Bull Radar

Style Outperformer:

• Large-Cap Growth -.1%

Sector Outperformers:

• 1) Gold & Silver +5.6% 2) HMOs +1.2% 3) Internet +1.1%

Stocks Rising on Unusual Volume:

• CEB, HALO, ALXN, AMBA, MAT, PVG, TAHO, NTES and SONC

Stocks With Unusual Call Option Activity:

• 1) COH 2) ALXN 3) KSS 4) JWN 5) VIAB

Stocks With Most Positive News Mentions:

• 1) RIG 2) AMTD 3) MA 4) CMG 5) TWLO

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.2% Above 100-Day Average
• 2 Sectors Rising, 8 Sectors Declining
• 47.5% of Issues Advancing, 49.3% Declining
• 104 New 52-Week Highs, 4 New Lows
• 60.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.8%
• Vix 11.7 -1.4%
• Total Put/Call .97 +11.5%
• TRIN/Arms 1.03 +1.4%

Thursday Watch

Evening Headlines

Bloomberg:

• China's Traders Brace for Tighter Liquidity. (video)
• China’s Rural Poor Bear the Brunt of the Nation’s Aging Crisis. 
• Yen Extends Gains as Stock Rally Fades After Fed: Markets Wrap. The yen extended gains and a stock rally fizzled as traders in Asia digested minutes from the Federal Reserve’s December meeting. Crude oil maintained an advance. Japan’s currency rose 0.5 percent against the dollar and the Bloomberg Dollar Index retreated for a second day. Equity indexes in Japan swung between gains and losses, while Australian shares advanced and South Korea’s Kospi index dropped. The S&P 500 Index rose a second day overnight and the greenback fell as the Fed minutes highlighted concerns about the impact of a strong currency on the new U.S. administration’s stimulatory economic policies. The MSCI Asia Pacific Index rose 0.6 percent as of 10 a.m. in Tokyo. The Topix index added 0.1 percent and Australia’s S&P/ASX 200 Index advanced 0.3 percent. South Korea’s Kospi index slid 0.1 percent and New Zealand’s S&P/NZX 50 Index lost 0.2 percent.

Wall Street Journal:

• Donald Trump Plans Revamp of Top U.S. Spy Agency. President-elect works with advisers on restructuring Office of the Director of National Intelligence.
• Clients Want Hedge Funds but Not Their Big Bets. Institutional investors discourage the high-stakes punts for which hedge funds became famous.

Fox News:

• 'Guccifer' casts doubt on Obama administration's Russia hacking claims.

CNBC:

• Iraq, OPEC’s 2nd biggest producer, may have hard time cutting oil production. (video)

Zero Hedge:

• Trump Is Working On A Plan To Restructure, Pare Back The CIA And America's Top Spy Agency.
• In Massive Blow To California Unions, A Second Court Rules That Pension Benefits Can Be Reduced.
• House Passes Bill To Undo Months Of Obama Regulations With Just One Vote.
• This "Rogue" Oil & Gas Nation Just Set A Slew Of Output Records. (graph)
• No Mr. Soros, America Needs Defending.
• What Happens Next? (graph)
• December Auto Sales Jump To Record 18.4 Million SAAR As Light Truck Sales Surge. (graph)
• Crude Confusion As Gasoline, Distillates See Biggest Inventory Build In A Year.
• Macy's(M), Kohl's(KSS) Crash After Reporting Abysmal Holiday Sales; Cut Guidance; Announce Mass Layoffs, Store Closures.
• Global Debt Hits 325% Of World GDP, Rises To Record $217 Trillion. (graph)
• Fed Fails To Deliver Dow 20k But Bitcoin Hits Record High. (graph)

Busines Insider:

• Sears(SHLD) is closing 150 stores — here's the full list.
• Amazon's(AMZN) rumored bid for American Apparel could solve its Trump problem in one master stroke.
• Mexico spooked by Trump's leverage in keeping jobs in the US after Ford's pivot.
• From commodities to Bitcoin, Chinese speculators are looking to escape the weakening yuan.
• Macy's(M) is closing 68 stores — here's where they will shut down. (video)

Bild:

• German Economists Want Exit From Loose EU Monetary Policy. Rising inflation rates in Germany and Europe prompt calls for change in ECB monetary policy, citing comments from German economists.

Night Trading 

• Asian equity indices are -.25% to +.75% on average.
• Asia Ex-Japan Investment Grade CDS Index 116.25 -2.5 basis points.
• Asia Pacific Sovereign CDS Index 35.0 -.75 basis point.
• Bloomberg Emerging Markets Currency Index 69.87 +.15%. 
• S&P 500 futures -.04%. 
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (STZ)/1.71
• (MON)/-.02
• (SCHN)/-.04
• (WBA)/1.09
• (HELE)/1.89
• (PSMT)/.82

Economic Releases
7:30 am EST

• Challenger Job Cuts YoY for December.     

8:15 am EST:

• The ADP Employment Change for December is estimated to fall to 175K versus 216K in November.

8:30 am EST

• Initial Jobless Claims for last week are estimated to fall to 260K versus 265K the prior week. 
• Continuing Claims are estimated to fall to 2051K versus 2102K prior. 

9:45 am EST

• Final Markit US Services PMI for December is estimated at 53.4 versus a prior estimate of 53.4.

10:00 am EST

• ISM Non-Manufacturing for December is estimated to fall to 56.8 versus 57.2 in November. 

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,712,890 barrels versus a +614,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +1,206,560 barrels versus a -1,593,000 barrel decline the prior week. Distillate inventories are estimated to rise by +349,560 barrels versus a -1,881,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.41% versus a -.5% decline prior. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The UK Services PMI report, Australia Trade balance report, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, Goldman Sachs Energy Conference, CES 2017 and the (LB) Dec. Sales report could also impact trading today.

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

Stocks Higher into Final Hour on Economic Optimism, Oil Gain, Short-Covering, Healthcare/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Slightly Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 11.95 -7.0%

• Euro/Yen Carry Return Index 128.52 +.43%

• Emerging Markets Currency Volatility(VXY) 11.02 -1.61%

• S&P 500 Implied Correlation 46.90 -4.6%

• ISE Sentiment Index 83.0 -25.23%
  

• Total Put/Call .87 -11.22%

• NYSE Arms 1.20 +41.98%

Credit Investor Angst:

• North American Investment Grade CDS Index 63.50 -4.23%
  

• America Energy Sector High-Yield CDS Index 430.0 -4.60%

• 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 35.05 -1.81%

• Emerging Market CDS Index 232.74 -2.89%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.79 -.12%

• 2-Year Swap Spread 24.25 -.75 basis point

• TED Spread 47.0 -3.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -46.25 +3.75 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.71 +.45%
• 3-Month T-Bill Yield .53% +3.0 basis points

• Yield Curve 122.0 -1.0 basis point
  

• China Import Iron Ore Spot $77.25/Metric Tonne -.85%

• Citi US Economic Surprise Index 25.50 +.8 point

• Citi Eurozone Economic Surprise Index 60.60 +10.2 basis points

• Citi Emerging Markets Economic Surprise Index 25.60 -.1 point

• 10-Year TIPS Spread 2.00% unch.
• 33.1% chance of Fed rate hike at March 15 meeting, 46.4% chance at May 3 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +104 open in Japan 
• China A50 Futures: Indicating +59 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• China Bank Sells More of Riskiest Wealth Management Products. A Chinese bank preparing to list in Hong Kong said that it had ramped up sales of its riskiest wealth management products as investors sought higher returns. Guangzhou Rural Commercial Bank Co.’s preliminary listing document gave the latest insight into the nation’s 26.3 trillion yuan ($3.8 trillion) market for the investment products. The bank in Guangdong province sold 93 billion yuan of “level 5” products -- the highest of its five risk categories -- in the nine months ended September, according to its filing to Hong Kong’s stock exchange Wednesday. That amounted to a third of the bank’s sales of the products, up from 6 percent in 2015.
• Eurasia Group's Medeiros Warns of China on the Edge. (video)
• Tencent Shares Losing $35 Billion Shows Depth of China Pessimism. For a clue on how bearish foreign investors have become about Chinese stocks, take a look at Tencent Holdings Ltd. The Shenzhen-based technology giant has tumbled 13 percent from its September record, wiping $35 billion off the value of its shares, as overseas funds pulled money from Hong Kong and Chinese equities. The company’s large weighting on the Hang Seng Index -- at 10 percent -- helped make Hong Kong’s benchmark stock gauge one of the world’s worst performers last quarter.
• Mexico City Goes On Sale With Big Macs at Half Sao Paulo's Price. Trump-Induced Peso Plunge Puts Big Mac at $2.
• European Stocks Halt 3-Day Advance After Entering Bull Market. European stocks were little changed, halting a new-year rally that was boosted by industries seen as benefiting the most from stronger economic growth. The Stoxx Europe 600 Index fell 0.1 percent at the close, paring an intraday slide of as much as 0.5 percent. Commodity producers were among the worst performers, after helping propel the benchmark into a bull market on Tuesday. Next Plc dragged retailers lower, down 14 percent after lowering its annual profit forecast and predicting a difficult year ahead.
• Top Iron Ore Forecaster RBC Says Prices Will Pull Back This Year. Iron ore prices are primed for a retreat this year after surging in 2016, according to RBC Capital Markets, the most accurate forecaster for the commodity in the final quarter of last year. “We believe iron ore prices are not sustainable at current levels and expect a pullback in 2017,” RBC analysts wrote in a report received on Wednesday. The firm placed first in predicting prices, according to data compiled by Bloomberg.
• Harvard Academic Sees Debt Rout Worse Than 1994 ‘Bond Massacre’. If you thought you had already read the gloomiest possible prognosis for bonds, wait until you read this one. Paul Schmelzing, a PhD candidate at Harvard University and a visiting scholar at the Bank of England, said if the latest bond market bubble bursts, it will be worse than in 1994 when global government bonds suffered the biggest annual loss on record.
• S&P 500 Bull Market Is Getting Old, UBS Technical Analysts Warn. (video)

Wall Street Journal:

• How Republicans Might Replace Obamacare.

Fox News:

• Holder hired to help California fight Trump administration. (video)

CNBC:

• Fed minutes explain why officials see three rate hikes in 2017. (video)
• CBS joins Hulu's upcoming livestreaming TV service. (video)
• Top OPEC members were putting 'pedal to the metal' ahead of planned output cuts. (video)

Zero Hedge:

• WikiLeaks To Sue CNN For Defamation.
• FOMC Minutes Show Fed Fearful Of Fiscal Policy Overshoot: "May Raise Rates Faster".
• Obamacare Repeal Clears First Hurdle.
• 3M LIBOR Tops 1.00% For First Time Since 2009. (graph)
• Bitcoin Nears Parity With Gold. (graph)
• December Auto Sales Exceed Estimates As SAAR Reaches Record Highs. (graph)
• Restaurants To Eliminate More Waiters In Response To Minimum Wage Hike.
• Mortgage "Refi Boom" Crashes To Lehman Lows. (graph)
• Peso Plunges To Record Low After Trump Tweet. (graph)
• US Ends 2016 With $19.98 Trillion In Federal Debt; Up $1,054,647,941,626.91.
• Wikileaks Offers $20,000 Reward For Info On Obama Admin Destroying Records.
• Art Cashin On The "Multiple Personalities" Of 2017's First Market Session.
• Marine Le Pen Wants France Out Of The Euro, Will Redenominate French Debt In New Currency.
• Goldman(GS)-Affiliated Wall Street Lawyer Is Trump's Top Candidate For SEC Chair.

Business Insider:

• PAUL RYAN: Assange is 'a sycophant for Russia'.