Bull Radar

Style Outperformer:

• Small-Cap Value +.5%

Sector Outperformers:

• 1) Oil Service +2.3% 2) Disk Drives +2.3% 3) Computer Hardware +2.3%

Stocks Rising on Unusual Volume:

• SEMI, AIMT, NTAP, CACI, CSIQ, REN, ANW, YRD and LITE

Stocks With Unusual Call Option Activity:

• 1) ILMN 2) OAS 3) PTLA 4) CLNE 5) RTRX

Stocks With Most Positive News Mentions:

• 1) NTAP 2) LB 3) CIE 4) SNPS 5) AEGN

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -15.3% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 69.8% of Issues Advancing, 27.1% Declining
• 117 New 52-Week Highs, 2 New Lows
• 62.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.6%
• Vix 11.6 -4.8%
• Total Put/Call 1.08 +21.4%
• TRIN/Arms 1.18 +1.15%

Thursday Watch

Evening Headlines

Bloomberg:

• Germany Sees Turkey as Platform for Islamist Groups, Leak Shows. Turkey’s government rebuffed a leaked German report that described the country as a platform for Islamist groups in the Middle East, increasing the risk of renewed tension between Turkish President Recep Tayyip Erdogan and Chancellor Angela Merkel. The German government’s internal assessment, cited by broadcaster ARD, is a “new indication of a twisted mentality that attempts to wear out our country by targeting our president and the government,” the Turkish Foreign Ministry said in e-mailed statement on Wednesday. It blamed unnamed politicians in Germany for applying “double standards” on countries’ commitment to fighting terrorism. It’s the latest fraught moment between the two countries after Turkey pledged in March to halt the flow of refugees from the Middle East to Europe under an accord with the EU that was championed by Merkel. Turkey, now grappling with upheaval after an attempted military coup against Erdogan in July, has said it will scrap the deal if isn’t granted visa waivers for its citizens traveling to the EU.
• Japan’s Exports Drop in July, Marking 10th Month of Decline. Japan’s exports declined more than forecast in July, with shipments down for a 10th consecutive month. The continued drop highlights the difficulty of kick-starting growth and pulling Japan’s economy out of the doldrums.
• Yen Surges Past 100 as Dollar Rally Unwinds After Fed Flip Flops. The yen surged past 100 per dollar for a second time this week as the U.S. currency’s bid to break out from a three-month low stalled after Federal Reserve minutes indicated officials were divided over the urgency to raise interest rates. The greenback has slumped more than 5 percent this year as Fed policy makers have yet to see signs that inflation is moving toward their 2 percent goal. That means the U.S. central bank is less likely to diverge from the paths of the Bank of Japan and European Central Bank, which are boosting monetary stimulus as they seek to spur flagging growth.
• Asia Stocks Gain on Fed Minutes While Yen Pressures Japan Shares. Asian stocks outside Japan rose after Federal Reserve meeting minutes showed officials were divided over the urgency to raise interest rates. Shares in Tokyo slipped as the yen strengthened past 100 per dollar. The MSCI Asia Pacific Excluding Japan Index rose 0.2 percent as of 9:07 a.m. in Tokyo. Japan’s Topix index slipped 0.9 percent as the yen traded at 99.79 against the dollar. 

Wall Street Journal:

• Fed’s July Minutes Show a Split Central Bank Seeking to Keep Options Open. The minutes suggested a rate increase is a possibility as early as September.
• U.S. Held Cash Until Iran Freed Prisoners. An Iranian cargo plane left Geneva with $400 million in cash after a flight with Americans aboard took off from Tehran in January.

CNBC:

• Obamacare is unsustainable — the backbone could collapse, expert warns. (video)
• O'Leary: Don't be fooled by bank stocks again.

Zero Hedge: 

• Obama Lied: New Details Confirm $400 Million Given To Iran Was Indeed "Hostage Ransom".
• 10 Orwellian Moments Found In The Newly Leaked Private NSA Newsletters.
• Japanese Imports, Exports Crash At Worst Rate Since 2009. (graph)
• Carl Icahn Turns Apocalyptic: "I Am More Hedged Than Ever, A Day Of Reckoning Is Coming". (graph)
• Bad Data, Broader Alarms, And Business Cycles. (graph)
• Obamacare Doomed As Insurers Lose $2 Billion On Plans In 2016 (Prompting 2017 Rates To Soar).
• Expecting War? Russia Conducts Armored Train Drills For First Time In 15 Years.
• In Surprising Twist, Global Central Banks Dump A Record $335 Billion In US Debt In Past Year. (graph)
• Cisco Fires 5,500; Market Disappointed It Wasn't More - Shares Fall. (graph)
• Bonds & Stocks Surge After Fed's Equity Valuation Warning. (graph)

Business Insider:

• San Francisco's housing bubble is collapsing under its own weight.
• Human Rights Watch: Russia, Syria used internationally banned incendiary weapons on civilians.

21st Century Business Herald:

• China Should Lower Expectations on Home Price Gains. Chinese local govts should expand land supply and lower market and developers' expectations on home price gains to stave off property bubble risks, a front-page editorial says. Money is entering into asset sector mainly because market expects the bubble won't be pricked soon. China's bond and property markets have become liquidity pools, the editorial said. China must tell market that money supply won't continue to be expanded and the monetary policy will be more prudent to serve structural reform.

Economic Information Daily:

• Chinese Industrial Growth May Slow to 5% in June 2017. Chinese industrial growth may slow to 5% in June next year, from a 6% gain in 1H 2016, citing a Chinese Academy of Social Sciences report.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 114.25 -.5 basis point.
• Asia Pacific Sovereign CDS Index 44.75 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 73.84 +.19%. 
• S&P 500 futures +.07%. 
• NASDAQ 100 futures +.08%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (HRL)/.35
• (PERY)/.01
• (SSI)/.05
• (TTC)/.99
• (WMT)/1.02
• (CRMT)/.46
• (AMAT)/.48
• (DV)/.60
• (GPS)/.59
• (ROST)/.67  

Economic Releases 
8:30 am EST

• Initial Jobless Claims are estimated to fall to 265K versus 266K the prior week.
• Continuing Claims are estimated to fall to 2141K versus 2155K prior.
• Philly Fed Business Outlook for August is estimated to rise to 2.0 versus -2.9 in July.  

10:00 am EST

• The Leading Index for July is estimated to rise +.3% versus a +.3% gain in June. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Williams speaking, ECB Minutes, Eurozone CPI, UK Retail Sales, weekly Bloomberg Consumer Comfort Index, Bloomberg Economic Expectations Index for August and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by technology and industrial 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 Reversing Slightly Higher into Final Hour on Central Bank Hopes, Oil Bounce, Technical Buying, Utility/Road & Rail Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.44 -1.58%

• Euro/Yen Carry Return Index 118.21 +.04%

• Emerging Markets Currency Volatility(VXY) 9.93 +1.02%

• S&P 500 Implied Correlation 46.31 -.54%

• ISE Sentiment Index 53.0 -23.2%
  

• Total Put/Call .91 -11.65%

• NYSE Arms 1.22 +32.6% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.54 +.51%
  

• America Energy Sector High-Yield CDS Index 694.0 -1.33%

• European Financial Sector CDS Index 89.85 +5.0%

• Western Europe Sovereign Debt CDS Index 24.27 +1.57%

• Asia Pacific Sovereign Debt CDS Index 44.64 +.79%

• Emerging Market CDS Index 240.13 -.02%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.42 -.29%

• 2-Year Swap Spread 25.25 +1.75 basis points
  

• TED Spread 53.0 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -39.0 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.63 -.35%
• 3-Month T-Bill Yield .22% +2.0 basis points

• Yield Curve 82.0 -1.0 basis point
  

• China Import Iron Ore Spot $60.87/Metric Tonne -1.87%

• Citi US Economic Surprise Index 5.4 -.6 point

• Citi Eurozone Economic Surprise Index 27.5 -.1 point

• Citi Emerging Markets Economic Surprise Index -1.1 -.5 point

• 10-Year TIPS Spread 1.48% +3.0 basis points
• 23.7% chance of Fed rate hike at Nov. 2 meeting, 48.0% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -100 open in Japan 
• China A50 Futures: Indicating -41 open in China

• DAX Futures: Indicating +62 open in Germany

Portfolio: 

• Slightly Higher: On gains in my index hedges and emerging markets shorts
  

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.5%

Sector Underperformers:

• 1) Hospitals -2.8% 2) Gold & Silver -2.4% 3) Disk Drives -1.8%

Stocks Falling on Unusual Volume: 

• CREE, PLKI, HAIN, LOW, SITE, TGT, INCR, REN, AEO, VRSN, PCMI, CMCM, BKS, SEP, ULTI, ATHM, ACM, CSIQ, QVCA, HIBB, ASML, CCRN, PFGC, BMY, JHKY and LDOS

Stocks With Unusual Put Option Activity:

• 1) XHB 2) TGT 3) CREE 4) VNQ 5) LOW

Stocks With Most Negative News Mentions:

• 1) ODP 2) CREE 3) NBL 4) ADS 5) SPLS

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.10%

Sector Outperformers:

• 1) Utilities +.5% 2) Airlines +.3% 3) HMOs +.3%

Stocks Rising on Unusual Volume:

• URBN, PATK, TEDU, OSIS, VRX and YRD

Stocks With Unusual Call Option Activity:

• 1) FL 2) URBN 3) TJX 4) ODP 5) QVCA

Stocks With Most Positive News Mentions:

• 1) URBN 2) CTAS 3) VRX 4) OZM 5) PBR

Charts:

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