Bull Radar

Style Outperformer: 

• Small-Cap Growth +.4%

Sector Outperformers:

• 1) Alt Energy +1.6% 2) Gaming +1.5% 3) Agriculture +1.4% 
  

Stocks Rising on Unusual Volume: 

• MESG, MON, OLED, ONCE, FDC, CF and WATT

Stocks With Unusual Call Option Activity: 

• 1) SHPG 2) PACB 3) XPO 4) DRII 5) ACAS

Stocks With Most Positive News Mentions: 

• 1) OLED 2) RLYP 3) ELY 4) AMD 5) ATI

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -24.8% Below 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 51.7% of Issues Advancing, 45.2% Declining
• 29 New 52-Week Highs, 6 New Lows
• 50.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.1%
• Vix 15.9 +4.7%
• Total Put/Call .99 -2.9%
• TRIN/Arms 1.28 +79.2%

Monday Watch

Today's Headlines

Bloomberg: 

• China’s Office Supply Set to Double Amid Building Frenzy: Chart. (graph) A building binge is under way in China as the government strives to revive sluggish real estate investment. Properties under construction will double the supply of commercial space to 10.7 million square meters (115.2 million square feet) this year, and will lift the vacancy rate nationwide to 21.5 percent from 13.8 percent in 2015, according to Cushman & Wakefield Inc.
• A Look at China's Unusual Default Excuses. (video)
• Abu Dhabi Stocks in Worst Run Since October as Gulf Markets Drop. Abu Dhabi stocks posted their longest losing streak since October amid a slump in trading across Gulf Arab equity markets as investors held out for more than a $1 billion worth of rights issues. The ADX General Index fell 1.1 percent, declining for the sixth straight day. Emirates Telecommunications Group Co., or Etisalat, the largest phone company in the Middle East, led the retreat with a 2.6 percent drop. Traders exchanged shares in about a third of companies on the gauge. The Bloomberg GCC 200 Index slipped for a third day, with volumes on the main gauges in the six-nation Gulf Cooperation Council languishing at less than half the 20-day average. Saudi Arabia’s Tadawul All Share Index slipped 1 percent, falling for a third day and taking its loss this year to 4.1 percent.
• Iran Won’t Freeze Oil Output Before OPEC Meeting. Iran, which is due to meet with OPEC partners on June 2, has no plan to join any freeze in crude output as the country won’t be done ramping up oil exports to pre-sanctions levels before the second half of the year, the head of the state oil company said. The Persian Gulf state’s oil exports will likely surpass 2.2 million barrels a day by the middle of the summer, Rokneddin Javadi, managing director of National Iranian Oil Co., told Mehr news agency. Iran last exported at this level before sanctions were imposed on the country for its nuclear program more than four years ago. Sanctions were eased in January, and Iranian officials said they won’t discuss any output freeze or cut before reaching pre-sanctions levels. “The government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out,” Javadi said. “In the current context, the oil ministry and the government have issued no policy or program to halt the increase in production and exports and so, the country’s plans to increase crude output continues.”
• Williams Says Fed Rate Moves to Block Out Election-Year Pressure. The U.S. economy should be solid enough to merit an interest-rate increase this year, and the central bank won’t cave to political pressure to refrain from tightening during a presidential election year, said John Williams, president of the Federal Reserve Bank of San Francisco. While global threats to growth, including in Europe and Asia, have forced a “balancing act” against largely encouraging data in the U.S., Fed officials probably will raise the benchmark interest rate sometime this year, Williams said Sunday on Fox News. He doesn’t vote on monetary policy until 2018.
• Hedge Funds That Choked on Momentum Stocks Taking Another Bite. Hedge funds are piling into the same shares that zapped their returns at the start of the year. They just added momentum stocks for a fifth consecutive quarter, according to an Evercore ISI analysis of 13F filings with the Securities and Exchange Commission. Those shares, loosely defined as the ones that went up the fastest in the past 12 months, posted some of their worst losses in seven years at the start of 2016.
• Sanders’s Rift With Democrats Widens With Jab at Committee Chair. Bernie Sanders stepped up his feud with the Democratic leadership, saying he’s backing the primary opponent of Representative Debbie Wasserman Schultz, the party’s national committee chairwoman. “Clearly, I favor her opponent. His views are much closer to mine than Ms. Wasserman Schultz’s,” the Vermont senator said in an excerpt of an interview with CNN’s “State of the Union” that will air in full on Sunday. Sanders added he would not reappoint the congresswoman to head the committee if he’s elected president in November.

Barron's:

• Had bullish commentary on (RHT), (PEP) and (FDC). 
• Had bearish commentary on (BA).

Fox News:

• Iraq launches military operation to retake ISIS-held city of Fallujah. (video) Iraqi Prime Minister Haider al-Abadi announced the beginning of military operations to retake the Islamic State-held held city of Fallujah, west of Baghdad, in a televised address on Sunday night. Iraqi forces are "approaching a moment of great victory" against the Islamic State group, said al-Abadi, who was surrounded by top military commanders from the Ministry of Defense and the country's elite counterterrorism forces.

CNBC:

• US close to passing test for June rate rise, Fed official says. The US is on the verge of meeting most of the economic conditions the Federal Reserve has set to increase interest rates next month, according to a member of the rate-setting Federal Open Market Committee. Eric Rosengren, the president of the Federal Reserve Bank of Boston, told the Financial Times he was getting ready to back tighter monetary policy after financial and economic indicators swung in a positive direction after the Fed’s policy meeting in March. 
• China pressures Taiwan's President Tsai Ing-wen to acknowledge One China. China has threatened to cut off regular communication with Taiwan unless the country's new president acknowledges the so-called One China principle. According to a report from Xinhua, the Chinese state media outlet, China's Taiwan Affairs Office spokesman Ma Xiaoguang said on Saturday that only by Taiwan confirming the One China principle - which dictates that the island of Taiwan and mainland China are parts of a single Chinese state - could "cross-Strait affairs authorities continue regular communication."

Zero Hedge: 

• Chinese Part-Time Workers Soar As Economy Deteriorates. (graph)
• Is This The Scariest Chart Out There? (graph)
• "The Time Is Now" For Markets To Price In China's Next Slowdown, A Gloomy Morgan Stanley Warns.
• Rate Hike? This Chart Says Don't 'Bank' On It. (graph)
• Another Unicorn Bites The Dust.
• Guess What Occupation Is Most Frequently Cited In The Panama Papers?
• Gold Fund Inflows Surge To Highest Of The Year. (graph)
• Iran Mocks Obama Again, Test-Fires 2 More Ballistic Missiles.
• Suddenly Trump And Hillary Is All Goldman's Clients Want To Talk About. (graph) 
• A Retired White House Correspondent Explains "How Obama Gets Away With It".
• State Of The States: New Jersey's Problems Are Not "Mathematically Solvable".
• Why Deutsche Bank Thinks A Fed Rate Hike Would Unleash A Stock Market Crash.
• How The Deep State's Cronies Steal From You.
• What Bubble? Triple-Wide Mobile Home Sells For $5.3 Million In Malibu.
• The Eurozone Is The Greatest Danger.
• "We Are Becoming Convinced That The System Won't Stabilize" - Citi Explains How Central Banks Broke The Market.

Business Insider:

• China produced more steel than the rest of the world in April.
• Former Chinese foreign minister: America must 'steer clear' of China.
• Another US oil driller bites the dust.
• Iran isn't backing down over oil.
• American companies are 'masking' a $6.6 trillion mountain of debt.
• Businesses are falling behind on their loans like it's 2008.
• House prices are creeping toward bubble territory again.
• The world economy is running on monetary fumes.
• Puerto Rico's debt crisis is getting deeper.

NY Times:

• Key G.O.P. Donors Still Deeply Resist Donald Trump’s Candidacy.

Telegraph:

• Europe's fifty year bonds signal decades long slump.

Night Trading

• Asian indices are -.% to +.% on average.
• Asia Ex-Japan Investment Grade CDS Index 145.5 unch.
• Asia Pacific Sovereign CDS Index 53.5 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 70.84 unch.
• S&P 500 futures +.01%.
• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note

Company/Estimate

• (CRMT)/.58
• (SCOR)/.26

Economic Releases

9:45 am EST

• The Preliminary Markit US Manufacturing PMI report for May is estimated to rise to 51.0 versus 50.8 in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Harker speaking, Fed's Bullard speaking, Eurozone PMI report, JPMorgan Tech/Media/Telecom conference, UBS Global Healthcare Conference, UBS Global Oil/Gas Conference and the (XLNX) Analyst Day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly mixed. The Portfolio is 50% net long heading into the week.

Weekly Outlook

• 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 rising European/Emerging Markets/US High-Yield debt angst, global growth concerns, commodity weakness, yen strength, Fed rate-hike fears and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Today's Headlines

Bloomberg:      

• Clock Ticks on Bull Market With No New High for Stocks in a Year. (graph) An up week in the S&P 500 Index did little to alleviate the frustration of U.S. investors who have now watched stocks go nowhere for a full year. Yes, the S&P 500 rose over the last five days, halting a three-week slide that had been the longest since January. But the rally didn’t come close to ending a 12-month fallow period that the index has spent stuck below its all-time high. The stretch is one of the longest in the history of U.S. bull markets. 
• G-7 Warns on Weak Global Growth as Japan Bristles Over Yen. Finance chiefs from the world’s biggest developed economies meeting in Japan underscored concerns that global growth is flagging and reaffirmed a pledge not to deliberately weaken their currencies, even as Japan again warned on the yen’s surge. At the end of two days of talks, Group of Seven central bank governors and finance ministers highlighted risks from terrorism, refugee flows, political conflicts and the potential for a U.K. exit from the European Union.
• World’s No. 2 Currency Trader Says Dollar Rebound Just the Start. The dollar’s three-week rally is just the beginning, according to Deutsche Bank AG. A slump by the greenback earlier this year has “likely run its course,” analysts at the world’s second-largest currency trader wrote in a note Friday. The bank favors buying the U.S. currency versus emerging markets -- such as China, Mexico and South Korea -- following a shakeout in speculative bets on the dollar, George Saravelos, co-head of global foreign-exchange research in London, wrote.
• New Brazil Economic Team Downgrades Expectations for Budget. Brazil’s new economic team projects the largest budget gap before interest payments on record this year, underscoring the challenge Acting President Michel Temer will face in turning around Latin America’s biggest economy. Temer’s administration will submit legislation that would allow it to report a so-called primary budget deficit of 170.5 billion reais ($48.4 billion) this year, Finance Minister Henrique Meirelles said Friday. The budget estimate is realistic and transparent, and doesn’t include possible spending cuts and revenue increases that require congressional approval, he said.
• Dollar Rally Is Biggest Since January as Fed Stokes Divergence. The dollar extended its biggest advance since January to a third week as traders weighed the possibility of tighter monetary policy in the U.S. against stimulus in Japan and other major economies. The U.S. currency has rallied since the minutes of the Fed’s most recent meeting prompted traders to add to bets on a June rate hike. The move was also spurred by Bank of Japan Governor Haruhiko Kuroda reiterating that he’s ready to add to stimulus if necessary. Japan used a meeting of finance chiefs from the world’s major industrialized nations to warn of the economic risks from sharp swings in the yen, even as the U.S. made clear that currency markets remain calm.
• Sequoia Sharply Cuts Valeant(VRX) Stake, Limits Position Sizes. The Sequoia Fund, a top investor in Valeant Pharmaceuticals International Inc., told clients that it has significantly reduced its stake in the troubled drugmaker since the end of March.

Wall Street Journal: 

• U.S., Japan Clash Over Yen Policy at G-7 Meeting. Finance ministers and central bank chiefs end two-day meeting without an agreement on a more balanced policy mix.

Zero Hedge: 

• 407,000 Workers Stunned As Pension Fund Proposes 60% Cuts, Treasury Says "Not Enough".
• "The Sendai Dischord" - Japan Humiliated At G-7 Meeting In Sharp Rift Over Yen Intervention.
• The Mother Of All Head & Shoulder Patterns Just Completed The Right Shoulder. (graph)
• Venezuela Launches Biggest Ever "Military Exercise" In History: A Preview Of What's Coming.
• Egypt Officials Release First Footage Of EgyptAir Debris; Find Airplane Black Boxes.
• Portland School Board Bans Literature Denying Climate Change.
• What Does The Next OPEC Meeting Have In Store?
• One Year Later... (graph)
• The Biggest Bubbles: China vs. The U.S.
• Goldman Explans Why Hedge Funds Got Crushed In 2016.
• Weekend Reading: Yellen’s Line In The Sand.
• Hawkish Fed Slams Stocks To Longest Losing Streak In 20 Months. (graph)

Business Insider:

• A group that helped the White House sell the Iran deal gave NPR $100,000 to report on it.
• The TSA is in a full-blown crisis.
• The Fed has come back to life.
• There's a 'secondary conflict' brewing in northern Syria that 'could easily spin out of control'.
• US military could deploy to Libya 'any day'.

The Telegraph:

• Venezuela: how the socialist paradise turned into debt and hyperinflation hell.

Market Week in Review

• S&P 500 2,049.44 +.09%*

The Weekly Wrap by Briefing.com.

*5-Day Change