Bear Radar

Style Underperformer:

• Small-Cap Growth -.81%

Sector Underperformers:

• 1) Road & Rail -2.31% 2) Coal -2.07% 3) Hospitals -1.67%

Stocks Falling on Unusual Volume:

• AVID, DEG, GDOT, SEMI, MON, IPHI, DPLO, TERP, BLUE, AET, PRXL, CTL, FTNT, CHA, QLYS, WMB, NDRM, ALV, IPGP, NCW, HP, KNX, SAM, RAVN, PUK, SPLS, POZN, KNX and QLYS

Stocks With Unusual Put Option Activity:

• 1) AMD 2) LEN 3) MON 4) BBY 5) NFLX
  

Stocks With Most Negative News Mentions:

• 1) FEYE 2) ALV 3) HP 4) FIT 5) SPLS
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Growth -.28%

Sector Outperformers:

• 1) Homebuilders +1.98% 2) Airlines +.04% 3) Foods -.02%
  

Stocks Rising on Unusual Volume:

• NKTR, BOX, ALDR, VNDA, FCX and SRNE

Stocks With Unusual Call Option Activity:

• 1) CCL 2) SYY 3) NLY 4) LL 5) JCP
  

Stocks With Most Positive News Mentions:

• 1) IHS 2) CMA 3) LEN 4) F 5) FB
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running 11.4% Below 100-day average
• 1 Sector Rising, 9 Sectors Declining
• 39.2% of Issues Advancing, 57.0% Declining
• 77 New 52-Week Highs, 20 New Lows
• 52.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.2
• Vix 12.2
• Total Put/Call 1.06
• TRIN/Arms .90

Wednesday Watch

Evening Headlines 

Bloomberg:  

• Syriza Hardliners Balk at Tsipras’ Reforms. (video)

• Marine Le Pen: Just Call Mr Mrs Frexit. (video) Marine Le Pen is distancing herself from hard-liners - and aims to ride an anti-EU wave to the French presidency. Marine Le Pen, a frontrunner in France’s 2017 presidential election, says a Greek exit from the euro is inevitable. And if it’s up to her, France won’t be far behind. “We’ve won a few months’ respite but the problem will come back,” Le Pen said of Greece in an interview at her National Front party headquarters in Nanterre, near Paris, on Tuesday. “Today we’re talking about Grexit, tomorrow it will be Brexit, and the day after tomorrow it will be Frexit.” 

• Hollande Calls Emergency Meeting After U.S. Spying Reports. French President Francois Hollande has called a high-level emergency meeting for 9 a.m. on Wednesday after WikiLeaks reported that the U.S. had spied on him and two of his predecessors.

• China Developers: Are High Onshore Ratings Hiding Risks? (video)

• Will China's Manhattan Succeed, or Crash and Burn? “Yujiapu must keep building so that banks can create fictional collaterals with which to increase lines of credit to LGFV debtors,” said Victor Shih, a professor at the University of California at San Diego who studies China’s politics and finance. “China can prevent the bankruptcy of local LGFVs and developers by ordering banks to roll over loans. However, it would take a Stalinist relocation of businesses to Yujiapu to fully occupy the office towers there.” 

• China Steelmakers Defy Profit Squeeze as Shares Ride Market Wave. (graph) China’s steelmakers are defying the weakest profit margins in seven years to outpace even the world’s best-performing stock market. An index of 28 steel producers in China is up 76 percent this year compared with the 41 percent advance in the Shanghai Composite Index, the best performer among 92 major peers tracked by Bloomberg. That’s in contrast to a gauge of industry profitability that’s tumbled to an almost seven-year low amid rising iron ore and depressed steel prices, as the attached chart of Bloomberg Intelligence data shows. 

• Generation Without Recession Leaves Aussies Unprepared for Risks. Australia is set to enter its 25th year without recession next week. For the economy, one of the longest periods of growth on record in the developed-world has actually stored up trouble. The country is increasingly relying on past momentum, as the costs of political inertia mount and a generation untouched by economic shock breeds complacency. Having shunned major policy change since the turn of the century, Australia’s economy may need to weaken further before the nation will accept reforms from any government.

• Russia Stuck at Junk as S&P Joins Moody’s Crushing Upgrade Hopes. Russia will probably be saddled with a junk credit rating for two more years, Standard & Poor’s said, joining Moody’s Investors Service in dashing expectations by officials for a higher debt grade.

Wall Street Journal:

• Hedge Funds Score Big Gains. After several lackluster years, money managers are raking in profits, fueled in part by booming M&A.

• Foreign Reserves Slip in Emerging Markets, Raising Risks. While still relatively robust, diminishing currency hoards reduce capacity to ride out crises.

Fox News:

• Barbarism by the book: New ISIS video aims to show religious purity.

MarketWatch.com:

• Is China really so ... Japanese?

Zero Hedge:

• Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers.

• Keeping Government Bureaucrats Off the Backs Of The Citizenry: The Supreme Court Responds.

• Abe Ratings Crash To Record Lows, Japan Lowers Minimum Voting Age. (graph)

• The World's Exposure To China In 6 Easy Charts. (graph)

• Confusion Reigns At PBoC As Multi-Trillion Yuan Bailout Threatens To Undermine Rate Cuts. (graph)

• The "Smart Money" Just Sold The Most Stocks In History. (graph)

• The Instability Of The Global Game Of Central Bank Chicken.

• "September It Is": The Good (Greenback), The Bad (Bonds), & The Ugly (Buillion). (graph)

Business Insider:

• Palantir is reportedly raising $500 million at a $20 billion valuation, making it the third most valuable US startup.

• Democrats vow to come up with a legal solution if Supreme Court strikes down Obamacare.

• At least 18 Chinese are dead in China's western Xinjiang province after a Ramadan attack on police.

• Netflix(NFLX) is splitting its stock 7 ways.

Evening Recommendations 

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 106.0 unch.

• Asia Pacific Sovereign CDS Index 57.0 -.5 basis point.

• S&P 500 futures -.02%.

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (LEN)/.64

• (MON)/2.06

• (BBBY)/.94

• (HGR)/.45

• (SCS)/.15

• (WOR)/.43

Economic Releases

8:30 am EST

• 1Q GDP is estimated to fall -.2% versus a prior estimate of a -.7% decline.

• 1Q Personal Consumption is estimated to rise +1.9% versus a prior estimate of a +1.8% gain.

• 1Q GDP Price Index is estimated to fall -.1% versus a prior estimate of a -.1% decline.

• 1Q Core PCE is estimated to rise +.8% versus a prior estimate of a +.8% gain.
  

10:30 am EST

• Bloomberg consensus estimates call for a crude oil inventory decline of -1,677,780 barrels versus a -2,676,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -388,890 barrels versus a +460,000 barrel gain the prior week. Distillate inventories are estimated to rise by +583,330 barrels versus a +114,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.46% versus a -1.5% decline prior.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone GDP report, BoJ Minutes, $35B 5Y T-Note auction, weekly MBA mortgage applications report, (MCK) investor day, (RHT) analyst day and the (JOE) annual meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by financial and consumer 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 Higher into Final Hour on Greece Debt Deal Optimism, Less Eurozone/Emerging Markets Debt Angst, Short-Covering, Retail/Energy Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.19 -4.32%

• Euro/Yen Carry Return Index 144.65 -1.01%

• Emerging Markets Currency Volatility(VXY) 8.88 +.23%

• S&P 500 Implied Correlation 61.19 -2.63%

• ISE Sentiment Index 92.0 -36.99%

• Total Put/Call .95 +7.95%

• NYSE Arms .68 -8.27% 

Credit Investor Angst:

• North American Investment Grade CDS Index 65.48 +.35%

• America Energy Sector High-Yield CDS Index 1,534.0 +.79%

• European Financial Sector CDS Index 75.33 -3.61%

• Western Europe Sovereign Debt CDS Index 22.07 -11.46%

• Asia Pacific Sovereign Debt CDS Index 57.0 -.87%

• Emerging Market CDS Index 297.49 -1.97%
  

• iBoxx Offshore RMB China Corporates High Yield Index 120.74 +.06%

• 2-Year Swap Spread 24.25 -.5 basis point

• TED Spread 28.0 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.25 unch.

Economic Gauges:

• 3-Month T-Bill Yield .00% unch.

• Yield Curve 173.0 +2.0 basis points

• China Import Iron Ore Spot $61.34/Metric Tonne +2.2%

• Citi US Economic Surprise Index -36.80 +1.2 points

• Citi Eurozone Economic Surprise Index 13.5 +20.1 points

• Citi Emerging Markets Economic Surprise Index -15.70 +.5 point

• 10-Year TIPS Spread 1.94 +1.0 basis point

Overseas Futures:

• Nikkei 225 Futures: Indicating +116 open in Japan 
• China A50 Futures: Indicating -71 open in China

• DAX Futures: Indicating +16 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Greece Inches Closer to a Deal. Euro-area finance ministers will meet for the third time in a week on Wednesday to try and secure an agreement to avert a default in Greece. With a week to go before the country’s bailout expires, a deal appeared within reach after Greek prime minister Alexis Tsipras signaled he was ready to end a bitter five-month standoff and reach agreement with creditors to unlock aid. While hurdles remain -- including votes in the German and Greek parliaments, and figuring out how to pay the International Monetary Fund -- analysts say a solution will be found.

• Tsipras Party Members Voice Reservations Over Funding. Greek Prime Minister Alexis Tsipras is facing the first signs of dissent within his own party over his latest plan to end a five-month standoff with creditors. Some of Syriza’s more radical and populist lawmakers expressed opposition Tuesday to the proposal as the deal’s backers called on members to see the bigger picture. “Personally, I cannot support such an agreement that is contrary to our election promises,” Dimitris Kodelas, a Syriza lawmaker associated with former Maoists, said in an interview. “I do not care about the consequences of my decision.”

• German Lawmakers Say IMF Stamp Is Key to Greek Deal Vote. Members of Chancellor Angela Merkel’s coalition said the International Monetary Fund’s backing for a financing plan for Greece is key to German parliamentary support for a deal.

• The World's Biggest Economies Are About to Feel the Impact of China's Slowdown.
  
  Commodity, reprocessing and developed country exporters should brace for the impact of weakening China demand this year. Emerging markets and commodity suppliers have grappled with reduced demand from China as a property downturn weighed on the world's second-largest economy. U.S., Japanese and German exporters did better, supplying capital goods like machines that China still demanded. That may soon change, according to a study of global exposure to China by UBS Group AG economists Donna Kwok, Wang Tao and Jennifer Zhong.

• Beware Bond-Liquidity Traps When Hunting Yield, Pimco Says. Investors risk falling into liquidity traps as they seek to boost yields depressed by the European Central Bank’s 1.1 trillion euro ($1.2 trillion) bond-buying program, according to Pacific Investment Management Co. The search for yield has caused investors to buy riskier and less frequently traded bonds, which may be hard to sell quickly, said Mike Amey, a London-based fund manager at Pimco, which oversees about $1.59 trillion of assets. Overall bond trading has slumped since the global financial crisis because banks have cut inventories to preserve capital in response to tighter regulations. 

• Europe Stocks Rise for 4th Day on Optimism Over Greece, Economy. European stocks posted their biggest four-day rally since January as the region’s leaders agreed Greece’s government was getting serious about reaching a deal. The Stoxx Europe 600 Index rose 1.2 percent to 398.83 at the close of trading. A report showed euro-area factory and services expanded more than forecast in June, signaling a pickup in the region’s economy amid quantitative-easing measures by the European Central Bank.

• Fed’s Powell Puts Odds of September Rate Increase Around 50%. The chances are about 50-50 that the U.S. economy will improve enough for the Federal Reserve to raise interest rates in September, said Fed Governor Jerome Powell, who also expects the central bank to move again in December. Speaking at a Wall Street Journal event in Washington Tuesday, Powell said he forecast stronger growth than in the first half of 2015, growth in the labor market and a “greater basis for confidence” in inflation returning to 2 percent. “If those things are realized, I feel that it is time, it will be time, potentially as soon as September,” he said. “I don’t think the odds are 100 percent. I think they’re probably in the 50-50 range that we will realize those conditions, but that’s my forecast.”

• Big Days Dying Off in Stocks With No 2% Move Since December. (video) Days of frantic buying or selling have been absent from the U.S. stock market this year. The Standard & Poor’s 500 Index hasn’t posted a gain or loss of 2 percent or more for 126 days, the longest streak since one ending in February 2007, according to data compiled by Bloomberg and Deutsche Bank AG.

• Google(GOOG) Reveals Health-Tracking Wristband. Google Inc.’s life sciences group has created a health-tracking wristband that could be used in clinical trials and drug tests, giving researchers or physicians minute-by-minute data on how patients are faring.

Fox News:

• White House to announce US won't prosecute hostages' families who pay ransom. In a softening of longstanding policy, the Obama administration will tell families of Americans held by terror groups that they can communicate with captors and even pay ransom without fear of prosecution -- part of a broad review of U.S. hostage guidelines that will be released Wednesday.

ZeroHedge: 

• The Unspoken Tragedy In The Upcoming Greek Bailout.

• Corporations Win Again: Senate Passes Obamatrade Fast-Track Bill.

• Economic Confidence Tumbles Back To 2015 Lows. (graph)

• White House Lies (Again): Jonathan "Stupidity Of The American People" Gruber Called "Our Hero".

• IMF Spoils The Party Again: Throws Up On Latest Greek Proposal.

• Facing "Full Blown Crisis", Bank Of Greece Enlists Security Firm To Ensure ATMs Stay Stocked.

• "The End Of The Road" - Debt-Funded Buyback Boosts Are Finite. (graph)

• Why New Home Sales Remain At Recession Levels, In One Chart. (graph)

• New Home Sales Surges To Highest Since Feb 2008 As Northeast Spikes 87%. (graph)

• US Manufacturing PMI Slumps To Weakest Since Oct 2013. (graph)

• Durable Goods Order Bounce Dead; Biggest Drop Since 2009. (graph)

• Economically Key Industrial Metals Complex Is Breaking Down.

Business Insider:

• Confederate flag sales are skyrocketing.

MNI: 

• Chinese Banks Review Exposure to Stock Market. At least one big state-owned Chinese bank told branches to step up risk controls over investment in the domestic stock market, citing an official at the bank.

Telegraph: 

• Embattled Alexis Tsipras faces domestic revolt over plans to implement 'harsh' austerity blitz. Leftist government is forced to defend its plans from left and right-wing critics amid prospect of a government collapse.