Bull Radar

Style Outperformer:

• Small-Cap Value unch.

Sector Outperformers: 

• 1) Gaming +2.2% 2) Tobacco +1.3% 3) REITs +1.3%

Stocks Rising on Unusual Volume: 

• BIN, SWHC, RGR, FXCM, FSLR, CHSP, FLIR and SAVE

Stocks With Unusual Call Option Activity: 

• 1) MNKD 2) TWX 3) ODP 4) DNKN 5) SWHC

Stocks With Most Positive News Mentions: 

• 1) SE 2) CW 3) NOC 4) SWHC 5) FLIR

Charts: 

• ETFs Rising on Unusual Volume 
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running -1.6% Below 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 54.7% of Issues Advancing, 43.0% Declining
• 70 New 52-Week Highs, 60 New Lows
• 26.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.5%
• Vix 20.3 -2.1%
• Total Put/Call 1.0 -6.5%
• TRIN/Arms 1.8 +32.7%

Tuesday Watch

Evening Headlines
Bloomberg:  

• China Stocks Fluctuate as Regulator Seeks to Reassure Investors. China’s stocks swung between gains and losses as the regulator moved to reassure investors after Monday’s plunge put the nation’s new market circuit breakers to the test on their first day. The CSI 300 Index was little changed at 10:05 a.m. local time after rising as much as 1.4 percent and dropping 2.7 percent. Trading was halted on Monday after the gauge dropped 7 percent. The circuit breaker plays an important role in stabilizing the market, and the government will work to improve the system, China Securities Regulatory Commission spokesman Deng Ge said in a statement on Tuesday. The central bank conducted the biggest reverse-repurchase operations since September, adding funds to the financial system after money-market rates climbed to an eight-month high.
• China's Big Banks in 2016: Another Challenging Year on Bad Loans. Lower interest rates, rising bad loans and a growing challenge from Internet finance companies will add up to another tough year for China’s biggest banks in 2016, with their profit growth set to pick up only marginally from the slowest pace in more than a decade in 2015. Here are five snapshots. No end is in sight for increases in nonperforming loans. Going by the official numbers, which are widely regarded as understated, bad loans rose to a seven-year high of 1.2 trillion yuan ($184 billion) as of the end of September. In a sign of the write-offs to come, policy makers are aiming for a clean-up of “zombie companies” that rely on government subsidies and bank loans to keep operating. Xuanlai He, an analyst at Commerzbank AG, is among those forecasting a worsening of asset quality in 2016. 
• DeMark Sees ‘Big Risk’ That Chinese Stocks Will Retreat Further. Chinese stocks trading in Hong Kong may extend their worst start to a year since 1995, according to Thomas DeMark, who correctly predicted the selloff in the country’s equity market last year. “It’s critical tomorrow,” DeMark, founder of DeMark Analytics, said on Bloomberg Television on Monday in New York. “We are going to have a big risk on the downside” if the Hang Seng China Enterprises Index opens lower and trades below Monday’s intraday low, he said. If those conditions are met, the gauge will decline to 7,933, DeMark said in a follow-up phone interview. That would be about a 15 percent decline from Monday’s closing level. The direction of the market will be inconclusive if the conditions are unfulfilled, said DeMark, who has spent more than 40 years developing indicators to identify market turning points. 
• China's Hand Feared Behind Hong Kong Publisher's Disappearance. The disappearance of a Hong Kong-based publisher of books critical of China’s Communist Party is fueling concerns that tactics used to limit dissent on the mainland are being exported to the former British colony.
• Volkswagen Faces Billions of Dollars in Penalties From U.S. Suit. The U.S. Justice Department sued Volkswagen AG for installing illegal devices meant to defeat emissions testing, and laid out claims that could push penalties into the tens of billions of dollars -- an opening salvo in a legal battle that could be far more costly for the German carmaker than had been expected. The civil complaint filed Monday accuses the automaker of four violations of the Clean Air Act and outlines penalties that could amount to as much as $80 billion -- about four times as much as the maximum some legal experts had estimated. While the court is unlikely to come anywhere near that amount, according to a senior Justice Department official, the penalties sought against the company would still be in the billions of dollars, another senior Justice Department official said. 
• Won Drops to Three-Month Low as China Selloff Deters Risk-Taking. The won fell to a three-month low as an equities selloff in China, South Korea’s largest export market, damped demand for emerging-market assets by curbing risk-taking. The Bank of Korea will closely monitor the impact of global volatility on local financial markets, the monetary authority said after meeting Tuesday to discuss the effects of the China rout. The worst-ever start to a year for Chinese shares triggered a trading halt in more than $7 trillion of equities, futures and options on Monday. The won declined as much as 0.4 percent to 1,192.06 a dollar, the weakest level since September, before paring the day’s loss to 0.2 percent as of 10:23 a.m. in Seoul, according to data compiled by Bloomberg. 
• Asia Stocks Stabilize as China Adds Funds to Financial System. Asian stocks stabilized after the worst start to the year since 1988 as China’s central bank added funds to the financial system and U.S. equities staged a late rally. The MSCI Asia Pacific Index was little changed at 128.93 as of 11:05 a.m. in Tokyo, swinging between losses of 0.4 percent and gains of as much as 0.2 percent.
• Oil shrugs as glut blunts shock from deeper Saudi-Iran conflict. At almost any other time, an escalating diplomatic conflict between OPEC members Iran and Saudi Arabia should mean a spike in oil prices. That the rally this time couldn't be sustained shows just how abnormal things are in the oil market. Brent crude erased an initial gain of more than 4 percent as a global supply glut and the slowest Chinese growth in a generation trumped mounting strife between the nations on either side of the world's busiest waterway for oil tankers. "When oil supplies were tight, we've seen bigger reactions to geopolitical tensions," Tushar Tarun Bansal, a senior oil analyst in Singapore at industry consultant FGE, said by phone. "Now the price rise has actually been quite muted because the world is in a surplus situation."
• Why More Retailers Could Default in 2016. Last year was grim for retailers. This year could be even worse. Despite a late surge in holiday sales, companies like J. Crew Group Inc. and 99 Cents Only Stores are struggling under debt they took on in leveraged buyouts years ago. Their bond prices have plummeted -- in some cases to as little as 25 cents on the dollar -- as investors brace for possible defaults. The industry has been limping along for a while now due to a variety of forces. Spending has migrated to the Internet, lenders have turned wary and the debt burdens of pre-crisis buyouts will make it tough to revive struggling merchants. Eleven retailers defaulted last year through Dec. 14, the highest annual tally since 2009, according to Standard & Poor’s data. And the near future doesn’t look much brighter. 

Wall Street Journal: 

• Supermines Add to Supply Glut of Metals. Giant mines, begun when prices were high, weigh down copper, iron ore and other metals. In this volcanic desert, a dusty moonscape patrolled by bats, snakes and guanacos, America’s biggest miner is piling on to the new force in industrial resources: supermines. It’s a strategy that could be driving miners into the ground.
• The U.S. Economy’s Latest Growth Is Looking Increasingly Frail. The Federal Reserve Bank of Atlanta said Monday it now believes fourth-quarter GDP grew at just a 0.7% pace, down from a prior estimate of 1.3% growth. J.P. Morgan Chase cut its estimate in half to 1% growth from 2%. Forecasting firm Macroeconomic Advisers lowered its estimate by three-tenths of a percentage point to 1.1%. 
• Poll Points to Upside for Ted Cruz, Marco Rubio in GOP Race. Trump and Bush would have harder time picking up supporters of other candidates, WSJ/NBC poll suggests. 
• America’s Year of Living Dangerously. In 2016, rogue states will take a hammer to the soft plaster of Obama’s resolve. Two thousand sixteen will be the year of America living dangerously. Barack Obama will devote his last full year in office to shaping a liberal legacy, irrespective of real-world results. America’s enemies will see his last year as an opportunity to take what they can, while they can. America’s allies, or former allies, will do what they must.

Fox News:

• Obama executive action on guns to require background checks for more sales. (video) President Obama’s series of executive actions on guns will require background checks for those purchased from dealers even if they're bought online or at gun shows, the White House announced late Monday. The Justice Department's Bureau of Alcohol, Tobacco, Firearms and Explosives will also issue updated guidance that says the government can consider someone a gun dealer regardless of where the guns are sold.

MarketWatch.com:

• 2016 predictions: 15 game-changers that could happen this year.
• China’s rigged markets could fall much further, much faster.

CNBC:

• The easy way to bet on a Chinese stock market disaster. (video)

Zero Hedge: 

• "It's Coming To A Head In 2016" - Why Bank of America Thinks The Probability Of A Chinese Crisis Is 100%.
• The Tragicomedy Of Self-Defeating Monetary Policy. 
• With A Straight Face, US Government "Finds" Number Of Retiring 20-24 Year-Olds Has Doubled. (graph)
• For Kyle Bass This Is "The Greatest Investment Opportunity Right Now".
• This Just Became The Most Important Map In Geopolitics.
• This Is A Very Troubling Chart. (graph)
• China Day 1: Monumental Destruction. (graph)
• The Fed's New Mandate.
• Visualizing Brazil's Economic Decline In One "Straight-Line" Chart. (graph)
• Are Governments Running Out of Candy?
• The Best Leading Indicator For Recession Is Flashing Red, JPMorgan Warns. (graph)
• Pay Attention, Things Are Beginning To Get Interesting. (graph)
• Citigroup Says "It's Too Early To Panic"; Here's Why. (graph)
• Late-Day Buying Panic Saves Stocks From Worst Start To January In 84 Years. (graph)

Business Insider: 

• Hillary is facing a long fight as Bernie Sanders' fundraising has soared.
• Smith & Wesson(SWHC) says gun sales are booming, and the stock is going bonkers.
• The future of the bank branch is in trouble — here's why.
• The Fed's cheap money regime is a substantial threat to Saudi Arabia.
• China just made yet another provocative move in the disputed South China Sea.
• Head of Putin's military intelligence unexpectedly dies.

Evening Recommendations 

• None of note

Night Trading 

• Asian equity indices are -.50% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 139.25 unch.
• Asia Pacific Sovereign CDS Index 75.5 +3.0 basis points.
• Bloomberg Emerging Markets Currency Index 68.66 +.04%.
• S&P 500 futures +.31%
• NASDAQ 100 futures +.35%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

• (CMC)/.25
• (SONC)/.23
• (TISI)/.84

Economic Releases
9:45 am EST

• ISM New York for December.

Afternoon:

• Total Vehicle Sales for December are estimated to fall to 18.0M versus 18.05M in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The UK Construction PMI, US weekly retail sales reports, Citi Internet/Media/Telecom conference, (F) Dec. US sales conf call and the (LLY) guidance call could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by tech and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Falling Substantially into Final Hour on China Bubble-Bursting Fears, European/Emerging Markets/US High-Yield Debt Angst, Emerging Markets Currency Worries, Homebuilding/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 22.18 +21.64%

• Euro/Yen Carry Return Index 135.05 -1.16%

• Emerging Markets Currency Volatility(VXY) 11.65 +2.1%

• S&P 500 Implied Correlation 62.55 +6.0%

• ISE Sentiment Index 81.0 +8.0%

• Total Put/Call 1.09 +7.92%

• NYSE Arms 1.15 -9.75% 

Credit Investor Angst:

• North American Investment Grade CDS Index 91.19 +3.18%

• America Energy Sector High-Yield CDS Index 1,679.0 -.72%

• European Financial Sector CDS Index 79.63 +3.32%

• Western Europe Sovereign Debt CDS Index 16.42 +1.39%

• Asia Pacific Sovereign Debt CDS Index 75.18 +3.71%

• Emerging Market CDS Index 363.73 +1.45%
  

• iBoxx Offshore RMB China Corporate High Yield Index 123.87 +.06%

• 2-Year Swap Spread 12.25 +.25 basis point

• TED Spread 45.0 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -20.0 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 68.60 -.88%
• 3-Month T-Bill Yield .16% unch.

• Yield Curve 121.0 -1.0 basis point

• China Import Iron Ore Spot $44.37/Metric Tonne +1.84%

• Citi US Economic Surprise Index -34.4 -2.6 points

• Citi Eurozone Economic Surprise Index 21.1 +5.7 points

• Citi Emerging Markets Economic Surprise Index 8.90 -4.0 points

• 10-Year TIPS Spread 1.58% unch.
• 49.7% chance of next Fed rate hike at March 16 meeting, 55.3% chance at April 27 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -305 open in Japan 
• China A50 Futures: Indicating -389 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging market shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:

• China Halts Stock Trading After 7% Rout Triggers Circuit Breaker. (video) The worst-ever start to a year for Chinese shares triggered a trading halt in more than $7 trillion of equities, futures and options, putting the nation’s new market circuit breakers to the test on their first day. Trading was halted at about 1:34 p.m. local time on Monday after the CSI 300 Index dropped 7 percent. An earlier 15-minute suspension at the 5 percent level failed to stop the retreat, with shares extending losses as soon as the market re-opened. Traders said the halts took effect as anticipated without any major technical problems. The world’s second-largest stock market began the year on a down note after data showed manufacturing contracted for a fifth straight month and investors speculated that the end of a ban on share sales by major stakeholders may come as soon as this week. Chinese policy makers, who went to unprecedented lengths to prop up stock prices during a summer rout, are trying to prevent financial-market volatility from weighing on economy set to grow at its weakest annual pace since 1990. The CSI 300, comprised of large-capitalization companies listed in Shanghai and Shenzhen, fell as much as 7.02 percent before trading was suspended. The Shanghai Composite Index lost 6.9 percent. 
• China Could 'Spook' Markets Again in 2016, IMF's Obstfeld Warns. China could once again “spook” global financial markets in 2016, the IMF’s chief economist warned. Global spillovers from China’s slowdown have been “much larger than we could have anticipated,” affecting the global economy through reduced imports and weaker demand for commodities, IMF Economic Counselor Maurice Obstfeld said in an interview posted on the fund’s website. After a year in which China’s efforts to contain a stock-market plunge and make its exchange rate more market-based roiled markets, the health of the world’s second-biggest economy will again be a key issue to watch in 2016, Obstfeld said.
• China's Seven-Minute Selling Frenzy That Shook Global Markets. (video) The sell orders piled up fast on Monday at Shenwan Hongyuan Group, China’s fifth-biggest brokerage by market value. China’s CSI 300 Index had just tumbled 5 percent, triggering a 15-minute trading halt, and stock investors were scrambling to exit before getting locked in by a full-day suspension set to take effect at 7 percent. When the first halt was lifted, the market reaction was swift: it took just seven minutes for losses to reach the limit as volumes surged to their highs of the day. “Investors rushed to the door during the level-one stage of the circuit breaker as they fretted the market would go down further,” said William Wong, the head of sales trading at Shenwan Hongyuan in Hong Kong.
• A Closer Look at the Carnage in World Markets.
• Who Was the Cleric Saudis Executed and Why His Death Matters. (video) Saudi Arabia’s execution of a leading Shiite cleric has triggered the worst crisis between the Sunni kingdom and its chief Middle Eastern foe, Iran, in more than two decades. The execution of Nimr al-Nimr, who was a vocal critic of Saudi Arabia’s ruling royal family, triggered international condemnation, with the harshest reaction coming from Iran. Protesters stormed the Saudi embassy in Tehran and set the building on fire. Iran’s supreme leader, Ayatollah Ali Khamenei, warned Saudi officials they will face “divine” revenge for their actions. In Riyadh, authorities responded on Sunday by cutting diplomatic ties and giving Iran’s ambassador 48 hours to leave the country. The sharp escalation in tensions between the world’s largest oil explorer and a nation seeking to emerge from years of international sanctions may have wide-ranging regional repercussions, with the two already engaged in proxy confrontations from Syria to Yemen as they tussle for supremacy. Here’s an overview of who’s involved and what may happen next. 
• Brazil Heads for Worst Recession Since 1901, Economists Forecast. (video) Brazil’s economy will contract more than previously forecast and is heading for the deepest recession since at least 1901 as economic activity and confidence sink amid a political crisis, a survey of analysts showed. Latin America’s largest economy will shrink 2.95 percent this year, according to the weekly central bank poll of about 100 economists, versus a prior estimate of a 2.81 percent contraction. Analysts lowered their 2016 growth forecast for 13 straight weeks and estimate the economy contracted 3.71 percent last year. Brazil’s policy makers are struggling to control the fastest inflation in 12 years without further hamstringing a weak economy.
• India Index Signals First Manufacturing Contraction Since 2013. A closely watched index signaled a contraction in Indian manufacturing for the first time in more than two years, showing weakness in the economy even as headline growth numbers are among the fastest in the world. The Nikkei and Markit Economics Index fell to 49.1 in December, the lowest since August 2013, data showed Monday. A reading above 50 signals expansion while anything below that indicates a contraction. A similar gauge for crucial services growth is due on Wednesday. The data underscores Prime Minister Narendra Modi’s struggle to boost private investment in the face of legislative logjams, choked credit lines and weakened global prospects due to China’s slowdown. Government spending has underpinned India’s growth, which the Finance Ministry forecasts at 7 percent to 7.5 percent in the year through March. 
• Canadian Dollar's Worst Rout Ever Raises Petro-State Worries. A decade ago, Canada set out to become an energy superpower. Now, it enters 2016 riding down one of the world’s most battered petro-currencies. When the clock struck midnight on Dec. 31, the loonie, so-called for the bird engraved on the dollar coin, officially recorded its longest and deepest downturn since it became a floating currency in 1970. And there’s no relief in sight. The loonie’s 16 percent decline against the U.S. dollar over the past year marks its third straight annual decline. The currency has lost more than a quarter of its value since 2012, falling to 72.27 U.S. cents from $1.01. That’s almost a penny a month.   
• Biggest Economies Face $7 Trillion Debt Refinancing Tab in 2016. The value of bills, notes and bonds coming due for the Group-of-Seven nations plus Brazil, China, India and Russia will total $7.1 trillion, compared with $7 trillion in 2015 and down from $7.6 trillion in 2012. Japan, Germany, Italy and Canada will all see redemptions fall, while the U.S., China and the U.K. face increases, data compiled by Bloomberg show.
• Iraq's Kurds to Continue Exporting Crude Independently in 2016. Authorities in Iraq’s cash-strapped Kurdish region will withhold delivery of oil to the central government and export crude independently in 2016 to ensure revenue amid a global price slump, according to a senior lawmaker in the territory’s parliament. The central government in Baghdad wasn’t committed last year to paying the self-ruled Kurdistan Regional Government its 17 percent share of the federal budget, and this lack of commitment persists in 2016, said Izzat Sabir Ismael, chairman of the Kurdish parliament’s finance and economic affairs committee. Ismael also serves on the KRG’s parliamentary committee for energy, industry and natural resources. “Oil prices are low, and government revenues in 2015 were about $50 billion at best, which means half of what has been forecast,” he said in a phone interview. “If the KRG delivers to Baghdad the agreed quantity of 550,000 barrels a day, Baghdad will not be able to pay the KRG its share of the budget -- which is about $1 billion a month. So, the KRG studied the situation and decided to export oil on its own.” 
• Spain Deadlock Deepens as Political Turmoil Rocks Catalonia. Spain’s political deadlock deepened as the industrial region of Catalonia stumbled toward fresh elections, adding to an existing impasse over the formation of a new national government. Barcelona followed Madrid into uncertainty on Sunday as acting Catalan President Artur Mas failed to win support from the anti-capitalist CUP party for his bid to piece together a regional government dedicated to independence from Spain. That raises the likelihood of early elections in March in a region that accounts for about 20 percent of Spain’s output. Catalonia ran into further instability as political leaders in Madrid struggle with the result of last month’s general elections that left no one party or constellation of potential allies with a clear majority. The political mix, already complicated by national party leaders lining up on either side of the Catalan independence debate, is still harder to predict with the collapse of efforts to form a regional government.
• Denmark Imposes Controls at German Border as Schengen Frays. Denmark is enforcing what it described as temporary controls on its German border, following its Scandinavian neighbors Sweden and Norway in stepping up measures to stem the influx of migrants from the war-ravaged Middle East. Prime Minister Lars Loekke Rasmussen, who signaled in a New Year’s speech that his government was considering the move, said the controls took effect at noon local time. German Chancellor Angela Merkel was briefed before the measures were enforced, Rasmussen said. The controls will initially be imposed for a period of 10 days, he said.   
• Emerging Assets Slump on China Selloff as Iran-Saudi Ties Sour. (video) Emerging-market assets sank as a bigger-than-forecast slump in Chinese manufacturing fueled concern that the nation’s economic slowdown will curb global growth and escalating tension between Saudi Arabia and Iran underscored geopolitical risks in the Middle East. China halted stock, futures and options trading after a 7 percent slump in the CSI 300 Index caused the nation’s new circuit breakers to kick in. Equities in South Korea, India and South Africa slid at least 2.1 percent, while Saudi Arabian shares dropped 2.4 percent. Brazil’s stock benchmark fell for a fourth day. The offshore yuan weakened the most in five months. A gauge of 20 developing-nation exchange rates fell to a record low against the dollar. The MSCI Emerging Markets Index slumped 3.4 percent to 767.46 at 1:10 p.m. in New York. All 10 industry groups retreated, led by technology companies. The equity benchmark, which has traded below its 50-day moving average since late November, tumbled 17 percent in 2015. A gauge tracking 20 emerging-market currencies slid 0.9 percent to a record low. Malaysia’s ringgit and Indonesia’s rupiah fell the most in three weeks as an escalation of tension between Iran and Saudi Arabia bolstered demand for the dollar.
• European Stocks Post Worst Start to a Year as China Rout Spreads. (video) European stocks fell after a rout in Chinese equities rekindled concern that the nation’s economic slowdown will hamper the global recovery, while tension between Saudi Arabia and Iran added to bearish sentiment. Automakers declined the most in the Stoxx Europe 600 Index, which lost 2.5 percent for its worst start to a year ever. Germany’s DAX Index, among the best performers in 2015, dropped 4.3 percent, the biggest slide for the export-driven gauge since the China-led rout in August.
• Grains Fall to Nine-Year Low on Global Supply Glut, Equity Rout. A measure of wheat, corn and soybean prices fell to a nine-year low as beneficial weather in Latin America boosted concerns that global supply gluts will expand, while a slump in equities dragged commodities lower. The Bloomberg Grains Subindex fell as much as 2.1 percent to 38.77, the lowest since Sept. 15, 2006. Beneficial rain boosted prospects for crops in Brazil, and Argentina exporters are increasing shipments, partly after the government relaxed tariffs. World equities had the biggest drop to start to a year in at least three decades, led by a rout in China.
• Debt Gauge Signals Concern for Stocks. (graph)
• Fischer Worries Fed Can't Head Off or Contain Financial Crises. Federal Reserve Vice Chairman Stanley Fischer sounds concerned that the central bank may lack some key tools needed both to prevent another financial crisis and to contain the fallout should one occur. He told the American Economic Association on Sunday that the Fed is not as well-equipped with regulatory powers to rein in housing and other asset bubbles as some other central banks. And he questioned whether Congress had gone too far in limiting the Fed’s ability to intervene if a crisis erupted and threatened the financial system. "We won’t know until it’s very late" whether the Fed has been constrained too much, Fischer said at the AEA’s annual meeting in San Francisco. That’s something "we have to worry about a great deal." 
• Too Much Momentum Is Hazard for U.S. Stocks Stuck in Neutral. (video) It may seem strange that in a stock market that went nowhere, investment strategies premised on buying shares based on their momentum just posted the best year since 2007. But they did -- and that’s not great news for bulls. Momentum stocks, defined as the ones showing the biggest gains in the last six to 12 months, kept rallying in 2015, returning 32 percent, according to data compiled by Evercore ISI and Bloomberg. That beat the next-best quantitative category, high earnings and sales growth, by 10 percentage points. Rallies in companies from Amazon.com Inc. to Regeneron Pharmaceuticals Inc. and industries such as biotech and software kept the engine humming even as the Standard & Poor’s 500 Index barely budged. Past instances when momentum stocks won have occurred closer to the end of rallies than the beginning, signaling indiscriminate buying at a time when more traditional share drivers such as earnings growth are starting to wane. “More and more funds were driven into a shrinking group of momentum stocks with other strategies not working,” said Jim Paulsen, the Minneapolis-based chief investment strategist at Wells Capital Management Inc., which oversees $351 billion. “It’s a characteristic you often get at the end of a market cycle.” 
• Chipotle(CMG) Not the Only Fast-Casual Chain That's Suffering: Chart.
• GM(GM) Invests $500 Million in Lyft. (video) General Motors Co. will invest $500 million in Lyft Inc., giving the ride-hailing startup a valuation of $5.5 billion and a major ally in the global battle against Uber Technologies Inc. The investment, part of a $1 billion financing round for Lyft, is the biggest move by an automaker to date when it comes to grappling with the meteoric rise of the ride-hailing industry.

Wall Street Journal: 

• Dow Plunges After Rout in Chinese Market. Weak economic data in China spurs global selloff, while Shanghai Composite declines nearly 7%. Global stocks started 2016 with a sharp selloff as fresh signs of economic slowdown in China deepened fears about global growth and lowered hopes for a better year. The Dow Jones Industrial Average fell 384 points, or 2.2%, to 17042 in morning trading, on the heels of a rout in European and Asian markets.
• Red Flag for Stocks: Amazon(AMZN), Microsoft(MSFT), Facebook(FB) Tumble.
• Hedge Funds’ Idea Man. Ari Bergmann has been an under-the-radar consultant for some of Wall Street’s most influential investors.
• Port Traffic Grew at Slowest Rate Since Recession in 2015. Container traffic rose only 0.8% last year at the 30 busiest ports worldwide, the smallest increase since 2009, according to an estimate by Alphaliner.

Fox News: 

• Source: 'Al Qaeda followers' among 17 being transferred from Gitmo. (video) The group of 17 detainees expected to be transferred out of Guantanamo Bay as early as this week includes “multiple bad guys” and “Al Qaeda followers,” a source who has reviewed the list told Fox News. Little is known publicly about which prisoners are being prepared for transfer, but the Obama administration has notified Congress it plans to ship out 17 detainees – some of whom could be transferred within days.

CNBC: 

• The market will drop more than 20% - and other predictions.
• China slowdown to hit luxury real estate.
• Cashin: Disappointed by muted oil reaction. (video)
• Kovacevich warns market bubbles may burst in 2016. (video)

Zero Hedge: 

• Byron Wien's Reveals Top 10 Predictions: Expects Stocks To Decline After Predicting 15% Rise In 2015. 2. The United States equity market has a down year. Stocks suffer from weak earnings, margin pressure (higher wages and no pricing power) and a price- earnings ratio contraction. Investors keeping large cash balances because of global instability is another reason for the disappointing performance.
• This Time Isn't Different.
• Here Are The Key Findings From The SEC's ETFlash Crash Data Dump.
• Atlanta Fed Just Slashed Q4 GDP Forecast To Barely Positive 0.7%, Down 1.2% In Ten Days. (graph)
• European Stocks Suffer Worst Start To Year Ever. (graph)
• Gun Stocks Soar Ahead Of Obama's Gun-Control Executive-Action Tomorrow.
• A Close Up Of The Market Ripple Which Stopped Stocks Tumbling At 11:01 am. (graph)
• Saudi Default, Devaluation Odds Spike As Mid-East Careens Into Chaos. (graph)
• Market On Track For Worst Opening Day Loss In 84 Years. (graph)
• What Really Happened In 2015, And What Is Coming In 2016.... (graph)
• Industrial Recession Now Inevitable As Manufacturing ISM Worst In Six Years. (graph)
• China ETFs Extend Asian Carnage - Crash Most Since August To 3-Month Lows. (graph)
• JPMorgan(JPM) Crushes The BTFDers: "Sell Any Rallies".
• Mid-East Melee: Sectarian Showdown Looms As Bahrain Cuts Ties With Iran, UAE Recalls Ambassador.
• The Best And Worst Performing Assets Of 2015. (graph)

Business Insider: 

• BREMMER: 'Saudi Arabia is in serious trouble, and they know it'.
• One of the world's most reliable economic indicators has bad news about all major markets. South Korean exports — also referred to as the world's economic canary in the coal mine — fell 13.8% in December from a year earlier. This was a deterioration from the 4.8% decline in November, and it was much worse than the 11.7% decline expected by economists.
• The US government is suing VW for emissions cheating.

Telegraph:

• North Sea oil and gas production to reverse 15 years of decline. Output from UK Continental Shelf rose in 2015 despite oil prices crashing to more than 10-year low. 
• Euro to tumble below the US dollar for first time since 2002, predicts Bank of America. Analysts say that a further bout of monetary stimulus will knock the euro.  

Bear Radar

Style Underperformer: 

• Small-Cap Growth -2.9%

Sector Underperformers: 

• 1) Homebuilders -4.0% 2) Internet -3.8% 3) Biotech -3.6%

Stocks Falling on Unusual Volume:

• FEP, WSH, NORD, NHTC, FXCM, MLI, ASML, AXON, WAGE, HNP, SRI, LDR, NSTG, AWR, CMG, CMCM, CAF, TSLA, VR, SUN, TW, FMS, NOAH, VXUS, WB, KEX, RJF, BJRI, AIRM, BDX, PMC, AMZN, RGC, P and RTEC

Stocks With Unusual Put Option Activity: 

• 1) EWT 2) HLT 3) KRE 4) BBT 5) YUM

Stocks With Most Negative News Mentions: 

• 1) CMG 2) NFLX 3) PYPL 4) TSLA 5) BABA

Charts:

• ETFs Falling on Unusual Volume 
• Stocks Falling on Unusual Volume