Bull Radar

Style Outperformer:

• Large-Cap Growth -.4%

Sector Outperformers:

• 1) Restaurants +.4% 2) REITs +.1% 3) Foods -.2%

Stocks Rising on Unusual Volume:

• VMW, DXCM, FFIV and RMBS

Stocks With Unusual Call Option Activity:

• 1) OAS 2) MCD 3) KR 4) INFN 5) HUM

Stocks With Most Positive News Mentions:

• 1) JNJ 2) BA 3) MCD 4) V 5) NKE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -19.6% Below 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 36.7% of Issues Advancing, 60.0% Declining
• 85 New 52-Week Highs, 3 New Lows
• 61.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.4%
• Vix 12.6 +1.0%
• Total Put/Call .95 +3.3%
• TRIN/Arms .89 +15.2%

Tuesday Watch

Evening Headlines 
Bloomberg: 

• China's Local Debt Problem Goes Global. A very local problem in China is being exported at an alarming rate. Debt from special-purpose vehicles linked to municipal and provincial governments -- leverage that central authorities are trying (unsuccessfully) to extinguish -- is becoming more common in overseas markets. What's worse, lately it's been the weakest cities and provinces panhandling to international investors.
• Venezuela Nears Constitutional Crisis as Opposition Changes Tack. Venezuela is heading toward a constitutional crisis to add to its economic collapse after the opposition-controlled National Assembly challenged the power of the Supreme Court that backs President Nicolas Maduro. The National Assembly last week voted to strip 13 of 32 Supreme Court judges of their powers and said any decisions the justices participated in would be invalid. Congress now is studying the appointment of its own judges, according to congressional President Henry Ramos Allup.
• Most Asian Stocks Advance as Weaker Yen Boosts Japan’s Topix. Most Asian stocks climbed after a weaker yen boosted Japanese shares and investors weighed the prospects for added stimulus from global central banks. The MSCI Asia Pacific Index was little changed at 133.90 as of 9:17 a.m. in Tokyo, with 278 shares rising and 214 declining.
• Rio Second-Quarter Iron Ore Output Rises 7% as Prices Gain. Rio Tinto Group’s second-quarter iron ore production rose 7 percent as the No. 2 shipper continues to boost the world’s lowest-cost supply amid a rebound in prices this year. Total global output rose to 85.3 million metric tons in the three months to June 30, London-based Rio said Tuesday in a statement. That compared with 79.7 million tons a year earlier and missed the 88 million ton median estimate of seven analysts surveyed by Bloomberg.

Wall Street Journal:

• The Better Angels of Our Nature. What’s at stake in Cleveland is the identity of the GOP, not the next president.

Fox News:

• Afghan refugee shot dead after slashing attack on German train. Multiple people were injured after a teenage Afghan refugee went on a slashing spree armed with an axe and knife on a train in southern Germany on Monday night before he was shot to death by police, officials said. Wuerzburg police said on their Facebook page that three of the victims suffered serious injuries and one was slightly injured. Another 14 people were being treated for shock.
• Republican officials approve convention rules, triggering uproar. (video) Republican officials hastily adopted a set of much-contested convention rules Monday, setting off an unruly protest from anti-Donald Trump delegates on the first day of the Republican National Convention in Cleveland. Those anti-Trump forces had hoped to challenge the rules that bind delegates to vote for the presumptive GOP nominee, as part of a last-ditch bid to at least disrupt his march to the nomination. But the convention's presiding officer, Arkansas GOP Rep. Steve Womack, abruptly put the rules to a vote -- twice -- and declared them approved by voice. 
• GOP Convention: Live Blog.

Zero Hedge:

• Axe-Wielding Afgan Man Shot Dead After Slashing At Least 20 People On German Train Screaming "Allahu Akbar".
• Millennials Face An Existential Crisis: "It Won't Be A Short Period Of Difficulty".
• After Eight Years Of "Hope And Change", Voters Are Angry.
• The Hamptons Housing Market Has Crashed: Luxury Home Sales Drop By Half As Prices Plunge.
• Citi Is Stunned How Quick The "Extraordinary Political Backdrop" Is Deteriorating.
• Celebrity Lives Matter... More.
• Republican Platform Unexpectedly Calls For A Return To Glass-Steagall.
• IBM(IBM) "Beats" Despite 17th Straight Revenue Decline; Margin Miss; Spike In Net Debt. (graph)
• Netflix(NFLX) Plummets As Growth Story Comes To A Halt: Company Says "We Are Not Growing As Fast As We Would Lke".
• Failed 'Coup' Sparks Yen-Driven Buying Spree In US Stocks. (graph)

Business Insider:

• Police unveil 'chilling' evidence displaying how Baton Rouge shooter targeted police.
• The world is 'addicted to debt'.
• Asia's central banks are 'losing their punch'.
• Mother of Benghazi victim addresses Republican convention: 'Hillary for prison. She deserves to be in stripes'.
• After the Nice attack, France is reconsidering its approach to multiculturalism.

Night Trading 

• Asian equity indices are -.25% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 119.25 -.5 basis point.
• Asia Pacific Sovereign CDS Index 47.5 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 73.81 -.07%. 
• S&P 500 futures -.06%. 
• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (BDC)/1.26
• (CMA)/.69
• (GPC)/1.29
• (GS)/3.05
• (GWW)/3.17
• (JNJ)/1.68
• (KSU)/1.03
• (LMT)/2.93
• (PM)/1.19
• (RF)/.20
• (AMTD)/.38
• (UNH)/1.89
• (WIT)/8.93
• (CTAS)/1.01
• (DFS)/1.39
• (IBKR)/.34
• (ISRG)/4.99
• (MRVL)/.09
• (MSFT)/.58

Economic Releases  
8:30 am EST

• Housing Starts for June are estimated to rise to 1165K versus 1164K in May.
• Building Permits for June are estimated to rise to 1150K versus 1138K in May.     

Upcoming Splits 

• None of note

Other Potential Market Movers

• The German ZEW Economic Survey, UK CPI report and the weekly US retail sales reports could also impact trading today.

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

Stocks Rising into Final Hour on Buyout Speculation, Yen Weakness, Short-Covering, Tech/Retail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.39 -2.21%

• Euro/Yen Carry Return Index 122.74 +1.5%

• Emerging Markets Currency Volatility(VXY) 9.90 +2.17%

• S&P 500 Implied Correlation 48.54 -1.68%

• ISE Sentiment Index 155.0 +33.62%
  

• Total Put/Call .93 +10.71%

• NYSE Arms .82 -33.12% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.47 -.34%
  

• America Energy Sector High-Yield CDS Index 715.0 -.44%

• European Financial Sector CDS Index 95.62 -2.11%

• Western Europe Sovereign Debt CDS Index 26.42 +3.20%

• Asia Pacific Sovereign Debt CDS Index 47.54 +1.01%

• Emerging Market CDS Index 253.84 +.91%
  

• iBoxx Offshore RMB China Corporate High Yield Index 130.89 +.11%

• 2-Year Swap Spread 20.75 +1.0 basis point
  

• TED Spread 37.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -49.0 -1.0 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.88 -.14%
• 3-Month T-Bill Yield .30% -1.0 basis point

• Yield Curve 90.0 +1.0 basis point
  

• China Import Iron Ore Spot $56.86/Metric Tonne -2.67%

• Citi US Economic Surprise Index 25.10 +3.2 points

• Citi Eurozone Economic Surprise Index 4.9 +.4 point

• Citi Emerging Markets Economic Surprise Index -11.20 +1.0 point

• 10-Year TIPS Spread 1.51% unch.
• 19.2% chance of Fed rate hike at Sept. 21 meeting, 19.2% chance at Nov. 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +198 open in Japan 
• China A50 Futures: Indicating +5 open in China

• DAX Futures: Indicating -17 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg: 

• The Coup Failed, But Erdogan’s Wrath Keeps Investors on Edge. Fresh from an election victory that secured his party’s rule for four years, Prime Minister Ahmet Davutoglu in January assured investors in London that Turkey was a safe place for their cash. Four months later he was forced to resign and two months on from that, F-16 fighter jets bombed parliament in a coup attempt. Already embroiled in Syria’s war, a conflict with the Kurds and beset by a string of terrorist attacks, Friday’s failed plot to topple President Recep Tayyip Erdogan risks shattering what’s left of Turkey’s image as a stable country that can attract enough investment to finance one of the highest current-account deficits among G-20 economies.
• Gloomy Post-Brexit Outlook in Larger Euro-Area Economies: Chart.
• China Curbs Leverage of Asset Management Plans Investing in Debt. China is tightening the leverage of structured asset management plans that invest in bonds, highlighting the authorities’ concern about financial risks as the number of corporate defaults surge. The China Securities Regulatory Commission said the size of the senior tranche of fixed-income products should not be more than three times that of the junior tranche, according to the statement, which didn’t specify the previous figure. Senior portions of such products are usually bought by banks’ wealth management products, which help brokerages and asset management firm subsidiaries to boost their buying in the bond market. The cap before was 10 times, according to Industrial Securities Co. “The regulators have realized the possible risks the leverage can bring,” said Fan Lei, an economist at Mizuho Securities Asia Ltd. “The new rules would help lower financial risks.”
• Yuan Weakens Past 6.7 Versus Dollar for First Time in Five Years. China’s yuan fell beyond 6.7 per dollar for the first time in more than five years, fueling depreciation concerns amid cooling property prices and a rebound in the dollar. There’s room for further declines because the greenback is set to strengthen further, although the People’s Bank of China may provide some verbal support, according to HF Financial Group Ltd. in Hong Kong. Official data released Monday showed new home prices rose in fewer cities in June compared with a month earlier, blunting optimism prompted by last week’s figures showing forecast-beating economic growth.
• SoftBank to Buy Britain’s ARM for $32 Billion in Record Deal. (video) SoftBank Group Corp. agreed to buy ARM Holdings Plc for 24.3 billion pounds ($32 billion), securing a slice of virtually every mobile computing gadget on the planet and future connected devices in the home. The Japanese company is offering 1,700 pence in cash per share or a 43 percent premium to Friday’s close, according to a statement Monday.
• European Stocks Advance as ARM Holdings Leads Chipmakers Higher. A surge in ARM Holdings Plc after a deal announcement pushed chipmakers higher, boosting European equities at the close of a volatile session. ARM jumped 41 percent to a record after SoftBank Group Corp. agreed to buy the chip designer for 24.3 billion pounds ($32 billion). Peers Dialog Semiconductor Plc and Ams AG advanced more than 4.7 percent, pushing a gauge tracking the region’s technology shares to their biggest surge since last August. Miners erased earlier declines, while energy companies in the Stoxx Europe 600 Index fell as oil slipped. The market showed resilience after a failed coup in Turkey, with the benchmark gauge for Europe’s stocks adding 0.2 percent at the close of trading in London. Speculation that central banks will limit the fallout of Britain’s vote to leave the European Union has helped the Stoxx 600 rise in two of the past three weeks. It closed 2.2 percent away from its level on the day of the referendum.
• Swelling Pile of Iron Ore Casts ‘Dark Cloud’ Over Prices: Chart. Iron ore holdings at China’s ports just posted the longest run of gains this year, expanding for five straight weeks to 105.4 million metric tons, according to Shanghai Steelhome Information Technology Co.
• Copper Drops on Outlook for Credit Tightening in Top User China. Copper fell with most industrial metals amid speculation that credit conditions in China, the biggest user, will curb demand in the second half of the year. Nickel held last week’s advance as the Philippines shuttered more mines as part of as environmental crackdown. While new lending figures released last week topped estimates, the stimulative effects of the easing of credit conditions in real estate look to be moderating, Barclays Plc said. Copper also retreated after data on Monday showed China’s home-price gains taperedoff last month, as second-tier cities joined some of the nation’s largest hubs in imposing housing curbs to cool surging prices.
• Traders Reviving Fed Rate-Rise Bets Put a Floor Under the Dollar. Traders boosted bets of an increase in U.S. borrowing costs this year, helping a gauge of the dollar hold its advance after climbing to a one-week high on Friday. The U.S. currency has strengthened against all its Group of 10 peers since July 14 after data the following day showed retail sales and factory output beat estimates. Futures contracts show the probability of a rate increase by the Federal Reserve by December has climbed to 44 percent from 9 percent at the end of last month, when global markets convulsed following the U.K.’s vote to leave the European Union. 

Wall Street Journal:

• World Anti-Doping Agency Finds Cheating Conspiracy by Russia at Sochi Olympics. Pressure on International Olympic Committee to ban country ahead of Rio Games.
• Baltimore Officer Acquitted of All Charges in Freddie Gray Trial. Prosecutors fail to secure conviction in fourth trial involving 2015 death of black man in a police van.

Fox News:

• Rocky opening for GOP convention as Cruz forces clash with team Trump. (video) The Republican convention appears to be facing a rocky opening both inside and outside the arena – inside, from forces loyal to Ted Cruz mulling a procedural fight and outside, from anti-Trump protesters testing the demonstration rules set by the city.
• GOP Convention: Live Blog. 
• Erdogan's appeal to Islamists in wake of failed coup spurs fears for Turkey's future. (video) Shouts of “Allahu Akbar” and sermons blaring from speakers continue to echo throughout the cosmopolitan districts of Istanbul in the wake of Friday’s failed military coup, creating a “surreal” scene and stoking fears a nation that remained proudly secular for the last century could be hurtling down the path to full-blown Islamic rule.

CNBC:

• Another billionaire questions whether US stocks should be at new highs. (video) The U.S. stock market, making a string of recent record highs, "doesn't make much sense," distressed debt specialist Marc Lasry told CNBC Monday, sharing the view of fellow billionaire investment titan Larry Fink.
• A Goldman metric shows stocks extremelyovervalued. Extreme valuations in stocks should cause investors to think twice before chasing the rally at these levels, Goldman Sachs cautions. "S&P 500 stands at an all-time high and the median stock's P/E is at the 99th percentile relative to the past 40 years," Goldman's market strategist David Kostin wrote in a note to clients Friday.

Zero Hedge:

• Erdogan Purges 20,000 As Europe Voices Concern Coup Was Staged With "Prepared Arrest Lists".
• Turkish Prosecutors Raid Incirlik Airbase Housing US Warplanes And 50 Nuclear Bombs.
• French Prime Minister Booed At Moment Of Silence In Nice. (video)
• The Entire Financial System Is Exposed To This 'Junk' Bond Market.
• European Central Banks Disclose Which Corporate Bonds They Own.
• Why Oil Prices Might Never Recover.
• WTI Tumbles To $45 Handle As 'Failed Coup' Leaves Flows Unhindered. (graph)
• The Cleveland Fed Wants You To Know That Its President Does Not Advocate Helicopter Money.
• Turkish Stocks Crash Most In 3 Years, Give Up Brexit Gains. (graph)
• France "Is On Verge Of Civil War" Security Chief Warns Feckless Hollande.
• Murdered Baton Rouge Cop's Sister: "It's Coming To The Point Where No Lives Matter". “If I could say anything to anyone, it is to get their lives right with God,” she said. “Hell is a horrible, horrible place to be.”

Business Insider:

• The US just issued a 'remarkable' warning to Turkey amid its post-coup crackdown.
• Audience groans as Trump's campaign chair slams John Kasich in his home state.
• Pakistani model's brother confessed to 'honor killing' his sister due to 'shameful' Facebook pictures.
• SCORECARD: These hedge funds are killing it this year.
• Report: The feds are investigating Fiat Chrysler.

AP:

• AP Exclusive: Secret document lifts Iran nuke constraints. A document obtained by The Associated Press shows that key restrictions on Iran's nuclear program will ease in slightly more than a decade, halving the time Tehran would need to build a bomb. The document is the only secret text linked to last year's agreement between Iran and six foreign powers. It says that after a period between 11 to 13 years, Iran can replace its 5,060 inefficient centrifuges with up to 3,500 advanced machines. Since those are five times as efficient, the time Iran would need to make a weapon would drop from a year to six months. Iran says its enrichment is peaceful, but the program could be used for nuclear warheads. Two diplomats providing the information Monday demanded anonymity because they weren't authorized to do so.

El Pais:

• Spain Rejects EU Demand for More Spending Cuts. Spanish govt won't comply with EU demands to make EU 10b of structural spending adjustments by 2017.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.1%

Sector Underperformers:

• 1) Coal -.9% 2) Telecom -.8% 3) Oil Service -.6%

Stocks Falling on Unusual Volume:

• HAS, HE, FOE, HLF, SSYS, JBHT, YRD, STRP, DDD, WRLD, SUPN, BC, MNST, ATHM, K, LMT, PRXL, SGY, WAIR, HAWK, IR, HUM, HNP, ATHN and CSL

Stocks With Unusual Put Option Activity:

• 1) LQD 2) VMW 3) IBM 4) M 5) MOS

Stocks With Most Negative News Mentions:

• 1) SSYS 2) DDD 3) SUPN 4) KOP 5) FCAU

Charts:

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