Bear Radar

Style Underperformer:

• Mid-Cap Growth -3.5%

Sector Underperformers:

• 1) Gaming -6.4% 2) Hospitals -6.3% 3) Construction -5.1%

Stocks Falling on Unusual Volume:

• KWEB, BRX, PRFZ, PUK, DXCM, DKT, DATA, HSEA, WEX, ABMD, NEWR, DCUA, WMB, DTK, TOT, WPZ, LXFT, CRM, WAL, WDAY, FBHS, AZN, ABB, STZ, LYV, RLGY, FB, ORLY, CHTR, LB, BAC, Z, ATHN, CRAY, TROW, CIT, JLL, RCL, CMA, GS, HBI, FLT, ZG, CTSH, MPWR, MPC, SABR, DY, ITCI, GRUB, CRM, TSLA, DATA, SPLK, VA, RNG, NOW, PANW, W, TSRO, ALGN, CSOD, GWRE, ZEN, RDC, ABMD, PCTY and ETP

Stocks With Unusual Put Option Activity:

• 1) JNPR 2) PYPL 3) YELP 4) WSM 5) V

Stocks With Most Negative News Mentions:

• 1) DATA 2) ETE 3) RCL 4) ADBE 5) CSGP

Charts:

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

Bull Radar

Style Outperformer: 

• Small-Cap Value -1.7% 

Sector Outperformers:

• 1) Gold & Silver +5.5% 2) Road & Rail -.3% 3) Utilities -.6% 

Stocks Rising on Unusual Volume: 

• GOLD, USLV, GG, ABX, OUTR, GPRO and SLW

Stocks With Unusual Call Option Activity: 

• 1) BK 2) APOL 3) P 4) ZNGA 5) GDXJ

Stocks With Most Positive News Mentions: 

• 1) TSN 2) GPRO 3) HAS 4) FCFS 5) F

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +44.6% Above 100-Day Average
• 0 Sectors Rising, 10 Sectors Declining
• 12.3% of Issues Advancing, 87.0% Declining
• 38 New 52-Week Highs, 377 New Lows
• 18.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 38.6%
• Vix 26.6 +13.8%
• Total Put/Call 1.06 +9.3%
• TRIN/Arms .89 -11.32%

Monday Watch

Today's Headlines
Bloomberg:

• Holding Back China's Capital Flight ‘Dam’ Is Key. The decline in China’s foreign-currency reserves to a four-year low, even without evidence of widespread domestic capital flight, adds pressure on policy makers to strengthen the economy through fiscal easing and structural reforms. China’s reserves, once a continuously rising hoard, fell $99.5 billion in January, continuing a slump from 2015 as the People’s Bank of China sought to shore up the yuan. While estimates of the sources of the hard-currency outflows differ, much of the total is thought to be pay-downs of foreign debt. A much bigger threat -- "the dam that the PBOC must make sure doesn’t break," according to Frederic Neumann at HSBC Holdings Plc -- would be an exodus of funds from domestic investors.
• The Magic Formula That Powered Japanese Stocks Is Falling Apart. For Japanese investors, it must have seemed the equivalent of turning lead into gold. Unlike in the Middle Ages, the alchemy now relied on mixing central bank stimulus with a weakening yen to create rising profits and a stock market that soared to an eight-year high. But that was back in August, and the formula has since lost its potency. By one measure, earnings in the world’s third-largest stock market are poised to retreat more than 20 percent this quarter, and for the first time since 2012 more Japanese companies are missing forecasts than beating them. Meanwhile, the yen just staged its biggest weekly rally since 2009 even though the Bank of Japan surprised the world by cutting interest rates to below zero.
• Consumption Seen Dropping as Japan's Workers Eke Out 0.1% Rise. Japan’s workers barely got a pay rise in 2015, with a 0.1 percent increase in cash earnings slower than the 0.4 percent bump in 2014. Total wages in Japan haven’t risen more than 1 percent in any year since 1997 and they fell for the past four years once inflation is accounted for, the labor ministry said on Monday in Tokyo. Higher wages are considered crucial to generate growth and consumption and for the Bank of Japan’s efforts to spur inflation. Japanese Prime Minister Shinzo Abe has repeatedly called for companies to boost pay, and Bank of Japan Governor Haruhiko Kuroda has said that the level of increase is "somewhat slow" considering Japan’s low unemployment and companies’ profits.
• Russia Courts Foreign Banks as Funding Crunch Overtakes Politics. Pressure is mounting on Russia to break the vow of abstinence on selling Eurobonds it has maintained since the U.S. and Europe slapped sanctions on some of its biggest companies. In the three weeks since the finance ministry last said there’s no point to go abroad for cash while penalties are still in place, the ruble tumbled to a record amid an oil plunge and rising yields at home made borrowing targets more elusive. For the first time since Russia last issued international bonds in September 2013, the government said on Friday it invited banks from nine countries to submit proposals to broker its return to foreign capital markets. “Russia probably needs to access international markets to raise funds to plug its deficit this year,” Greg Saichin, the chief investment officer for emerging-market fixed-income at Allianz Global Investors Europe GmbH, said by e-mail Friday. “The problem is sanctions. They are still on, but we presume that they may fall away completely at best or eased at worst.”
• Dollar Gains Versus Yen, Euro as Fed Odds Weighed Before Yellen. The dollar rose for a second day against the euro and yen as investors looked toward Federal Reserve Chair Janet Yellen’s testimony to Congress Wednesday for signs of whether markets are underestimating the odds of a near-term interest-rate increase. The greenback climbed after a U.S. employment report showed wage growth exceeded estimates, bolstering the case for the Fed to continue lifting rates this year. Futures pricing for a move before year-end climbed to 53 percent Friday from 46 percent the previous day. The yen weakened versus Australia’s dollar as equities in Japan pared declines and the nation reported a current account surplus that was smaller than economists had forecast.
• Gulf Stocks Retreat From Highest Level in More Than Three Weeks. Stocks across the Gulf fell, following a drop in global markets, as traders cashed in on gains after a gauge of the region’s biggest companies climbed to a three-week high. The Bloomberg GCC 200 Index, which tracks some of the six-nation Gulf Cooperation Council’s largest companies, slipped 0.8 percent from the highest level since Jan. 11. The Tadawul All Share Index was the region’s biggest decliner as it retreated 1.3 percent, followed by ADX General Index with a 0.9 percent drop. The MSCI World Index lost 1.6 percent on Friday. “Markets have had a good run, now we’re seeing a bit of profit taking," said Wafic Nsouli, the managing director and head of equities at Dubai-based investment bank Arqaam Capital Ltd.

Wall Street Journal:

• Big Companies Pull Back After Rough Quarter. Strong dollar, slumping stocks lead to cautious capital budgets; some firms plan layoffs. After a tough end to 2015, big companies are starting the new year with a tight rein on capital spending, and in some cases layoffs, as they seek to cope with sluggish industrial demand and uncertainties about the continued resilience of the American consumer.
• Emerging-Market Central Banks Battle Capital Flight. Rate cuts are avoided as they signal concerns about growth prospects. Central banks in some emerging markets are stepping up efforts to flood their financial systems with cash, highlighting the pressure that they face from rapid capital flight.

CNBC:

• This group of stocks are in a free fall.

Zero Hedge:

• Catch Up On The Latest Chinese News With These Seven Bullets.
• What The Charts Say: "Now Is The Time To Worry". (graph)
• Why The 'Sultan Of Chaos' Is Freaking Out.
• "Few Are Yet Willing To Admit The Harsh Reality..."
• Steve Keen Exposes Our Dysfunctional Monetary System.
• Even The Fed's "Owners" Aren't Buying What Janet Is Selling. (graph)
• The Number Everyone's Been Waiting For: Chinese Reserves Plunge By $100BN - What Does It Mean For Markets?
• Madeleine Albright Stunner: "There's A Special Place In Hell For Women Who Don't Help" Hillary.
• The "Minimum Wage" Surged In 6 Cities Last Year; Then This Happened. (graph)
• P2P Cracks Start To Show As LendingClub Write-Offs Double Forecasts.
• Bank Of America(BAC) Admits The U.S. May Already Be In A Recession.
• Dot Com 2.0 – The Sequel Unfolds.
• Mainstream Media Guide To Obama's Economic "Recovery".

 Business Insider:

• The rapid pace of China's currency reserve depletion is 'simply unsustainable'. 
• JP MORGAN(JPM) STRATEGIST: Central banks tried to control the world … and failed miserably.
• People are boycotting Beyoncé after her Super Bowl song sent a harsh message to police.
• Oil prices may counterintuitively crash further because of oil producers' high debt levels.
• Thousands marched in anti-Islam Pegida rallies across Europe.
• APPLE(AAPL): THE WORST-CASE SCENARIO — 2016.
• The American Dream Is Dead (And Now Even The Mainstream Media Is Starting To Admit It).
• Donald Trump on New Hampshire: 'I don't think I need it' to win the nomination.

Chicago Sun-Times:

• Losing GOP candidates double down on being mean. Chris Christie and Jeb Bush, in particular, have decided their best chance to stay in the race is to attack other candidates. Chris Christie seems to be reverting to form as a guy with a mean streak, something he has mostly avoided in the debates. He is at his best when he channels his anger toward terrorists and worst when he demeans his fellow Republicans. His comments this week about Marco Rubio make Christie, not Rubio, look bad. If Bush, Christie or Kasich fare poorly in New Hampshire, I hope they will do the right thing. The same goes for Ben Carson and Carly Fiorina. Hanging on hoping you can take another candidate down a notch certainly does the party no good.

Night Trading

• Asian indices are -.50% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 159.0 +3.0 basis points.
• Asia Pacific Sovereign CDS Index 80.25 +.75 basis point.
• Bloomberg Emerging Markets Currency Index 68.58 +.02%.
• S&P 500 futures +.29%.
• NASDAQ 100 futures +.34%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (CNA)/.89
• (CTSH)/.78
• (DO)/.53
• (HAS)/1.30
• (L)/.77
• (WEX)/1.05
• (OMI)/.49
• (OI)/.40
• (YELP)/.12

Economic Releases
10:00 am EST

• Labor Market Conditions Index for January is estimated to fall to 2.5 versus 2.9 in December.

Upcoming Splits

• (HRL) 2-for-1

Other Potential Market Movers

• The German Industrial Production report, CSFB Financial Services Forum and the BIO investor conference could also impact trading today.

BOTTOM LINE: Asian indices are modestly lower, weighed down by commodity and industrial 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 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 earnings outlook concerns, rising European/Emerging Markets/US High-Yield debt angst, commodity weakness, Fed rate-hike fears, yen strength and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg:

• North Korea Launches Long-Range Rocket a Month After Nuclear Test. North Korea launched a long-range rocket Sunday, drawing immediate condemnation from Japan and the U.S. a month after the isolated nation conducted a fourth nuclear test. A South Korean official said the rocket was launched around 9:30 a.m. Seoul time and disappeared off the radar south of Jeju island, while adding it was too soon to determine whether it had been a success. Yonhap News, without citing anyone, said the launch was possibly a failure. The United Nations Security Council will hold an emergency meeting on the launch at 11 a.m. New York time.
• China's Foreign-Exchange Reserves Fall to $3.23 Trillion. China’s foreign-exchange reserves fell to $3.23 trillion in January from $3.33 trillion a month earlier as the central bank continued its defense of the yuan. The median forecast of economists surveyed by Bloomberg was January reserves of $3.21 trillion.
• Another Sign of Rough Sledding Ahead: Dividend Cuts Surpass 2008. Tightening credit puts pressure on companies to scale back payouts. In 2015, equity investors looking for yield suffered death by 394 cuts. Last year, the number of dividend reductions far surpassed 2008, according to Bespoke Investment Group, citing data from Standard & Poor's. The ratcheting down of payouts to shareholders is a function of weak commodity prices, sluggish growth dampening corporate profits, and a tightening of credit conditions. This combination—and in particular the stingier lending—could exacerbate the carnage already seen this year in financial markets, further dampening economic activity. The number of payout cuts enacted was almost 100 more than at the outset of the Great Recession—a time when the implosion of Lehman Brothers Holdings Inc. caused equity markets to plummet in the later stages of the third quarter: 
• Treasuries Extend Best Start to Year Since the Financial Crisis. Treasuries advanced for a fourth week in five, extending their best start to a year since the financial crisis, as slowing growth in U.S. services and tumbling commodity prices left traders doubting whether the Federal Reserve will raise rates this year. Yields rose early Friday after a Labor Department report showed wages increased more than forecast in January, before longer-dated government debt erased losses. A bond-market gauge of inflation expectations known as the 10-year break-even rate still fell to the lowest since 2009. Earlier in the week a report showed U.S. service industries expanded in January at the slowest pace since 2014, dimming the outlook for growth.
• Gundlach Says Financials Below Crisis Prices ‘Frightening’. DoubleLine Capital’s Jeffrey Gundlach said it’s “frightening” to see major financial stocks trading at prices below their financial crisis levels. He cited Deutsche Bank AG and Credit Suisse Group AGas examples in a talk outlining bearish views at a conference in Beverly Hills, California, on Friday. Both banks fell this week to their lowest levels since the early 1990s in European trading. “We see the price of major financial stocks, particularly in Europe, which are truly frightening,” Gundlach said. “Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009? Do you know that Deutsche Bank is at a lower price today than it was in 2009 when we were talking about the potential implosion of the entire global banking system?”
• Obscure Chinese Firm Dives Into $22 Trillion U.S. Market. When Cromwell Coulson heard that an obscure Chinese real estate firm had agreed to buy the Chicago Stock Exchange, he was shocked. “My first reaction was, ‘Wow, that’s who they’re selling to?”’ said Coulson, the chief executive officer of OTC Markets Group Inc. in New York. “These new buyers have no connection to Chicago’s existing business. They’re completely disconnected from the current business of supporting the Chicago trading community. So wow, that’s out of left field.”
• Insider Sales Raise Extra Red Flag.

Wall Street Journal:

• Tech Stocks Swoon as Growth Disappoints. Sector leads broad decline, as disappointing outlook from LinkedIn helps fuel a rush out of stocks. A sharp dive in technology shares underscored investor worries about uneven U.S. economic growth, as the latest lackluster corporate outlook, this time from LinkedIn Corp., fueled a rush out of stocks.
• Anti-Islam Groups Rally Across Europe. Riot police clash with demonstrators in Amsterdam.
• Why a Recession Could Arrive Without a Yield Curve Warning. Very low short-term interests rates may prevent the yield curve from inverting even if a recession looms.
• Clinton’s False Email Equivalence. Hillary tries to wrap Powell and Rice into her email security breach.
• Low Gas Prices Have Politicians Pumped to Raise Taxes. Obama’s $10-a-barrel fee won’t go anywhere, but states too are eager to try to make drivers pay more.
• Marco Rubio’s New Hampshire Crucible. The Florida senator has become everyone’s target as he pitches optimism and conservative unity to build on his Iowa momentum.
• Donald Trump Holds Substantial Lead in New Hampshire, According to Poll. Marco Rubio gains rapidly since strong finish at Iowa caucuses.

Barron's:

• Had bullish commentary on (GILD), (TOWN), (SBCF), (TMO) and (CELG).
• Had bearish commentary on oil, (KMI), (LINE) and (CHK).

MarketWatch.com:

• National polls show Bernie Sanders nearly even with Hillary Clinton. Quinnipiac poll says Clinton at 44%, Sanders at 42%.

Fox News:

• GOP Debate: Live Blog.
• North Korea fires rocket seen as covert missile test. (video) North Korea on Sunday defied international warnings and launched a long-range rocket that the United Nations and others call a cover for a banned test of technology for a missile that could strike the U.S. mainland. The rocket was fired from North Korea's west coast and tracked separately by the governments Japan and South Korea, which immediately convened a an emergency national security council meeting. South Korean media reported that the rocket may have failed, but provided no other details. The South Korean government couldn't immediately confirm the reports.
• More than 3,100 pregnant women in Colombia infected with Zika virus, raising fears of spread. (video) The president of Colombia said Saturday that more than 3,100 pregnant women in the country are infected with the mosquito-borne virus which has been linked to birth defects and has no vaccine or treatment. Reuters reported that President Jaun Manuel Santos pointed out, however, that there has been no recorded cases of Zika-linked microcephaly, the birth defect that involves the fetus’ brain.

CNBC:

• Verizon(VZ) CEO confirms interest in buying Yahoo(YHOO). (video)

Zero Hedge: 

• Is This How The Smart Money Is Betting On A Market Crash? (graph)
• How Did The World Get This Way? (graph)
• A Badly Wounded Deutsche Bank Lashes Out At Central Bankers: Stop Easing, You Are Crushing Us.
• Chinese Factory Worker Explains What "The Government Is Most Fearful Of".
• "They'll Return To Their Countries In A Wooden Coffin": Iran, Syria Warn Saudis, Turks Against Ground Troops.
• Is Shorting The Yuan Dangeorus?
• The Mechanics Of NIRP: How The Fed Will Bring Negative Rates To The U.S. (graph)
• This Is What Hillary Told Wall Street Behind Closed Doors.
• And Now "Some Important News About JPMorgan's New Cash Policies".
• These Are The Banks The Market Is Most Concerned About.
• Visualizing The World's Most Famous Case Of Deflation, Part 1. 
• These Vancouver Homes Sold For MillionsIn 2011 And Have Been Vacant And Rotting Since: Here's Why.
• Video Shows Tens Of Thousands Massing At Turkey Border As Russia, Iran Bear Down On Key Syrian City.
• "A Key Technical Indicator Just Rang The Bell On The Cyclical Bull Market". (graph)
• 22 Signs That The Global Economic Turmoil We Have Seen So Far In 2016 Is Just The Beginning.
• World Succumbs To Zika Panic: Puerto Rico Declares Emergency; Plane Cabins Sprayed; CDC Says "Use A Condom".
• BofA: "The Sense Of Calm Which Had Descended On Markets Has Come To An Abrupt End".
• China's 3 Trillion Dollar Mistake. (graph)
• Weekend Reading: The Awakening.
• Bloodbathery. (graph)

Business Insider:

• The long-awaited tech correction is here.
• Joe Biden might run for president after all.
• Clinton's social security plan could end up hurting your wallet.

PollingReport.com:

• PRESIDENT Hillary Clinton (D) 41% Marco Rubio (R) 48% (Quinnipiac U., RV, 2/2-4).
• PRESIDENT Hillary Clinton (D) 46% Donald Trump (R) 41% (Quinnipiac U., RV, 2/2-4).

Financial Times:

• Lending to emerging markets comes to halt. The surge in lending to emerging markets that helped fuel their own — and much of the world’s — growth over the past 15 years has come to a halt, and may now give way to a “vicious circle” of deleveraging, financial market turmoil and a global economic downturn, the Bank for International Settlements has warned.

Telegraph:

• As the world economy again flirts with recession, prepare for years to come of zero interest rates. In the face of a slowing economy, central banks have again abandoned the quest for higher interest rates. 
• Debt, defaults, and devaluations: why this market crash is like nothing we've seen before. A pernicious cycle of collapsing commodities, corporate defaults, and currency wars loom over the global economy. Can anything stop it from unravelling? 
• Oil market spiral threatens to prick global debt bubble, warns BIS. An 'illusion of sustainability' has blinded borrowers and debtors, lulling them into a false of security. The BIS says liquidity is now drying up.