BETWEEN THE HEDGES

Tuesday, May 03, 2016

Wednesday Watch

Posted by Gary .....at 10:25 PM

Night Trading

Asian equity indices are -1.0% to -.25% on average.
Asia Ex-Japan Investment Grade CDS Index 143.0 +1.25 basis points.
Asia Pacific Sovereign CDS Index 55.0 +.75 basis point.
Bloomberg Emerging Markets Currency Index 72.51 -.31%.
S&P 500 futures -.15%.
NASDAQ 100 futures -.17%.

Morning Preview Links

Earnings of Note
Company/Estimate

(BUD)/.91
(DLPH)/1.34
(HAIN)/.49
(HUM)/1.81
(ICE)/3.66
(KLIC)/.06
(MOS)/.14
(PCLN)/9.64
(RDC)/.72
(ZTS)/.41
(CENT)/.59
(CF)/.46
(CB)/2.17
(FIT)/.03
(MTW)/-.02
(MCK)/3.14
(MET)/1.38
(MCHP)/.68
(MUR)/-.68
(OHI)/.81
(PRU)/2.36
(TSLA)/-.65
(RIG)/.28
(WFT)/-.26
(WBMD)/.33
(WFM)/.41
(WMB)/.23

Economic Releases
8:15 am EST

The ADP Employment Change for April is estimated to fall to 195K versus 200K in March.

8:30 am EST

The Trade Deficit for March is estimated at -$41.1B versus -$47.1B in February.
Preliminary 1Q Non-farm Productivity is estimated to fall -1.3% versus a -2.2% decline in 4Q.
Preliminary 1Q Unit Labor Costs are estimated to rise +3.3% versus a +3.3% gain in 4Q.

9:45 am EST:

Final Markit US Services PMI for April is estimated at 52.1 versus a prior estimate of 52.1.

10:00 am EST

ISM Non-Manufacturing for April is estimated to rise to 54.7 versus 54.5 in March.
Factory Orders for March are estimated to rise +.6% versus a -1.7% decline in February.

10:30 am EST

Bloomberg consensus estimates call for a weekly crude oil inventory build of +556,250 barrels versus a +1,999,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -462,500 barrels versus a +1,608,000 barrel gain the prior week. Distillate supplies are estimated to rise by +37,500 barrels versus a -1,695,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.34% versus a -1.3% decline prior.

Upcoming Splits

None of note

Other Potential Market Movers

The Fed's Kashkari speaking, China Services PMI, Eurozone Services PMI, weekly MBA mortgage applications report, Piper Jaffray Financial Institutions Conference, Deutsche Bank Health Care Conference and the (HESS) annual meeting could also impact trading today.

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

Stocks Falling into Final Hour on China Bubble-Bursting Fears, Emerging Market Currency Worries, Oil Decline, Commodity/Financial Sector Weakness

Posted by Gary .....at 4:00 PM

Broad Equity Market Tone:

Advance/Decline Line: Substantially Lower

Sector Performance: Almost Every Sector Declining

Volume: Slightly Above Average

Market Leading Stocks: Underperforming

Equity Investor Angst:

Volatility(VIX) 15.72 +7.08%

Euro/Yen Carry Return Index 127.99 -.20%

Emerging Markets Currency Volatility(VXY) 10.61 +1.43%

S&P 500 Implied Correlation 57.04 +4.60%

ISE Sentiment Index 54.0 -29.87%

Total Put/Call 1.12 +6.7%

NYSE Arms 1.87 +40.1%

Credit Investor Angst:

North American Investment Grade CDS Index 81.56 +4.75%

America Energy Sector High-Yield CDS Index 1,075.0 -.08%

European Financial Sector CDS Index 95.40 +6.03%

Western Europe Sovereign Debt CDS Index 25.66 +2.35%

Asia Pacific Sovereign Debt CDS Index 54.80 +.75%

Emerging Market CDS Index 290.57 +2.96%

iBoxx Offshore RMB China Corporate High Yield Index 127.03 unch.

2-Year Swap Spread 14.25 unch.

TED Spread 42.75 -1.0 basis point

3-Month EUR/USD Cross-Currency Basis Swap -24.0 -2.0 basis points

Economic Gauges:

Bloomberg Emerging Markets Currency Index 72.73 -1.12%
3-Month T-Bill Yield .20% +1.0 basis points

Yield Curve 104.0 -3.0 basis points

China Import Iron Ore Spot $63.41/Metric Tonne -4.27%

Citi US Economic Surprise Index -31.40 +.3 point

Citi Eurozone Economic Surprise Index -10.30 +.5 point

Citi Emerging Markets Economic Surprise Index 12.60 +1.9 points

10-Year TIPS Spread 1.65% -4.0 basis points
24.3% chance of Fed rate hike at July 27 meeting, 37.9% chance at September 21 meeting

Overseas Futures:

Nikkei 225 Futures: Indicating +38 open in Japan
China A50 Futures: Indicating n/a open in China

DAX Futures: Indicating +15 open in Germany

Portfolio:

Slightly Lower: On losses in my retail/tech/medical/biotech sector longs

Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short

Market Exposure: Moved to 25% Net Long

Bear Radar

Posted by Gary .....at 2:33 PM

Style Underperformer:

Small-Cap Value -1.7%

Sector Underperformers:

1) Oil Tankers -5.8% 2) Steel -4.8% 3) Oil Service -3.2%

Stocks Falling on Unusual Volume:

KTWO, COMM, Q, PRAH, EQT, INCR, UCBI, PODD, BCO, SBAC, QLYS, GRUB, ADRO, CYH, ARR, BETR, IMS, MOH, MPAA, VET, AMAG, TARO, DLNG, COTY, CACC, EL, ALLY, VC, SMG, GRUB, EXPD, IMS, TREE, HW, CFX, PBI, BCO and GLT

Stocks With Unusual Put Option Activity:

1) AKS 2) LYB 3) XLB 4) OIH 5) FDX

Stocks With Most Negative News Mentions:

1) ACAD 2) CYH 3) LC 4) ECA 5) SLB

Charts:

Bull Radar

Posted by Gary .....at 1:55 PM

Style Outperformer:

Large-Cap Growth -.6%

Sector Outperformers:

1) HMOs +.5% 2) Drugs +.2% 3) REITs +.2%

Stocks Rising on Unusual Volume:

CGNX, RYAM, FN, FIS, TNET, FMC, DENN, TSRA, VRX, MNK, EGOV and TECH

Stocks With Unusual Call Option Activity:

1) FTR 2) ALR 3) ENLK 4) KATE 5) TREE

Stocks With Most Positive News Mentions:

1) AXTI 2) AGII 3) CLX 4) EGOV 5) CVS

Charts:

Morning Market Internals

Posted by Gary .....at 10:54 AM

NYSE Composite Index:

Volume Running +16.9% Above 100-Day Average
3 Sectors Rising, 7 Sectors Declining
15.5% of Issues Advancing, 82.3% Declining
51 New 52-Week Highs, 18 New Lows
57.3% of Issues Above 200-day Moving Average
Average 14-Day RSI 45.6%
Vix 16.1 +9.6%
Total Put/Call .91 -13.3%
TRIN/Arms 1.76 +31.8%

Monday, May 02, 2016

Tuesday Watch

Posted by Gary .....at 10:04 PM

Evening Headlines
Bloomberg:

China Stock Analysts Were Among World's Worst Amid Surprise Rout. China’s stock market was the world’s second-worst over the past year. Analysts covering it didn’t do much better. The rout in the Shanghai Composite Index, which has lost more than a third of its value since the end of April 2015, followed one of the benchmark’s best rallies ever and shocked global markets as indicated by how badly the analysts covering Chinese equities performed. Their predictions were off by bigger margins than those of analysts researching stocks in the rest of the world’s 20 largest markets. Had they been right, the gauge would be 43 percent higher than last week’s 2,938 close on the Shanghai Composite, according to data compiled by Bloomberg, which uses weighting metrics to convert consensus price targets for companies to index forecasts reflecting analysts’ collective wisdom.
Should Investors Be Shorting Australian Banks? (video)
Asian Stocks Rebound With Japan Shut While Yen Dominates Dollar. Asian stocks climbed with markets from Hong Kong set to China to start trading for the week and Japan closed for holidays. The dollar extended declines at a one-year low, while Australia’s currency rose ahead of an interest-rate review and a private index of Chinese manufacturing. A gauge of regional equities excluding Japan, where markets are shut until Friday, climbed for the first time in five days following the strongest rebound in two weeks for U.S. shares. The Bloomberg Dollar Spot Index slipped for a fourth session, while the Aussie advanced with the government to unveil its budget just hours after the central bank’s policy announcement. The yen extended gains at its strongest level in more than 18 months. Most industrial metals opened lower in London, as U.S. crude oil lingered below $45 a barrel. The MSCI Asia Pacific excluding Japan Index added 0.3 percent as of 9:32 a.m. Tokyo time, climbing from its lowest level since April 12.
Oil Price Rally Isn't as Deep Rooted as It Looks at First Glance. At first glance, oil prices have rallied -- a lot. Look closer, however, and the market is still pricing the "lower-for-longer" mantra, much as it did at the beginning of the year. Front-month futures for West Texas Intermediate, the U.S. benchmark, have risen 21 percent this year, but the recovery looks very different if you focus on the longer term. The five-year-forward WTI contract fell 2.6 percent over the same period, reflecting the view that shale oil production could rebound as prices recover, capping any rally.

Wall Street Journal:

Aeropostale(ARO) Preparing to File for Bankruptcy This Week. Teen-apparel retailer, in talks for bankruptcy loan, plans to close more than 100 stores. Aéropostale Inc. is preparing to file for bankruptcy protection this week and close more than 100 stores, according to people familiar with the matter, as the teen-apparel retailer contends with mounting losses and falling sales.
Salesforce’s(CRM) Marc Benioff Has Kicked Off New Era of Corporate Social Activism. On social issues such as gay rights, Mr. Benioff is pushing companies to speak out, drawing brickbats from local lawmakers; ‘a corporate bully’.

Zero Hedge:

Business Insider:

Financial Times:

Worries mount over China’s bond market. Two-plus years of a near-unbroken rally and a market may perhaps be forgiven for a pullback — unless that market is in China, where the sharpest monthly jump in bond yields since the rally began has prompted worries another mainland boom looks to be on borrowed time. Concerns about a rise in defaults, excess leverage and doubts about the likelihood of more monetary easing has sapped investor appetite and overshadowed China’s massive bond market.
China financial regulator clamps down on shadow banking. China’s banking regulator is cracking down on financial engineering that Chinese banks have used to disguise trillions of dollars in risky loans as investment products. The clampdown, which will force banks to make provisions they previously avoided by disguising loans as investments, is designed to deflate one of the fastest-growing areas of the vast shadow banking apparatus, where bad debts are increasing.