Bull Radar

Style Outperformer:

• Mid-Cap Value +.2%

Sector Outperformers:

• 1) Gold & Silver +3.3% 2) Steel +2.6% 3) Oil Service +1.6%

Stocks Rising on Unusual Volume:

• SPSC, FOXF, CONN, ADBE, FDX, HOG, ETSY, JNPR, LL, HUN and NAV
  

Stocks With Unusual Call Option Activity:

• 1) SKX 2) POST 3) EXEL 4) EPD 5) ARRY

Stocks With Most Positive News Mentions:

• 1) CONN 2) ETSY 3) ADBE 4) FDX 5) OTIV

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -12.1% Below 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 68.8% of Issues Advancing, 29.2% Declining
• 42 New 52-Week Highs, 11 New Lows
• 58.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 36.6%
• Vix 15.0 -5.5%
• Total Put/Call 1.0 +3.1%
• TRIN/Arms .66 -46.0%

Tuesday Watch

Evening Headlines

Bloomberg: 

• Why China's Experiment in Direct Democracy Was Doomed to Fail. Five years ago Wednesday, the tiny fishing enclave of Wukan drew international attention after villagers rose up in a land dispute, eventually securing a landmark localelection in China. It has since become a cautionary tale for the nation’s democratic reformers. The village about 150 kilometers (90 miles) northeast Hong Kong erupted anew this month, as protesters returned to the streets to challenge the graft conviction of one of the last remaining leaders elected after the 2011 uprising. Videos circulated on social media showed riot police clashing with brick-throwing demonstrators and raiding the homes of alleged organizers. Authorities said Sept. 13 that they had detained at least 13 villagers over their suspected role in the protests.
• The Battle for China's Smartphone Market. (video)
• Japanese Exports Decline for an 11th Straight Month in August. Japan’s poor exports performance continued in August, with shipments falling for for 11th straight month as the strong yen and tepid global economy undercut demand.
• Asian Stocks Are Little Changed, Await Japan Policy Decision. Asian stocks were little changed as investors braced for policy statements Wednesday from the Bank of Japan and the Federal Reserve. The MSCI Asia Pacific Index gained less than 0.1 percent to 138.72 as of 9:02 a.m. in Tokyo. Global markets have oscillated amid an uptick in volatility the past two weeks, with concern mounting that central banks are becoming less committed to stimulus amid persistently mixed economic data. Traders are split over what action the BOJ will take in its review Wednesday in Tokyo, while bets on an interest-rate increase from the Fed remain around 22 percent, from over 40 percent in late August.
• iPhone 7 Teardown Shows Margins Slimming on Storage, Displays. Apple Inc.’s iPhone margins have narrowed with the release of its latest smartphone line, the iPhone 7, with higher costs to provide greater storage options, a glossy black cover and more advanced displays, according to an analysis by IHS Inc. The component analysis firm estimates that the total manufacturing cost of an entry-level iPhone 7, a model with a 4.7-inch screen and 32 GB of storage, is $224.80. This compares with an updated IHS estimate of $200 for an entry-level iPhone 6S in 2015. IHS didn’t perform an analysis of the larger iPhone 7 Plus but said the costs are likely higher than last year’s iPhone 6S Plus due to the presence of additional components.

Wall Street Journal:

• Fully Autonomous Robots: The Warehouse Workers of the Near Future. Grocery baron Rick Cohen is pitching bots that can pick and stack goods untethered, promising to cut inefficiency in a low-margin business.
• U.S. Believes Russia Bombed Syrian Aid Convoy. U.S. officials said new intelligence indicates Russian forces conducted strike that killed at least 12.
• Bill Clinton’s Speaking Fee Overlaps With Foundation Business. Former president was paid by fragrance industry that later benefited from family charity’s Haitian project.

Fox News:

• Clinton email wiper appears to have asked online how to hide 'VIP' info. (video)

CNBC:

• FedEx(FDX) earnings: $2.90 per share vs. expected EPS of $2.81. (video)
• The Fed gets the most grief over this one chart.

Zero Hedge: 

• "We Haven't Seen This Since The Great Depression" - Gallup CEO Destroys The "Recovery" Lie. (graph)
• China’s First Half “Credit Deluge” Is At Risk In The Second Half Of 2016. (graph)
• Dallas Police Pension On Verge Of Collapse As Record Number Of Cops Seek Full Withdrawals.
• BOJ Needs To Go All The Way.
• Are You Ready For The Next Recession?
• Markets Need To Realize That Nothing Is Forever.
• Microsoft(MSFT) Announces $40BN Share Buyback 1 Month After Its Largest Bond Offering Ever. (graph)
• The ZIRP/NIRP Gods & Their PhD Priesthood Have Failed. (graph)
• Retirement Crisis Looms As Average U.S. Household Has Saved $2,500 For Retirement.
• WTI Crude Jumps After Surprise Massive Inventory Draw. (graph)
• US Federal Debt Is Expanding At The Fastest Rate Since The Crisis. (graph)
• Traders Buy Everything As Yellenado & Kurodageddon Loom. (graph)

Business Insider:

• The wife of the accused NYC bomber left the US before the explosions.
• Bernie Sanders: 'Wells Fargo's business model is fraud'.
• 'The people there have lost trust in everything’ — a Mosul resident shares what it's like to live under ISIS.
• Here's everything you need to know ahead the Fed's big statement on Wednesday.

Night Trading 

• Asian equity indices are -.25% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 121.75 +10.25 basis points. (new series)
• Asia Pacific Sovereign CDS Index 31.75 -6.0 basis points.
• Bloomberg Emerging Markets Currency Index 72.39 +.02%. 
• S&P 500 futures +.04%. 
• NASDAQ 100 futures +.07%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (KMX)/.88
• (GIS)/.75
• (ALOG)/1.17
• (BBBY)/1.16
• (FUL)/.67
• (MLHR)/.62
• (JBL)/.25
• (RHT)/.54
• (SCS)/.32 

Economic Releases
10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory build of +3,361,110 barrels versus a -559,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,300,000 barrels versus a +567,000 barrel gain the prior week. Distillate inventories are estimated to rise by +38,890 barrels versus a +4,619,000 barrel gain the prior week. 

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25%-.5%.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, FOMC Policy Update & Economic projections, BoJ rate decision, weekly MBA mortgage applications report, (YRCW) analyst day, (INTU) investor day and the (AMAT) analyst day could also impact trading today.

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

Stocks Slightly Higher into Final Hour on Buyout Speculation, Oil Bounce, Technical Buying, Biotech/Restaurant Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 15.88 +2.25%

• Euro/Yen Carry Return Index 118.65 -.22%

• Emerging Markets Currency Volatility(VXY) 10.65 -1.75%

• S&P 500 Implied Correlation 54.40 +3.54%

• ISE Sentiment Index 58.0 -23.68%
  

• Total Put/Call 1.02 +29.11%

• NYSE Arms 1.16 -9.09% 

Credit Investor Angst:

• North American Investment Grade CDS Index 80.95 +8.38% (new series)
  

• America Energy Sector High-Yield CDS Index 672.0 -1.84%

• European Financial Sector CDS Index 102.70 +10.93%

• Western Europe Sovereign Debt CDS Index 21.90 -12.73%

• Asia Pacific Sovereign Debt CDS Index 31.57 -16.27%

• Emerging Market CDS Index 241.94 -4.19%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.66 +.04%

• 2-Year Swap Spread 26.0 +.75 basis point

• TED Spread 56.25 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -33.25 -.5 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.39 +.03%
• 3-Month T-Bill Yield .29% +4.0 basis points

• Yield Curve 91.0 -1.0 basis point
  

• China Import Iron Ore Spot $55.77/Metric Tonne +.16%

• Citi US Economic Surprise Index -1.70 -5.0 points

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

• Citi Emerging Markets Economic Surprise Index -15.2 -.1 point

• 10-Year TIPS Spread 1.5% -2.0 basis points
• 28.7% chance of Fed rate hike at Nov. 2 meeting, 58.2% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -67 open in Japan 
• China A50 Futures: Indicating +50 open in China

• DAX Futures: Indicating -3 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:

• Yuan Funding Crunch Shows Risks in Reserve Currency Ranking. China’s desire to stabilize the yuan risks undermining its future as a global reserve currency.
  For the second time this year, the overnight cost to borrow the offshore currency in Hong Kong surged above 20 percent amid speculation the People’s Bank of China is mopping up liquidity to boost the exchange rate. The volatility comes less than two weeks before the yuan’s inclusion in the International Monetary Fund’s Special Drawing Rights -- an event seen as a validation of President Xi Jinping’s efforts to promote its standing on the world stage. The PBOC said on Monday that the speculation wasn’t accurate.
• Deutsche Bank’s Low Capital Makes It No. 1 for Risk, Hoenig Says. Deutsche Bank AG’s status as the riskiest among more than two dozen large banks is worsening, according to a measure of its leverage used by Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig, adding to woes for Germany’s biggest lender as it braces for a large settlement over mortgage securities. In a twice-yearly look at what’s known as the leverage ratio -- a lender’s capital measured against its assets -- Deutsche Bank drags behind the rest of the major global banks, according to data released Tuesday by Hoenig. A lower ratio means the bank has less of a cushion if a crisis arises. Deutsche Bank’s ratio of 2.68 percent as of June 30 is about half of the average for the eight biggest U.S.-based firms including JPMorgan Chase & Co. and Citigroup Inc. It also trails its ratio of 3.01 percent from last year.
• Mexico’s Central Bank Tested by Traders as Peso Falls to Record. The Mexican peso posted the biggest loss among the most-traded currencies as it sank to a record, testing the central bank’s willingness to intervene. The peso weakened 0.7 percent as of 12:24 p.m. in New York and traded as low as 19.8723 per dollar Tuesday, missing out on the gains in most emerging-market currencies as policy makers in the U.S. and Japan entered their final stretch before announcing decisions on their benchmark rates. The currency has plunged 5.2 percent this month, more than twice as much as the second-biggest loser among 31 major currencies tracked by Bloomberg.
• European Stocks Little Changed as Investors Focus on Fed Meeting. (video) European stocks were little changed as investors speculated on the direction of Federal Reserve monetary policy at its meeting this week. The Stoxx Europe 600 Index fell 0.1 percent to 341.01 at the close of trading, erasing earlier gains of as much as 0.4 percent. The Fed’s policy decision is in focus for indications of the health of the world’s biggest economy and the likely trajectory of interest rates. Economists and investors expect the central bank to keep borrowing costs unchanged. December is the earliest month with at least even odds of a hike.
• Iran Committed to Building Oil-Market Consensus, OPEC Head Says. Iran is committed to building a consensus on stabilizing the oil market between OPEC and non-member countries, the group’s new Secretary-General Mohammed Barkindo said. Iranian Oil Minister Bijan Namdar Zanganeh and President Hassan Rouhani “assured me that Iran will do everything possible in joining hands with members within the OPEC group as well as outside OPEC," Barkindo said in a Bloomberg Television interview in Rome. "I am quite satisfied with the assurances" given during talks this month in Tehran, he said.
• OPEC May Hold Formal Meeting in Algiers as Oil Glut Persists. OPEC may turn its planned informal meeting in Algiers next week into a formal session as it seeks ways with other producers to cut crude supplies by 1 million barrels a day to re-balance markets and stabilize prices, Algerian Energy Minister Noureddine Bouterfa said. OPEC will hold an informal meeting after the closing session of the International Energy Forum conference in Algiers on the afternoon of Sept. 28, Bouterfa said on public radio. Depending on discussions until then or even during the informal session, OPEC ministers, since all will be present, can transform the gathering into an extraordinary meeting, he said.

Wall Street Journal:

• SEC Investigating Exxon on Valuing of Assets, Accounting Practices. Probe also examining how company values projects because of climate change.

Fox News:

• Bombing suspect's father says he called FBI on his violent son 2 years ago. (video)
• Fox News Electoral Scorecard: 2016 race tightens in key battlegrounds.
• Survivors recount horror of Minnesota mall stabbing attack.

CNBC:

• North Korea nuke test sparks new worries for ex-diplomats. North Korea's nuclear test this month was its fifth in only 10 years, but technological advances by the isolated communist state have former diplomats concerned that the latest blast is anything but more of the same.

Zero Hedge:

• Janet Yellen's "Footnote 8" - The Negative Rate 'Smoking Gun' That Everyone Missed.
• Elizabeth Warren Slams Wells' CEO Stumpf: "You Should Resign, You Should Be Criminally Investigated".
• FBI Lies Again: NYC Bomber Was On FBI "Radar" After All.
• Is This Why Deutsche Bank Is Crashing (Again)?
• Emails Show Hillary Aide Sid Blumenthal Created Obama "Birther" Conspiracy.
• Atlanta Fed's Exuberant Q3 GDP Estimate Tumbles Back To Reality. (graph)
• Soros Is "Investing" $500 Million In Europe's Refugees And Migrants: He Explains Why.
• Hilsenrath Calls It: No Rate Hike Until December.
• Housing Starts Tumble Despite Surging Homebuilder Confidence. (graph)

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Homebuilders -2.2% 2) Hospitals -1.9% 3) Gaming -1.4%

Stocks Falling on Unusual Volume: 

• HNI, BLBD, SBGI, LEN, TSE, PTCT, NXST, SEAS, DKT, MLHR, KNL, IQNT, GPRO, DXB, GTN, SCS, EQIX, DTK, UFPI, AXDX, RETA, GBT, DPLO, SAM, HSNI, TSE, CBS, DPLO and THC

Stocks With Unusual Put Option Activity:

• 1) EWJ 2) DXJ 3) FITB 4) LQD 5) KBH

Stocks With Most Negative News Mentions:

• 1) ASNA 2) IQNT 3) BAS 4) SEAS 5) HDS

Charts:

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