Bull Radar

Style Outperformer:

• Large-Cap Growth -.4%

Sector Outperformers:

• 1) Gaming +1.1% 2) Retail unch. 3) Drugs -.1%

Stocks Rising on Unusual Volume:

• AIRM, MGI, OFIX, EDIT, WIFI, VRTU, GDOT, MOMO, WU, REG, CVGW, PUK, JUNO, ARRS, TSLA, ETH and CTB

Stocks With Unusual Call Option Activity:

• 1) BHI 2) SNAP 3) DISH 4) DAL 5) SCHW

Stocks With Most Positive News Mentions:

• 1) ARRS 2) GDOT 3) CTB 4) DKS 5) INTC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -11.9% Below 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 19.2% of Issues Advancing, 76.7% Declining
• 27 New 52-Week Highs, 53 New Lows
• 54.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.2%
• Vix 12.2 +7.5%
• Total Put/Call 1.13 +22.8%
• TRIN/Arms 1.36 +34.4%

Tuesday Watch

Evening Headlines

Bloomberg:

• Chinese Leaders Back Bankruptcies for Unwanted Zombie Companies. China is getting serious about dealing with so-called zombie companies through court-led bankruptcies as it seeks to cut overcapacity in industries and boost economic growth. The country’s Chief Justice Zhou Qiang said at the National People’s Congress Sunday that authorities will improve the country’s judicial system for dealing with bankruptcies in 2017 to support those goals. Chinese authorities are devoting more resources to tackle corporate restructurings and bankruptcies as bad debts at banks soared to an 11-year high in 2016 and bond defaults more than quadrupled in the period.

• Australia Is 'Prepared to Do More' to Slow Housing, RBA Says. Australia could further curb mortgage lending to investors as the impact of earlier measures wanes and Sydney and Melbourne house prices keep surging, Reserve Bank Assistant Governor Michele Bullock said. “There is no doubt that the actions did address some of the risks,” she said in a Bloomberg Address in Sydney. “While the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time. We are continuing to monitor their ongoing effects and are prepared to do more if needed.”

• Asian Stocks Mixed Before Fed as Yen Fluctuates. Asian stocks began the session mixed with Treasuries trading near the highest level this year as investors anticipated a near-certain rate hike from the Federal Reserve this week. Japan’s Topix index slipped for the first time in four days as the yen fluctuated, while South Korean equities advanced. The yield on 10-year Treasuries remained at around 2.62 percent. The pound held steady after the U.K. parliament paved the way for Prime Minister Theresa May to begin two years of talks with the European Union over Britain’s exit. Oil extended its losing streak to a seventh straight session. The yen held at 114.82 per dollar as of 9:40 a.m. in Tokyo, after swinging between gains and losses of less than 0.1 percent. The Bloomberg Dollar Spot Index rose less than 0.1 percent. The euro was little changed at $1.0655, holding Monday’s 0.2 percent retreat. The Topix index fell 0.2 percent after closing Monday at the highest since December 2015. Australia’s S&P/ASX 200 Index was little changed and South Korea’s Kospi rose 0.4 percent after jumping 1 percent in the previous session. The yield on 10-year Australian government bonds rose one basis points to 2.94 percent.

• Flights Grounded and Power Prices Soar Ahead of U.S. Northeast Storm. Grounded flights and soaring power prices roiled the Northeast U.S. as a late-winter storm prepared to spin up the Atlantic Coast, threatening New York with an overnight blizzard, postponing German Chancellor Angela Merkel’s trip to Washington and promising snow by the foot in Boston. As many as 19 inches (48 centimeters) could land in New York, the National Weather Service said, with the white stuff starting to fall after midnight and ramping up to rates of 2 to 4 inches per hour. New York and Boston shuttered public schools Tuesday in anticipation.

• How Investors Are Positioning Ahead of the Fed Meeting. (video)

• Short Bets on Snap(SNAP) Are Cheap Thanks to Retail Investors.

• Regulator Proposes Walling Off Wall Street Investment Banks. President Donald Trump has worried Wall Street by promising to bring back a Depression-era law that separated investment banking from consumer lending, but he hasn’t offered details on what his modern version might look like. Now a key regulator may be filling the void.

Wall Street Journal:

• CBO’s Prophecies, Demystified. The budget gnomes tend to underestimate market incentives, especially in health care.

• More Bank Capital Could Kill the Economy. Regulators sparked the Great Recession with a credit crunch. Now they want to do it again.

• Trump Gave CIA Power to Launch Drone Strikes. New authority departs from Obama-era policy under which only the Pentagon conducted the operations.

• U.S. 10-Year Bond Yield Closes at Highest Since September 2014. Yield topples its mid-December peak of 2.6% as investors bet the fed will raise rates this week.

Fox News:

• ObamaCare repeal analysis: Millions would drop coverage, costs would fall under bill. (video)

CNBC:

• OPEC unity breaking down amid 'perfect storm' for crude oil sentiment, says Helima Croft. (video)

• Trump signs executive order aiming to trim government costs.

• After-hours buzz: VRX, INCY, COUP & more.

• US shale drillers set to raise oil output by 109,000 barrels a day in April. (video)

Zero Hedge:

• US Delta Force, SEAL Team 6 Prepare To Take Out Kim Jong-Un, Practice Tactical North Korea "Infiltration".

• White House Slams CBO Forecast: "It's Just Not Believable; The CBO Simply Has It Wrong".

• Small-Caps Sharply Underperform S&P As EPS Downgrade Concerns Grow. (graph)

• Turkey Says "Migrant Deal Has Ended", May Unleash Millions Of Refugees.

• Risk-Ignorance Reaches 23 Year High As Short Interest Hits Record Low. (graph)

• U.K. Parliament Gives Theresa May Approval To Start Brexit.

• When It Comes To Wall Street, Preet Bharara Is No Hero.

• Ackman Capitulates: Sells Entire Valeant Stake; Stock Tumbles.

• CBO: 24 Million Would Lose Health Insurance Under GOP Bill By 2026.

• 12 Million Americans Are About To Get An Artificial Boost To Their FICO Scores.

• Risk Parity Plunge Continues: Stocks Down, Bonds Down, VIX Down, Fed Up. (graph)

Business Insider:

• Americans cutting down on eating out.

Night Trading 

• Asian equity indices are unch. to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 93.75 -1.25 basis points.

• Asia Pacific Sovereign CDS Index 27.75 +.25 basis point

• Bloomberg Emerging Markets Currency Index 70.93 -.01%. 

• S&P 500 futures -.11%. 

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (DSW)/.16

• (HDS)/.43

Economic Releases 
6:00 am EST

• The NFIB Small Business Optimism Index for February is estimated to fall to 105.6 versus 105.9 in January. 

8:30 am EST 

• PPI Final Demand MoM for February is estimated to rise +.1% versus a +.6% gain in January.

• PPI Ex Food and Energy MoM for February is estimated to rise +.2% versus a +.4% gain in January. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The Angela Merkel/President Trump White House meeting, China Retail Sales/Industrial Production reports, Eurozone CPI/Industrial Production reports, weekly US retail sales reports, Barclays Healthcare Conference and the BofA Merrill Consumer/Retail Tech Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology 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 Slightly Higher into Final Hour on Less Eurozone Debt Angst, Buyout Speculation, Technical Buying, Gaming/Steel Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 11.45 -1.8%

• Euro/Yen Carry Return Index 127.75 -.15%

• Emerging Markets Currency Volatility(VXY) 9.34 -.85%

• S&P 500 Implied Correlation 44.55 -3.09%

• ISE Sentiment Index 57.0 -44.12%
  

• Total Put/Call .91 +4.6%

• NYSE Arms .91 -5.68%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.03 +1.5%
  

• America Energy Sector High-Yield CDS Index 385.0 +.29%

• European Financial Sector CDS Index 86.95 +.83%

• Western Europe Sovereign Debt CDS Index 14.52 -16.75%

• Asia Pacific Sovereign Debt CDS Index 27.69 -1.0%

• Emerging Market CDS Index 216.11 -.44%
  

• iBoxx Offshore RMB China Corporate High Yield Index 135.79 +.10%

• 2-Year Swap Spread 33.25 -.25 basis point

• TED Spread 37.5 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -21.0 -1.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 70.97 +.02%
• 3-Month T-Bill Yield .74% unch.
  

• Yield Curve 123.0 +1.0 basis point
  

• China Import Iron Ore Spot $88.26/Metric Tonne +1.78%

• Citi US Economic Surprise Index 47.50 -.5 point

• Citi Eurozone Economic Surprise Index 51.40 -6.5 points

• Citi Emerging Markets Economic Surprise Index 48.60 -2.9 points

• 10-Year TIPS Spread 2.02 +1.0 basis point
  
• 100.0% chance of Fed rate hike at May 3 meeting, 100.0% chance at June 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -49 open in Japan 
• China A50 Futures: Indicating -2 open in China

• DAX Futures: Indicating +4 open in Germany

Portfolio: 

• Slightly Lower: On losses in my in my retail sector longs and emerging markets shorts 

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.1%

Sector Underperformers:

• 1) Homebuilding -1.2% 2) Retail -.7% 3) Hospitals -.6%

Stocks Falling on Unusual Volume: 

• NCR, HZN, CMP, TACO, DSW, URBN, GME, DKS and ZGNX

Stocks With Unusual Put Option Activity:

• 1) SNAP 2) AXDX 3) HAIN 4) ETFC 5) LUV

Stocks With Most Negative News Mentions:

• 1) KSS 2) ALXN 3) XL 4) JCI 5) QCOM

Charts:

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