on payments for about 100 speeches, according to the filing, which Hillary Clinton's presidential campaign provided to Bloomberg News late Friday.

Wall Street Journal: 

• The Plight of the Middle East’s Christians. Ancient communities in Syria and Iraq are in mortal peril. Can the West find a way to preserve the Christian presence in the Middle East—and stave off a ‘clash of civilizations’? The Christian communities of Syria and Iraq have survived 2,000 years of tumult and war. In some of them, prayers are still said in Aramaic, the language that Jesus used in daily life. These communities now tremble on the brink of destruction.

Fox News:

• Army's elite Delta Force kills top ISIS official, Abu Sayyaf, in rare Syrian raid. (video) U.S. personnel overnight killed a key Islamic State leader in charge of the group's oil and gas operations in a raid in eastern Syria, the White House said Saturday. A team of Delta Force commandos slipped across the border from Iraq under cover of darkness Saturday aboard Black Hawk helicopters and V-22 Osprey aircraft, according to a U.S. defense official knowledgeable about details of the raid.

CNBC:

• Who's your debt daddy? China tops list of US foreign creditors once more.

ZeroHedge:

• How Big Government Kills The American Dream.
• UK PM David Cameron Proclaims: It’s Not Enough To Follow The Law, You Must Love Big Brother.
• Are You Ready For The Coming Debt Revolution?
• China Creates Perpetual Leverage Machine After Dropping Debt Directive. (graph)
• Global Trade Is "In The Doldrums", BofAML Says. (graph)
• Massively Levered Beta: Tepper Adds $1.3 Billion, Or 33% Of Long Equity AUM, In SPY, QQQ Calls.
• 5 Things To Ponder: Reading While Waiting List. (graph)
• Gold & Silver Surge As Bond-Buying Bonanza Stalls Stocks. (graph)
• Stock Indicator Suggests Big Move (Lower?) Coming, (graph)
• Leading German Keynesian Economist Calls For Cash Ban.
• Martin Armstrong Warns Of The Coming Crash Of All Crashes. (graph)
• This May Just Be The Start Of The Oil Price War Says IEA.
• Inside China's Insane IPO Market: Full Frontal.
• Greece Will Default On June 5 Without Deal, IMF Leaks.

Business Insider:

• Google(GOOG) could launch a huge counterstrike against Amazon(AMZN) in a few weeks.
• The NTSB is investigating whether Amtrak 188 was hit by a 'projectile' before it derailed.
• Luxury brands are suing Alibaba(BABA) over counterfeit goods.
• Some top activist investors are betting big on McDonald's(MCD).
• Asian American groups file federal complaint against Harvard for alleged 'racial quotas'.
• Egypt's first freely elected leader sentenced to death.
• Bush's tough week spells big trouble for him.

Mega TV:

• IMF Sees Little Progress in Greek Talks. IMF Director of European Department Poul Thomsen told IMF's Board Thursday that there's mostly progress in process, not substance, in Greek bailout talks. IMF officials have no access to ministers, don't know whether commitments by Greek bureaucrats in so-called Brussels Group have political backing. Situation is far from ideal, Thomsen said. IMF has no clear view of Greece's liquidity situation. Greece, creditors disagree on pension system reform, labor market deregulation, fiscal policy for 2015, public administration overhaul.

Financial Times: 

• Hedge funds loom large in oil price moves. Forget the interplay between supply and demand. When it comes to oil prices, hedge funds and speculators are exerting an uncommonly large influence, say many in one of the world’s most important markets. Oil traders have watched future prices rally to their highest level this year, within touching distance of $70 a barrel, even as the price of physical cargoes flounders under the weight of a massive oversupply.

RIA:

• Russia to Build Up Troops in Crimea to Respond to NATO. Russia has right to deploy all kinds of weapons in Crimea, citing Russian ambassador to NATO Alexander Grushko.

Channel 4:

• Greece won't be able to make IMF repayments, beginning with a June 5 payment, unless an agreement is reached with international partners, UK's Channel 4 reports, citing a leaked IMF memo dated May 14.

Market Week in Review

• S&P 500 2,120.46 +.23%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,120.46 +.23%

• DJIA 18,257.0 +.35%

• NASDAQ 5,043.97 +.81%

• Russell 2000 1,243.05 +.69%

• S&P 500 High Beta 35.38 -.28% 

• Goldman 50 Most Shorted 140.22 +.62% 

• Wilshire 5000 22,159.30 +.32%

• Russell 1000 Growth 1,018.06 +.51%

• Russell 1000 Value 1,037.35 +.05%

• S&P 500 Consumer Staples 510.17 +1.08%

• Solactive US Cyclical 141.08 +.33%

• Morgan Stanley Technology 1,049.64 +.71%

• Transports 8,677.18 -.98%

• Utilities 584.70 +.22%

• Bloomberg European Bank/Financial Services 119.25 -.39%

• MSCI Emerging Markets 42.96 +.77%

• HFRX Equity Hedge 1,219.42 +.42%
• HFRX Equity Market Neutral 990.75 +.14%

Sentiment/Internals

• NYSE Cumulative A/D Line 241,167 +1.05%

• Bloomberg New Highs-Lows Index 168 +321

• Bloomberg Crude Oil % Bulls 41.67 n/a

• CFTC Oil Net Speculative Position 325,706 +3.45%
• CFTC Oil Total Open Interest 1,750,082 +1.90%

• Total Put/Call .85 unch.

• OEX Put/Call 1.1 -31.25%

• ISE Sentiment 87.0 -4.40%

• NYSE Arms .97 +30.13%

• Volatility(VIX) 12.43 -3.34%

• S&P 500 Implied Correlation 63.49 -1.23%

• G7 Currency Volatility (VXY) 9.07 -7.07%

• Emerging Markets Currency Volatility (EM-VXY) 9.41 -6.55%

• Smart Money Flow Index 17,628.78 +.40%

• ICI Money Mkt Mutual Fund Assets $2.589 Trillion -.06%
• ICI US Equity Weekly Net New Cash Flow -$2.248 Billion

• AAII % Bulls 26.7 -1.2%
• AAII % Bears 26.4 -1.8%

Futures Spot Prices

• CRB Index 231.46 +.94%

• Crude Oil 59.87 +.25%

• Reformulated Gasoline 205.57 +2.96%

• Natural Gas 3.02 +5.62%

• Heating Oil 200.73 +2.28%

• Gold 1,224.50 +3.09%

• Bloomberg Base Metals Index 178.92 -2.04%

• Copper 292.40 +.38%

• US No. 1 Heavy Melt Scrap Steel 230.33 USD/Ton +.14%
• China Iron Ore Spot 61.31 USD/Ton -.15%

• Lumber 252.40 +3.62%

• UBS-Bloomberg Agriculture 1,103.35 -.49%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 1.2% +70.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.0483 +10.72%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 124.17 +.34%

• Citi US Economic Surprise Index -71.60 -7.3 points

• Citi Eurozone Economic Surprise Index 1.90 -12.3 points

• Citi Emerging Markets Economic Surprise Index -14.0 +3.1 points

• Fed Fund Futures imply 56.0% chance of no change, 44.0% chance of 25 basis point cut on 6/17

• US Dollar Index 93.16 -1.64%

• Euro/Yen Carry Return Index 142.74 +1.88%

• Yield Curve 160.0 +2.0 basis points

• 10-Year US Treasury Yield 2.14% -1.0 basis point

• Federal Reserve's Balance Sheet $4.462 Trillion +.62%

• U.S. Sovereign Debt Credit Default Swap 16.18 -8.99%

• Illinois Municipal Debt Credit Default Swap 230.0 +12.84%

• Western Europe Sovereign Debt Credit Default Swap Index 22.07 -3.56%

• Asia Pacific Sovereign Debt Credit Default Swap Index 60.31 +1.69%
  

• Emerging Markets Sovereign Debt CDS Index 309.30 -1.57%
  

• Israel Sovereign Debt Credit Default Swap 65.19 +.28%

• Iraq Sovereign Debt Credit Default Swap 347.32 -.01%

• Russia Sovereign Debt Credit Default Swap 301.16 -9.36%

• iBoxx Offshore RMB China Corporates High Yield Index 118.91 +.77%

• 10-Year TIPS Spread 1.86% -3.0 basis points

• TED Spread 26.5 -1.0 basis point

• 2-Year Swap Spread 26.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.75 +2.25 basis points

• N. America Investment Grade Credit Default Swap Index 62.77 -.04%

• America Energy Sector High-Yield Credit Default Swap Index 1,056.0 -1.74%

• European Financial Sector Credit Default Swap Index 73.1 +1.80%
  

• Emerging Markets Credit Default Swap Index 290.38 -.35%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 87.50 unch.

• M1 Money Supply $3.030 Trillion +2.0%

• Commercial Paper Outstanding 992.40 -2.40%

• 4-Week Moving Average of Jobless Claims 271,750 -7,750

• Continuing Claims Unemployment Rate 1.7% unch.

• Average 30-Year Mortgage Rate 3.85% +5.0 basis points
• Weekly Mortgage Applications 412.50 -3.46%

• Bloomberg Consumer Comfort 43.5 -.2 point

• Weekly Retail Sales +2.1% +90 basis points

• Nationwide Gas $2.69/gallon +.03/gallon

• Baltic Dry Index 637.0 +11.0%

• China (Export) Containerized Freight Index 875.21 -1.47%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 40.0 +23.1%
• Rail Freight Carloads 277,601 -1.80%

Best Performing Style

• Small-Cap Growth +.8%

Worst Performing Style

• Large-Cap Value +.1%

Leading Sectors

• Gold & Silver +3.9%

• HMOs +2.7%

• Alt Energy +2.6%

• Social Media +2.1%

• Papers +2.0%

Lagging Sectors

• Oil Service -1.1% 

• Energy -1.9%

• Road & Rail -3.2%

• Coal -4.3%

• Gaming -4.7%

Weekly High-Volume Stock Gainers (29)

• SSNI, AOL, PLL, ROSE, RENT, IMPV, TKAI, TGI, RVNC, MOH, ZBRA, DF, NVRO, HDP, QTWO, PN, OSIR, OPWR, ZU, YDLE, WMS, LOCO, PERY, KRNY, ISSI, WMB, GDDY, DHR and XHR

Weekly High-Volume Stock Losers (22)

• POM, MTZ, HMTV, NNI, KSU, NBL, MNST, GDOT, UEIC, PDVW, FGEN, PBYI, WAGE, KSS, RMD, ENV, APEI, DEPO, RAX, BBSI, NLNK and FLDM

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Reversing Slightly Lower into Afternoon on Global Growth Fears, Earnings Concerns, Technical Selling, Tech/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 12.65 -.81%

• Euro/Yen Carry Return Index 142.66 +.42%

• Emerging Markets Currency Volatility(VXY) 9.41 -2.39%

• S&P 500 Implied Correlation 63.38 -.44%

• ISE Sentiment Index 83.0 -62.27%

• Total Put/Call .87 +10.13%

• NYSE Arms .90 -30.59% 

Credit Investor Angst:

• North American Investment Grade CDS Index 62.94 -1.42%

• America Energy Sector High-Yield CDS Index 1,056.0 -.43%

• European Financial Sector CDS Index 73.11 -.31%

• Western Europe Sovereign Debt CDS Index 21.67 -1.81%

• Asia Pacific Sovereign Debt CDS Index 59.70 -1.01%

• Emerging Market CDS Index 290.81 -.06%
  

• iBoxx Offshore RMB China Corporates High Yield Index 118.91 +.11%

• 2-Year Swap Spread 26.25 -.5 basis point

• TED Spread 26.50 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.75 -.5 basis point

Economic Gauges:

• 3-Month T-Bill Yield .01% unch.

• Yield Curve 160.0 -9.0 basis points

• China Import Iron Ore Spot $61.31/Metric Tonne -1.59%

• Citi US Economic Surprise Index -71.6 -9.4 points

• Citi Eurozone Economic Surprise Index 1.90 -.3 point

• Citi Emerging Markets Economic Surprise Index -14.0 +5.0 points

• 10-Year TIPS Spread 1.86 -2.0 basis points

Overseas Futures:

• Nikkei 225 Futures: Indicating +23 open in Japan 
• China A50 Futures: Indicating -136 open in China

• DAX Futures: Indicating -85 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech sector longs and emerging markets shorts

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

• Market Exposure: Moved to 25% Net Long