Bear Radar

Style Underperformer:

• Small-Cap Growth +.1%

Sector Underperformers:

• 1) Biotech -2.4% 2) Gold & Silver -1.5% 3) Oil Tankers -1.2%

Stocks Falling on Unusual Volume:

• TEAM, CTLT, BIIB, MIK, KANG, RL, VRX, ALXN, AMG, SYNA, ZBH, FIX, HOFT, AVXS, TRIP, STZ, CASY, OMED, JD, LULU, WERN, ONCE, NVRO, CXRX, DISCA and IONS

Stocks With Unusual Put Option Activity:

• 1) Z 2) APC 3) UNP 4) OIH 5) CCL

Stocks With Most Negative News Mentions:

• 1) DRYS 2) BIIB 3) WERN 4) JBL 5) GDDY

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.38%

Sector Outperformers:

• 1) Oil Service +2.2% 2) Airlines +2.2% 3) Energy +1.8%

Stocks Rising on Unusual Volume:

• LDRH, UNFI, ZG, WATT, SRPT, NAV, AXLL and THO

Stocks With Unusual Call Option Activity:

• 1) UNP 2) CCL 3) MRK 4) Z 5) BIIB

Stocks With Most Positive News Mentions:

• 1) CXO 2) NBL 3) WDC 4) ALK 5) AAL

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.1% Below 100-Day Average
• 9 Sectors Rising, 1 Sector Declining
• 61.0% of Issues Advancing, 35.5% Declining
• 129 New 52-Week Highs, 5 New Lows
• 59.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.8%
• Vix 13.5 -1.17%
• Total Put/Call .86 +16.2%
• TRIN/Arms 1.06 +43.3%

Tuesday Watch

Evening Headlines
Bloomberg: 

• China Shares Fall on Economic Worry. (video)
• Aussie Near Four-Week High Before RBA as Fed Rate Rise Odds Drop. Australia’s dollar held near a four-week high versus its U.S. peer amid signs central banks in both country’s won’t rush to change policy. Swaps indicate only about 7 percent odds that the Reserve Bank of Australia will lower interest rates at its meeting Tuesday, following a cut last month. The Aussie rallied the most in three months against the dollar last week. 
• Asian Stocks Advance as Yen Lifts Topix, Commodity Shares Rally. Asian stocks rose as the weaker yen boosted Japanese exporters and commodity shares rallied after Federal Reserve Chair Janet Yellen signaled the U.S. economy is strengthening enough to withstand gradual increases in borrowing costs. The MSCI Asia Pacific Index climbed for a third day to extend a five-week high, advancing 0.4 percent to 130.45 as of 9:16 a.m. in Tokyo.
• Senators Probe Five Drugmakers on Price of Overdose Antidote. U.S. senators want five drugmakers to account for increases in the price of a drug that’s used to reverse the effects of prescription and illegal opioids, as the number of Americans overdosing on painkillers and heroin has skyrocketed in recent years.

Wall Street Journal:

• Goldman(GS) Probed Over Malaysia Fund 1MDB. Focus is on whether bank didn’t alert authorities to unusual funds movement. U.S. investigators are trying to determine whether Goldman Sachs Group Inc. broke the law when it didn’t sound an alarm about a suspicious transaction in Malaysia, people familiar with the investigation said.

Fox News:

• Former US attorney: Clinton aides' legal strategy is 'red flag'. (video) Four central figures in the FBI’s criminal investigation of Hillary Clinton’s email practices are all using the same lawyer, a move described as a “red flag” by a former U.S. attorney who now runs a government watchdog group.

MarketWatch:

• Hillary Clinton gave inequality speech in a $12,000 Armani jacket. Hillary Clinton’s New York primary victory speech in April focused on topics including income inequality, job creation and helping people secure their retirement. It was a clear attempt to position herself as an everywoman.

CNBC:

• Chinese luxury real estate investments leaving the 'golden age,' broker says. (video) As the Chinese economy is in the midst of a transition, so too, is America's luxury real estate market, a top broker told CNBC. Chinese investors in U.S. real estate have shifted away from "golden-age" trophy properties and toward "silver" level properties near good school systems, Jacky Teplitzky of Douglas Elliman told CNBC's "Power Lunch."

Zero Hedge:

• China's Real Unemployment Rate Is Three Times Higher Than The Offical Number.
• Peak Facebook(FB)? New Study Finds Social Media App Usage Tumbles Across The Globe.
• China Capital Outflow Crackdown: "Surprisingly Plump" Man Busted With $74,000 Strapped To His Waist.
• An Angry Bernie Sanders Responds To Hillary's Nomination.
• "Do I Have A Problem With That, Ya I Do" - Sanders Slams Hillary's Clinton Foundation Conflict Of Interest. (video)
• It Takes A Village To Maintain A Dangerous Financial System.
• "You Are Here".
• Introducing Europe's Frightening New Tax Directive.
• BofA Credit Analyst Loses It: "Central Banks Created A Fantasy Land".
• Yellen-nado Sends Stocks Soaring To 2016 Highs. (graph)

Business Insider:

• Here's why you should freak out about the stock market.

WWD:

• Ralph Lauren Said to Plan to Cut Up to 10% of Jobs. Cuts said planned throughout the co., some stores to be closed, citing industry sources. Could affect up to 10% of workforce.

Night Trading 

• Asian equity indices are unch. to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 139.0 -2.5 basis points. 
• Asia Pacific Sovereign CDS Index 51.75 -1.0 basis point.
• Bloomberg Emerging Markets Currency Index 71.89 -.04%. 
• S&P 500 futures unch. 
• NASDAQ 100 futures +.04%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (HDS)/.47
• (MIK)/.35
• (NAV)/-.15
• (VRX)/1.38
• (VNCE)/-.11
• (PAY)/.52
• (PLAY)/.59

Economic Releases 
8:30 am EST

• Final 1Q Non-farm Productivity is estimated to fall -.6% versus a prior estimate of a -1.0% decline.
• Final 1Q Unit Labor Costs are estimated to rise +4.0% versus a prior estimate of a +4.1% decline. 

10:00 am EST

• IBD/TIPP Economic Optimism for June is estimated to fall to 48.3 versus 48.7 in May.
  

3:00 pm EST

• Consumer Credit for April is estimated to fall to $18.0B versus.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The China Trade balance report, RBA meeting, US weekly retail sales reports, Goldman Healthcare Conference, Jefferies Healthcare conference, Stifel Tech/Internet/Media conference, (RL) investor day, (SWFT) Mid-Quarter conference call and the (QSII) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to strengthen into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Rising into Final Hour on Central Bank Hopes, Less European/Emerging Markets/US High-Yield Debt Angst, Yen Weakness, Commodity/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.62 +1.11%

• Euro/Yen Carry Return Index 127.62 +.86%

• Emerging Markets Currency Volatility(VXY) 10.09 -.20%

• S&P 500 Implied Correlation 52.77 -.13%

• ISE Sentiment Index 89.0 +9.88%

• Total Put/Call .67 -23.86%

• NYSE Arms .65 -46.09% 

Credit Investor Angst:

• North American Investment Grade CDS Index 74.18 -4.06%
  

• America Energy Sector High-Yield CDS Index 816.0 -8.01%

• European Financial Sector CDS Index 95.37 -.61%

• Western Europe Sovereign Debt CDS Index 25.99 -.40%

• Asia Pacific Sovereign Debt CDS Index 51.82 -1.7%

• Emerging Market CDS Index 281.19 -3.57%
  

• iBoxx Offshore RMB China Corporate High Yield Index 129.06 +.26%

• 2-Year Swap Spread 14.25 -.75 basis point
  

• TED Spread 40.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -31.25 -3.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.95 +.57%
• 3-Month T-Bill Yield .26% -2.0 basis points

• Yield Curve 94.0 +1.0 basis point
  

• China Import Iron Ore Spot $51.11/Metric Tonne +2.06%

• Citi US Economic Surprise Index -24.90 -.5 point

• Citi Eurozone Economic Surprise Index -2.40 -4.2 points

• Citi Emerging Markets Economic Surprise Index 9.1 +1.7 points

• 10-Year TIPS Spread 1.58% +2.0 basis points
  
• 21.6% chance of Fed rate hike at July 27 meeting, 42.0% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +135 open in Japan 
• China A50 Futures: Indicating -197 open in China

• DAX Futures: Indicating +13 open in Germany

Portfolio: 

• Higher: On gains in my biotech/medical/tech sector longs 
  

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• China's Debt Load Is (Much) Higher Than Previously Thought, Goldman Says. New credit creation points to an "uncomfortable" trend. Count total social financing (TSF) as another Chinese statistic of increasingly dubious value, according to analysts at Goldman Sachs Group Inc. With many investors grappling to understand the degree to which China's economic growth has been fueled by debt, efforts to get a grip on measures of new credit creation have gained fresh urgency. To date, many have relied on the TSF invented by the Chinese authorities in 2011 as a way of capturing a larger slice of the country's shadow banking activity, but Goldman analysts led by M.K. Tang cast fresh doubt, in a note published on Wednesday, on the measure's ability to gauge credit creation. They identify a discrepancy between China's official TSF and Goldman's new proprietary estimates of credit, describing the increasing difference as "an uncomfortable trend that has gotten more discomforting."
• Boom-Bust in China’s Equity Market Leaves an Economic Hangover. As China’s stock market boomed in early 2015, financial services provided a fillip to an ailing economy. What a difference a year makes: share trading is down more than 80 percent and the number of companies selling stock for the first time has plunged 65 percent. The fading impact on growth from the nation’s financial sector is adding to a list of economic headaches that includes weak demand for exports and a glut of spare capacity in the steel and coal industries. 
  
• Leave Takes Brexit Poll Lead as Major Turns Fire on Johnson. (video) Campaigners to get Britain out of the European Union have moved into the lead, according to a YouGov poll that increases the pressure on Prime Minister David Cameron with less than three weeks until the referendum. The online poll for ITV’s Good Morning Britain program Monday put “Leave” voters at 45 percent and “Remain” at 41 percent, with 11 percent undecided, according to an e-mailed statement. The poll comes on the back of others showing Brexit campaigners narrowing the gap or even leapfrogging “Remain” in the debate to sway voters ahead of the June 23 ballot. A second online poll released Monday, by TNS and conducted May 19-23, gave “Leave” a lead of 43 percent support to 41 percent.
• German Factory Orders Declined in April on Weak Export Demand. German factory orders declined in April as demand for investment goods from outside the 19-nation currency region slumped. Orders, adjusted for seasonal swings and inflation, fell 2 percent from the prior month, when they rose a revised 2.6 percent, data from the Economy Ministry in Berlin showed on Monday. The reading, which is typically volatile, compares with economists’ forecast for a drop of 0.5 percent. Orders slid 0.5 percent from a year earlier. 
• Dollar Touches 3-Week Low as Yellen Keeps Quiet on Fed’s Timing. (video) The dollar reached a three-week low after Federal Reserve Chair Janet Yellen said additional gradual interest-rate increases are appropriate, without specifying their precise timing. The Bloomberg Dollar Spot Index fluctuated after last week’s 1.6 percent decline, which was triggered by a U.S. Labor Department report showing employers in May added the fewest number of workers in almost six years. In a speech in Philadelphia Monday, Yellen said she is watching “four areas of uncertainty” in the economic outlook.
• Europe Stocks Advance as Miners, Oil Shares Climb on Price Gains. (video) European stocks rebounded from their first weekly drop in a month as energy and raw-material producers advanced, while U.K. shares surged. Rio Tinto Group and BHP Billiton Ltd. led miners to the best performance of the 19 industry groups on the Stoxx Europe 600 Index as commodities jumped. BP Plc added 2.8 percent, pushing oil stocks higher, as crude rose after Abu Dhabi forecast prices could climb as high as $60 a barrel. Air France-KLM Group slid 5.4 percent, dragging travel-and-leisure stocks to the biggest drop on the equity benchmark as Barclays Plc cut its price target on the airline. The Stoxx 600 climbed 0.3 percent to 342.41 at the close of trading, after earlier rising as much as 0.6 percent.
• Fed’s Rosengren Says Important to See If Weak Jobs Were Anomaly. (video) Federal Reserve Bank of Boston President Eric Rosengren said he expects U.S. economic conditions to continue improving, making further rate increases appropriate, although it will be important to see whether a weak employment report for May proves to be an anomaly. “Lately the economic data have been choppy,” Rosengren said in the text of a speech prepared for delivery at a central banking conference in Helsinki on Monday. “However, I still expect sufficient economic growth to justify a gradual removal of accommodation.” 
• Cheap Money Helped Inflate Energy Balloon.

Wall Street Journal: 

• Fed’s Bullard Sees Diminished Chance of June Rate Rise. St. Louis Fed president is leaning against supporting an interest-rate increase. Federal Reserve Bank of St. Louis President James Bullard said in an interview Monday that he is leaning against supporting a rate rise at the central bank’s coming meeting. If the Fed is going to raise its short-term interest-rate target, “I’d rather move on the back of good news about the economy,” Mr. Bullard told The Wall Street Journal. And since the Fed will be meeting following the release of the underwhelming May jobs data,... 
• Yellen Says Latest Jobs Report Raises Questions About Economic Outlook. Fed chief declines to say when a rate raise could come, after saying in May that a hike was probable ‘in the coming months’.
• Trump and the ‘Mexican’ Judge. Why equating ethnicity with judicial bias is so offensive.

Fox News:

• IRS releases list of groups targeted in scandal – 3 years later. (video)

CNBC:

• Janet Yellen probably just signaled two interest rate hikes for this year. If Fed Chair Janet Yellen has her way, there likely will be two rate hikes this year, contrary to current market expectations. While Yellen didn't overtly express that desire, there was one key section of the speech she prepared Monday that strongly signaled two hikes on the way: 
• Goldman(GS): China, not Fed, to dictate market's move.
• Santoli: Beware the high price for 'safe' stocks.
• Classic theory predicts more pain for stocks, technician says. (video)

Zero Hedge: 

• JPM(JPM) Still Hates The Market Rally: Here Are Its Reasons. (graph)
• Citi(C) On Yellen's Speech: "What She Did Not Say Is Dovish".
• UK PM Cameron Goes M.A.D. As Brexit Odds Hit Record High.
• ISIS Burns Alive 19 Women For Refusing Sex; Executes Dozens Of Its Own Fighters In Spy Purge.
• "I'm Considering Filing Bankruptcy" - St. Louis Proves A Harbinger Of Things To Come For Subprime Auto Lending.
• Paris Becomes Massive Camp For Illegal Migrants.
• Fed Sees Labor Market Deteriorating At Fastest Pace In 7 Years. (graph)
• Pure Coincidence? Massive McKinsey-Managed Hedge Fund Has Made Money In 24 Out Of 25 Years.
• The Keynesians Stole The Jobs. (graph)
• Fill In The Blank: Fed's Lockhart Says "Policy Continues To Stimulate The ..........." (graph)
• Morgan Stanley's(MS) Dour S&P500 Outlook: 5% Of Possible Upside vs 27% Of Downside. (graph)

Business Insider:

• Donald Trump is causing major alarm for Republicans again — and they're calling him out.
• The Fed is going to raise rates again soon — and this will drive some people crazy.
• Goldman Sachs(GS) says China's debt poses a 'sustainability risk'.

Washington Post: 

• Trump says it’s ‘inappropriate’ for ally Newt Gingrich to criticize his attacks on the ‘Mexican’ judge. Gingrich strongly rebuked Trump's comments during an interview on "Fox News Sunday," as did a number of prominent Republicans over the weekend. Senate Majority Leader Mitch McConnell (R) said that he “couldn’t disagree more” with Trump, although he would not label the attacks as racist. Senate Foreign Relations Committee Chairman Bob Corker struggled to answer questions about Trump's positions, at one point saying he had agreed to be interviewed just about foreign policy. House Speaker Paul D. Ryan (R-Wis.) said Friday that he disagreed with Trump's comments, adding: “He clearly says and does things I don’t agree with."