Bear Radar

Style Underperformer:

• Large-Cap Value +.4%

Sector Underperformers:

• 1) Energy -.4% 2) HMOs -.2% 3) Utilities -.1%

Stocks Falling on Unusual Volume: 

• IDXX, ABCO, DPM, ENSG, BTI, KSU, UNF, WTS, EROS, AMC, LIVE, RAI, MPC, VLO, OMCL and CLCD

Stocks With Unusual Put Option Activity:

• 1) JNK 2) RAI 3) GDXJ 4) JWN 5) KSS

Stocks With Most Negative News Mentions:

• 1) ISRG 2) AMC 3) ENSG 4) ANTM 5) ADPT

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.4%

Sector Outperformers:

• 1) Hospitals +5.7% 2) Biotech +2.3% 3) I-Banks +2.3%

Stocks Rising on Unusual Volume:

• WTW, SHAK, RHT, ANET, TSLA, ACAD, PCRX, BX, F, HTZ, APO, DPLO and INSY

Stocks With Unusual Call Option Activity:

• 1) STZ 2) THC 3) CHTR 4) WTW 5) XRX

Stocks With Most Positive News Mentions:

• 1) WTW 2) SPN 3) PTEN 4) CRL 5) STT

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -2.1% Below 100-Day Average
• 7 Sectors Rising, 3 Sectors Declining
• 80.3% of Issues Advancing, 17.8% Declining
• 111 New 52-Week Highs, 2 New Lows
• 58.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.5%
• Vix 12.2 -5.3%
• Total Put/Call .98 unch.
• TRIN/Arms 1.21 +43.7%

Wednesday Watch

Evening Headlines

Bloomberg:

• The Biggest Geopolitical Risks Facing Asia in 2017. (video) 
• Asia’s Richest Families Are Abandoning ‘Complacent’ Hedge Funds. For Michael Preiss, whose firm oversees $1.9 billion mainly for wealthy Asian families, adding hedge funds to his clients’ portfolios was an easy sell some years ago. Not anymore. The executive director at the Singapore-based Taurus Wealth Advisors Pte multi-family office said his clients are disappointed with mediocre hedge fund returns and are balking at high fees, prompting them to shift to private equity.
• A Hard Brexit Looms Large With Resignation of U.K. Envoy to EU. The chances that the U.K. will quit the single market and revert to a tariffs regime have grown more likely with the resignation of the British envoy to the European Union, an experienced Brussels insider who was reviled by the leading Brexit supporters. Backers of a clean break from the EU cheered the departure of Ivan Rogers as a sign the U.K. government is committed to regaining complete control of immigration, laws and budget even if that means fraying trade ties. His successor will play a leading role in Prime Minister Theresa May’s negotiations with the bloc and the choice will offer further clues on the direction of talks. “Britain’s partners will take this as a sign that May’s government is heading for a hard Brexit which puts sovereignty ahead of economic integration with the EU,” said Charles Grant, director of the Centre for European Reform.
• Japanese Stocks Lead Asian Equity Gains, Oil Rises: Markets Wrap. Stocks in Asia climbed after data fueled confidence in the U.S. economy, and as equity traders in Tokyo returned from holidays with the yen nursing a three-day slump. Japanese equities led gains with the Topix index climbing more than 1 percent on its first trading day of 2017. The S&P 500 Index had its biggest gain in four weeks and the dollar extended gains as U.S. manufacturing expanded. Oil recovered some of Tuesday’s slump ahead of U.S. stockpile data. Australian and South Korean shares were flat. A global equity rally has extended into the new year as data from the U.S., China and Europe boosted optimism for global growth. Traders look to be shrugging off doom sayers such as former Treasury Secretary Lawrence Summers, who warned that President-elect Donald Trump’s policies might have unintended consequences for the world’s largest economy, and analysts at Eurasia Group who said that America’s 45th president could contribute to a level of global instability not seen since World War II. The MSCI Asia Pacific Index gains 0.7 percent as of 9:11 a.m. Tokyo time. New Zealand’s S&P/NZX 50 Index rises 0.8 percent, with Australia’s S&P/ASX 200 Index and South Korea’s Kospi index little changed.
• Mnuchin Declines Reply to Brown’s Letter Before Panel Review. Treasury Secretary nominee Steven Mnuchin has declined to answer questions from a Democratic senator about his views on financial regulations, sanctions and his time as head of a bank accused of unfair foreclosure practices.
• Mnuchin’s Bank Broke Foreclosure Rules, Leaked AG’s Memo Says. A bank run by Steven Mnuchin, President-Elect Donald Trump’s pick to be Treasury secretary, may have engaged in “widespread misconduct” while foreclosing on homeowners, according to a leaked 2013 memo written by lawyers in the California attorney general’s office.

Wall Street Journal:

• China Inc.’s Large Dollar Debts Fuel Beijing’s Efforts to Curb Yuan Plunge. Concerns grow that companies with dollar debts will rush to repay them early, further pressuring the yuan.
• Senate Moves to Dismantle Health Law. GOP-led chamber sets aggressive timeline for repealing Barack Obama’s Affordable Care Act that cut the ranks of the uninsured.

Fox News:

• AFL-CIO, House Dems pledge to help Trump in push to rework NAFTA. (video)

CNBC:

• Sullivan lawyer Jay Clayton seen as Trump's top choice for SEC. 
• Four tech themes will be bigger than internet and mobile, Gene Munster says. (video)

Zero Hedge: 

• Trump Tells DHS To Prepare For Border Wall Construction.
• After Getting Almost Nothing Right In 2016, Here Are Byron Wien's "Ten Surprises" For 2017.
• The War Against Alternative Information.
• Luxury Apartment Bust Spreads To Main Street.
• OPEC Deal Non-Compliance Begins: Iraq Accuses Kurds Of Pumping More Than Permitted.
• Mexico Responds To Ford's Decision To Scrap Its New Plant.
• "The World Has Materially Changed": Why Morgan Stanley Began To Fade The Trump Rally.
• Why Trump's 4% GDP Will Remain Elusive.
• Tesla(TSLA) Reports Big Miss In Car Deliveries For The Quarter And 2016.
• Dow 20k Disappoints For 14th Day As Crude Crumbles, Peso Pounded. (graph)

JOC.com: 

• Container ship fleet growth expected to accelerate in 2017. The global container ship fleet will grow around 3.1 percent in 2017, a level of growth faster than 2016, and one that may or may not increase the gap between container shipping demand and supply, according to shipowner association Bimco.

Telegraph:

• Nothing could spook the markets in 2016. Was it the calm before the storm in 2017?

Night Trading 

• Asian equity indices are +.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 118.75 +4.5 basis points.
• Asia Pacific Sovereign CDS Index 35.75 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 69.41 -.29%. 
• S&P 500 futures +.08%. 
• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (RECN)/.19
• (SONC)/.21

Economic Releases
2:00 pm EST

• The FOMC Meeting Minutes from Dec. 14.     

Afternoon:

• Total Vehicle Sales for December are estimated to fall to 17.7m versus 17.75m in November.

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Eurozone Services PMI, CES 2017, weekly MBA mortgage applications report and the (F) conference call could also impact trading today.

BOTTOM LINE:  Asian indices are higher, boosted by industrial 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 Modestly Higher into Afternoon on Economic Optimism, Seasonality, Technical Buying, Telecom/Metals & Mining Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.48 -3.99%

• Euro/Yen Carry Return Index 127.93 -.35%

• Emerging Markets Currency Volatility(VXY) 11.15 -2.19%

• S&P 500 Implied Correlation 49.33 -3.80%

• ISE Sentiment Index 167.0 +173.77%
  

• Total Put/Call .97 -7.62%

• NYSE Arms .82 -51.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 66.44 -1.42%
  

• America Energy Sector High-Yield CDS Index 449.0 -2.04%

• European Financial Sector CDS Index 89.33 -4.40%

• Western Europe Sovereign Debt CDS Index 20.08 -3.69%

• Asia Pacific Sovereign Debt CDS Index 35.70 -1.0%

• Emerging Market CDS Index 239.19 -1.18%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.95 -.23%

• 2-Year Swap Spread 25.0 -1.0 basis point

• TED Spread 50.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -50.0 +6.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.49 -.16%
• 3-Month T-Bill Yield .50% unch.

• Yield Curve 123.0 -3.0 basis points
  

• China Import Iron Ore Spot $77.91/Metric Tonne -1.22%

• Citi US Economic Surprise Index 24.70 +1.4 points

• Citi Eurozone Economic Surprise Index 50.40 -2.7 basis points

• Citi Emerging Markets Economic Surprise Index 25.70 +7.6 points

• 10-Year TIPS Spread 2.00% +3.0 basis points
• 36.6% chance of Fed rate hike at March 15 meeting, 47.8% chance at May 3 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +116 open in Japan 
• China A50 Futures: Indicating +29 open in China

• DAX Futures: Indicating -31 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth +.3%

Sector Underperformers:

• 1) Coal -4.9% 2) Restaurants -1.3% 3) HMOs -1.0%

Stocks Falling on Unusual Volume: 

• MTZ, VYGR, CLVS, GCP, HDB, OTTR, NGG, HUM, HHC, MIME, NVDA, FOXF, TWLO, MDT, COG, HURN, HIIQ, AET, BDX, KATE, LVS, GBX, CC, IGOV, ARMK, DSW and RRC

Stocks With Unusual Put Option Activity:

• 1) VZ 2) PSX 3) LB 4) XLB 5) JCP

Stocks With Most Negative News Mentions:

• 1) FOXF 2) MLHR 3) BDX 4) BRKS 5) MDT

Charts:

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