Morning Market Internals

NYSE Composite Index:

• Volume Running +2.6% Above 100-Day Average
• 1 Sector Rising, 9 Sectors Declining
• 27.3% of Issues Advancing, 69.9% Declining
• 54 New 52-Week Highs, 25 New Lows
• 59.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.9%
• Vix 13.5 +3.9%
• Total Put/Call .92 +19.5%
• TRIN/Arms .80 +14.5%

Thursday Watch

Evening Headlines

Bloomberg:

• Central Banks on QE Highway Worry About Running Out of Road. (video) Two of the world’s most accommodative central banks are starting to think about ways out of the bond-buying maze. Long after their U.S. counterpart ended asset purchases and started raising interest rates, the Bank of Japan and the European Central Bank continue to rely on massive quantitative easing in a battle to revive consumer-price growth. But what worked once won’t necessarily work forever. The glow of QE is fading amid negative side effects including financial-stability concerns and reduced earnings for commercial lenders, and especially the simple difficulty of finding sufficient suitable assets to acquire.
• In Housing-Dependent Canada, New Cooling Measures Send Shivers. For almost a decade Canada’s housing market has withstood just about anything that government officials have thrown at it in an attempt to restrain breakneck growth. Measures introduced by Prime Minister Justin Trudeau’s federal government on Monday may finally bring it to heel, analysts and economists say. The fallout from the surprise announcement continued to build on Wednesday as shares of housing stocks tumbled anew, analysts forecast a hit to bank earnings and to an economy that has generated most of its meager growth from housing in recent years.
• Asian Stocks Rise as Weak Yen Bolsters Topix, Energy Shares Gain. Asian stocks rose as Japanese shares advanced after the yen traded near a one-month low and energy producers gained with crude oil. The MSCI Asia Pacific Index climbed 0.4 percent to 140.91 as of 9:07 a.m. in Tokyo and Japan’s Topix index was up 0.7 percent. The yen dropped 0.1 percent to 103.56 against the dollar, the eighth day of decline, as bets increased that the Federal Reserve will tighten policy this year amid signs the world’s biggest economy is gaining momentum.
• Aramco Cuts Pricing for Oil Sales to Asia as Glut Persists. (video) Saudi Arabia, the world’s largest crude exporter, cut pricing for November oil sales to Asia and Northwest Europe and for most grades to other regions amid a global supply glut. State-owned Saudi Arabian Oil Co., known as Saudi Aramco, lowered its official pricing for Arab Light crude to Asia by 25 cents a barrel to 45 cents less than the regional benchmark, it said Wednesday in an e-mailed statement. The company had been expected to widen the discount for shipments of Arab Light by 30 cents a barrel, to 50 cents less than the benchmark for buyers in Asia, according to the median estimate in a Bloomberg survey of six refiners and traders. 
• Saudis Risk More Pain From OPEC Reversal as Oil Rivals Ramp Up. For OPEC’s production deal to work, it was always clear that Saudi Arabia would need to make sacrifices. The world’s largest oil exporter faces the risk the costs will keep getting bigger. To bring daily output to the top end of the 32.5 million to 33 million-barrel range agreed to by the Organization of Petroleum Exporting Countries, the Saudis would only need to make the typical end-of-summer reductions as local demand tapers off, according to Citigroup Inc. If Nigeria and Libya restore production, the kingdom may need to cut twice as much, Petromatrix GmbH estimates. U.S. shale drillers also stand ready to fill any supply gap.
• Twitter(TWTR) Shares Slump After Report Says Google Won’t Make a Bid. Twitter Inc. fell as much as 11 percent in extended trading following a report that Alphabet Inc.’s Google isn’t interested in buying the social-networking service. Technology news website Recode reported Wednesday that Google doesn’t currently plan to make a bid for Twitter, citing unidentified people familiar with the situation. A representative for Google declined to comment on the report. Apple is also unlikely to be a suitor, Recode said, without naming its sources.
• Wal-Mart(WMT) Boosts Stake in JD.com Moving Further Into China. (video) Wal-Mart Stores Inc. is pushing more aggressively onto Alibaba Group Holding Ltd.’s turf. The Bentonville, Arkansas-based retailer boosted its stake in China’s second-largest e-commerce website JD.com Inc., strengthening an alliance to win more market share in the world’s largest online market. Wal-Mart lifted its holding to 10.8 percent from 5.9 percent, according to an amended 13-G filing on Thursday. JD rose 7.5 percent in extended trading in the U.S.

Wall Street Journal:

• Donald Trump Often Made Donations to State Attorneys General Reviewing His Business. Throughout his career, the GOP nominee and others close to him donated to state officials, in particular from New York.
• Dividend Stocks Take a Hit. Utility shares post longest losing streak since 2002 as investors shed holdings; sectors look pricey after this year’s sharp runup.

Fox News:

• Republicans blast FBI for 'astonishing' agreement to destroy Clinton aides' laptops. (video)

CNBC:

• KLA-Tencor(KLAC) and Lam Research(LRCX) to terminate merger. 
• Something rare and bad is happening to the market's earnings. (video)

Zero Hedge:

• The IMF Sounds An Alarm As Global Debt Hits A Record $152 Trillion Or 225% Of World GDP. (graph)
• 5 Stories The Mainstream Media Ignored While Reporting On Kim Kardashian's Robbery.
• Two Thirds Of Young American Adults Live With Their Parents.
• Something Strange Is Going On In Switzerland: "Is Someone Trying To Buy The Swiss National Bank". (graph)
• NY AG Admits Clinton Foundation Failed To Provide 3 Years Of Tax Forms On "Donors And Contributors".
• "It Cannot Be Allowed To Fail": Germany Pursuing "Discrete Talks" With The US Over Deutsche Bank.
• Absurd Thinking.
• Six-Sigma Services-Sector Survey Surge Sparks Buying Panic In Stocks.

Business Insider:

• CONFIRMED: The maker of EpiPen overcharged the government, and lawmakers are furious.
• The US economy shows 'evidence for an imminent recession'.
• Goldman Sachs(GS) is reportedly pulling money from Leon Cooperman's hedge fund.
• Florida could get pummeled twice by the same storm.
• Chinese policymakers face a difficult balancing act.
• The subprime auto market is turning toxic.

Telegraph: 

• Global debt hits all-time high of $152 trillion as IMF warns of world-wide economic stagnation.

Night Trading 

• Asian equity indices are -.25% to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 116.0 -1.0 basis point. 
• Asia Pacific Sovereign CDS Index 32.75 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.85 -.02%. 
• S&P 500 futures -.05%. 
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ISCA)/-.01
• (CMTL)/-.18
• (HELE)/1.14 

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for September. 

8:30 am EST

• Initial Jobless Claims are estimated to rise to 256K versus 254K the prior week.
• Continuing Claims are estimated to rise to 2081K versus 2062K prior.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The German Factory Orders report, Bloomberg weekly Consumer Comfort Index, weekly EIA natural gas inventory report, (LB)  Sept. sales report call, (WMT) annual meeting and the (ATU) investor conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by energy and financial 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 Afternoon on Diminished Global Growth Fears, Oil Bounce, Yen Weakness, Energy/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.89 -5.43%

• Euro/Yen Carry Return Index 121.13 +.60%

• Emerging Markets Currency Volatility(VXY) 10.33 unch.

• S&P 500 Implied Correlation 42.29 -3.29%

• ISE Sentiment Index 150.0 +23.97%
  

• Total Put/Call .64 -28.89%

• NYSE Arms .66 -25.89% 

Credit Investor Angst:

• North American Investment Grade CDS Index 74.64 -1.19%
  

• America Energy Sector High-Yield CDS Index 643.0 -1.54%

• European Financial Sector CDS Index 100.0 -2.91%

• Western Europe Sovereign Debt CDS Index 21.85 -.23%

• Asia Pacific Sovereign Debt CDS Index 32.93 -.74%

• Emerging Market CDS Index 236.62 -.62%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.22 -.01%

• 2-Year Swap Spread 22.25 -.5 basis point

• TED Spread 53.75 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -44.75 +3.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.82 +.25%
• 3-Month T-Bill Yield .32% unch.

• Yield Curve 87.0 +1.0 basis point
  

• China Import Iron Ore Spot $55.86/Metric Tonne unch.

• Citi US Economic Surprise Index .80 +7.7 points

• Citi Eurozone Economic Surprise Index 6.0 +.8 point

• Citi Emerging Markets Economic Surprise Index -11.70 -.2 point

• 10-Year TIPS Spread 1.65% +2.0 basis points
• 62.1% chance of Fed rate hike at Dec. 14 meeting, 65.3% chance at Feb. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +146 open in Japan 
• China A50 Futures: Indicating +40 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio: 

• Slightly Lower: On losses in my index hedges and emerging markets shorts

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +.3%

Sector Underperformers:

• 1) REITs -2.1% 2) Gold & Silver -1.6% 3) Telecom -1.0%

Stocks Falling on Unusual Volume: 

• AYI, AZZ, CRM, LSI, COKE, GIMO, KIM, CBB, ZOES, RPM, ENZL, ANGO, YUM, RRD, CRTO, NXRT, EGP, GOLD, COLL, GNRC, AIV, CUK, DLTR, AAT, STAG, AIV, PMT and ATEN

Stocks With Unusual Put Option Activity:

• 1) CRM 2) TSRO 3) YUM 4) M 5) MU

Stocks With Most Negative News Mentions:

• 1) GIMO 2) ATEN 3) OZM 4) MCRB 5) OKE

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.4%

Sector Outperformers:

• 1) Oil Service +3.3% 2) Banks +1.9% 3) I-Banks +1.9%

Stocks Rising on Unusual Volume:

• ENH, UEPS, SMMT, BEAT, REN, MOMO, ACIA, AAOI, NLNK, KBR, EDIT, CLVS, TPC and SHLD

Stocks With Unusual Call Option Activity:

• 1) CRC 2) GNC 3) K 4) LGF 5) STZ

Stocks With Most Positive News Mentions:

• 1) MDCA 2) ADGE 3) PII 4) GNW 5) RRGB

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +8.5% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 66.1% of Issues Advancing, 31.7% Declining
• 90 New 52-Week Highs, 13 New Lows
• 58.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.0%
• Vix 12.98 -4.8%
• Total Put/Call .59 -34.4%
• TRIN/Arms .64 -28.9%