Bear Radar

Style Underperformer:

• Mid-Cap Value -.3%

Sector Underperformers:

• 1) Gold & Silver -2.5% 2) Homebuliding -2.2% 3) Steel -2.1%

Stocks Falling on Unusual Volume: 

• USAC, DLTH, XTLY, RH, RETA, SWFT, NCS, CQH, FOX, CS, UHS, HIIQ, NOAH, IDT, DB, SWKS, FRAN, LITE, SHLD, GS, UBS, AFL, GGAL, IPHI, CVI, WERN, TASR, FRED, PI and NCS

Stocks With Unusual Put Option Activity:

• 1) PAY 2) RH 3) STZ 4) LVS 5) SWKS

Stocks With Most Negative News Mentions:

• 1) DTEA 2) DLTH 3) IHRT 4) OSK 5) CDW

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.4%

Sector Outperformers:

• 1) Gaming +2.4% 2) Drugs +1.8% 3) Biotech +1.3%

Stocks Rising on Unusual Volume:

• SWC, EBS, ATKR, AVGO, BIIB, ATW, INVN, VDSI, OPHT, TLYS, MTN, VRNT and PEGI

Stocks With Unusual Call Option Activity:

• 1) CPN 2) FOXA 3) ARNC 4) CAG 5) FGP

Stocks With Most Positive News Mentions:

• 1) VAC 2) AVGO 3) UAL 4) WNC 5) LEE

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
• 54.8% of Issues Advancing, 41.3% Declining
• 258 New 52-Week Highs, 5 New Lows
• 60.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.7%
• Vix 12.2 -3.6%
• Total Put/Call .74 +1.4%
• TRIN/Arms 1.14 +26.4%

Friday Watch

Evening Headlines

Bloomberg:

• U.S. Chamber Said to Tell Mexico It Will Defend Nafta Deal. The U.S. Chamber of Commerce told a closed-door gathering of Mexican and American corporate and government leaders that it is aiming to keep Donald Trump from fulfilling his campaign threat to tear up the North American Free Trade Agreement, according to three people with direct knowledge of the matter. Tom Donohue, head of the biggest U.S. business lobbying organization, told members of the U.S.-Mexico CEO Dialogue in Mexico City on Wednesday not to panic and to wait and see what the president-elect proposes once he takes office, said the three people, who spoke about the private event on condition of anonymity. The audience included cabinet officials from President Enrique Pena Nieto’s administration, U.S. Secretary of Commerce Penny Pritzker, and more than 100 business and government leaders.
• Mexico’s Peso Problems Are a Warning Sign for Global Investors. The world has never been so invested in Mexico, and so Mexico has never posed a bigger potential threat to the world. With a little more than six weeks before Donald Trump takes over with an agenda that could batter Latin America’s second-largest economy, Mexico is already showing signs of strain. Inflation is bouncing back, and traders bet it will only get worse; the peso has plummeted to record lows, and top analysts predict more pain; the government has lowered its growth forecast for four straight years, and Mexico is on the verge of a credit-rating cut just as Agustin Carstens gears up to leave the central bank after seven years at the helm.
• Rio’s Christ Statue Asking for Alms Amid Recession. It’s survived decades of wind, rain and lightning strikes, but now Brazil’s iconic Christ the Redeemer statue is suffering from the same elemental problem as the rest of the country: a lack of cash.
• Oil Climbs Above $51 Before Producer Talks as Asian Stocks Swing. Crude oil rose a second day, breaching $51 a barrel in New York before a meeting between OPEC and other major producers on output cuts. Asian stocks fluctuated at the end of their best week since September, while bonds and the Korean won declined. U.S. crude advanced to $51.06 a barrel before talks Saturday in Vienna among the Organization of Petroleum Exporting Countries and 14 other nations. The Asia-Pacific equity benchmark swung as shares in Sydney and Tokyo climbed, while those in South Korea slipped. Bonds from Australia to Japan fell after the European Central Bank pledged to cut bond buying, while at the same time extending quantitative easing until the end of 2017. The won trimmed its biggest weekly advance in two months as the dollar gained ground. About the same number of stocks rose as fell on the MSCI Asia Pacific Index, which was little changed as of 10 a.m. Tokyo time.  

Wall Street Journal:

• ‘Fake News’ Fun House. Journalism’s hall of mirrors.
• A Lawyer for a Lawless EPA. Scott Pruitt can restore respect for the states in environmental policy.

Fox News:

• Make India great again? Fighter jet giants look to move production to India.

MarketWatch:

• This is the ‘most frightening chart’ that Albert Edwards wants investors to see. (graph)

CNBC:

• Market indicator hits extreme levels last seen before plunges in 1929, 2000 and 2008. (video)
• Homeland Security tied to attempted hack of Georgia's election database: Report.
• Get ready for Republican rush of regulation rollback.

Zero Hedge:

• In Unprecedented Move, Dallas Pension System Suspends Withdrawals.
• What Has Gone Wrong With Oil Prices, Debt, & GDP Growth?
• Presenting SocGen's "Most Frightening Credit Chart". (graph)
• Lame-Duck Congress Looking To Ban Online Gambling.
• Hillary Reemerges, Slams "Dangerous Epidemic" Of Fake News.
• Life Expectancy In U.S. Drops For The First Time In Decades - "This Is A Big Deal".
• Restoration Hardware(RH) Implodes After More Terrible Guidance, Blames Election.
• VIX & Stocks Surge For Second Day Amid Bond Bloodbath. (graph)

Business Insider:

• Americans from all corners of the economy are loving life since Trump's election.
• Something interesting — and possibly alarming — is happening with Tesla(TSLA) stock.
• These photos captured the defining moments of decorated astronaut John Glenn's life and career.
• Rising interest rates are a bad omen for stocks.
• China is about to hit Macau hard, and casino stocks are getting spanked.
• The US is $19.9 trillion in debt — here are the countries we owe the most. (video)

Telegraph:

• Europe's comfort blanket is being pulled away.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 114.25 -4.0 basis points.
• Asia Pacific Sovereign CDS Index 36.25 -1.0 basis point.
• Bloomberg Emerging Markets Currency Index 69.95 -.15%. 
• S&P 500 futures +.02%. 
• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (MTN)/-1.56

Economic Releases
10:00 am EST

• Wholesale Inventories MoM Final for October are estimated to fall -.4% versus a -.4% prior estimate.
• Wholesale Trade Sales MoM for October are estimated to rise +.7% versus a +.2% gain in September.
• Preliminary Univ. of Mich. Consumer Sentiment for December is estimated to rise to 94.5 versus 93.8 in November.  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The USDA WASDE Report, German Trade Balance report and the (SWFT) Mid-Fourth Quarter Conference Call could also impact trading today.

BOTTOM LINE:  Asian indices are most lower, weighed down by industrial and technology 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 Slightly Higher into Final Hour on Economic Optimism, Yen Weakness, Oil Gain, Financial/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Slightly Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 12.64 +3.44%

• Euro/Yen Carry Return Index 126.44 -1.03%

• Emerging Markets Currency Volatility(VXY) 11.01 +.73%

• S&P 500 Implied Correlation 51.01 +1.1%

• ISE Sentiment Index 123.0 +86.4%
  

• Total Put/Call .70 -16.7%

• NYSE Arms 1.03 +15.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 68.39 +.01%
  

• America Energy Sector High-Yield CDS Index 466.0 -3.02%

• European Financial Sector CDS Index 96.78 -2.73%

• Western Europe Sovereign Debt CDS Index 23.17 +.72%

• Asia Pacific Sovereign Debt CDS Index 36.11 -3.03%

• Emerging Market CDS Index 248.89 +.36%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.98 +.01%

• 2-Year Swap Spread 23.0 +.5 basis point

• TED Spread 44.75 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -50.0 +1.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.04 -.41%
• 3-Month T-Bill Yield .50% unch.

• Yield Curve 129.0 +5.0 basis points
  

• China Import Iron Ore Spot $81.78/Metric Tonne -.57%

• Citi US Economic Surprise Index 29.50 -.6 point

• Citi Eurozone Economic Surprise Index 64.60 unch.

• Citi Emerging Markets Economic Surprise Index 7.3 +3.1 points

• 10-Year TIPS Spread 2.0% +3.0 basis points
• 100.0% chance of Fed rate hike at Feb. 1 meeting, 100.0% chance at March 15 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +125 open in Japan 
• China A50 Futures: Indicating -1 open in China

• DAX Futures: Indicating -5 open in Germany

Portfolio: 

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +14.8% Above 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 53.8% of Issues Advancing, 43.7% Declining
• 391 New 52-Week Highs, 12 New Lows
• 56.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.6%
• Vix 12.5 +2.1%
• Total Put/Call .71 -15.6%
• TRIN/Arms 1.16 +30.9%