Bear Radar

Style Underperformer:

• Large-Cap Value -.2%

Sector Underperformers:

• 1) Homebuilders -1.1% 2) Hospitals -.8% 3) Airlines -.4%

Stocks Falling on Unusual Volume: 

• GTY, ULTA, WBMD, FTR, KORS, SNAP, CUDA, REVG and CBB

Stocks With Unusual Put Option Activity:

• 1) RCII 2) FOSL 3) OPK 4) SNAP 5) PEP

Stocks With Most Negative News Mentions:

• 1) SNAP 2) KORS 3) TOL 4) TPH 5) PDCO

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.4%

Sector Outperformers:

• 1) Coal +4.5% 2) Oil Service +1.1% 3) Computer Hardware +1.0%

Stocks Rising on Unusual Volume:

• ARNA, FOLD, MLP, QIQI, NVCR, SIEN, RCII, YRD, SLP, XPO, ENTA, KLIC, TV, BGNE, LVNTA, CLB, AAWW, SQ, CPA, AIR, ALEX, YELP, HTZ, TLLP and RACE

Stocks With Unusual Call Option Activity:

• 1) FOLD 2) YELP 3) TSCO 4) SQ 5) ULTA

Stocks With Most Positive News Mentions:

• 1) ARNA 2) TXMD 3) ESV 4) HPQ 5) AIR

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -6.5% Below 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 46.7% of Issues Advancing, 48.9% Declining
• 63 New 52-Week Highs, 41 New Lows
• 45.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.3%
• Vix 11.3 +1.4%
• Total Put/Call 1.12 +24.4%
• TRIN/Arms .75 -9.7%

Tuesday Watch

Evening Headlines

Bloomberg:

• The $68 Billion Reason Why China May Start Injecting Cash Again. An onslaught of maturing funds may see China’s central bank reaching for the fire hose. The People’s Bank of China hasn’t pumped cash into the financial system via open-market operations for 15 days, the longest drought since March. A combination of curbs on loan issuance, a stronger yuan and seasonality factors meant they didn’t have to, with a rush of liquidity spurring policy makers to do the opposite, and drain funds. But that situation could reverse as soon as this week, when a total of 459.5 billion yuan ($67.6 billion) of funds issued via reverse-repurchase agreements and the PBOC’s medium-term lending facility comes due -- the most since the week ending June 5. Further mopping up funds, government issuers and policy banks will sell at least 483 billion yuan of bonds by Friday. And then there’s tax payments, which may see companies hoard cash into the end of July.

• In China, Shoppers Can Buy Bad Loans Online With Their Groceries. It’s not the only bad debt for sale on Taobao, which translates roughly as digging for treasure. Used by millions of Chinese to buy everything from clothes to food and electronics, the platform, known for its bargains, typically markets more than 1 billion yuan of soured assets a day, according to Bloomberg calculations. Recent listings include a portfolio of 118 non-performing loans from some companies in Yunnan province, a villa seized by a bank in the southern canal city of Shaoxing, and a property in central Beijing that’s also in default.

• Stocks in Asia Face Mixed Start as Bonds Steady. Stocks in Asia were poised for a muted start as investors awaited the U.S. earnings season to kick off, potentially a new catalyst to spur further moves. Trading volume was light in the U.S. and European equity sessions with the S&P 500 Index eking out a small gain. The dollar edged higher against most major currencies and bonds stemmed their recent slump that was triggered by more hawkish rhetoric emanating from central banks. Equity-index futures in Japan pointed to a moderate decline, while contracts in Hong Kong climbed. Crude oil held above $44.50 a barrel. Futures on the Nikkei 225 Stock Average lost 0.3 percent in Singapore trading. Contracts on Australia’s S&P/ASX 200 Index declined less than 0.1 percent, while futures on Hong Kong’s Hang Seng Index rose 0.2 percent.

• Your Evening Briefing. 

• True Value Weighs Sale, Could Fetch About $800 Million. True Value Co. is considering a sale that could value the home-improvement store chain at about $800 million, according to people familiar with the matter.

• Seattle Approves New Income Tax for Wealthy Residents. Seattle's wealthiest would become the only Washington state residents to pay an income tax under legislation approved by the City Council, a measure designed as much to raise revenue as to open a broader discussion about whether the wealthy pay their fair share.

Wall Street Journal:

• Trump to Appoint Randal Quarles as Fed Bank Regulator. Former Treasury official would be the first Fed vice chairman of supervision.

• Senate Republicans Set Sights on Revised Health Bill. Expected changes appear unlikely to win over opponents.

Fox News:

• Donald Trump Jr. 'did not collude with anybody,' White House says. (video)

CNBC:

• Alibaba's(BABA) Singles Day is Amazon's Prime Day — on steroids.

• Facebook(FB) shares to rally 45% by the end of next year, Credit Suisse predicts.

• Fewer insurers are applying to participate in Obamacare exchanges.

Zero Hedge:

• One Trader Made $200M Trading Ethereum... And Nobody Knows Who To Tax.

• Lawyer Who Leaked Comey Memos Speaks: "They Were Not Marked Classified".

• In Bizarre Confrontation, Israel Calls George Soros A "Threat To Democratic Governments".

• China's Richest Man Forced To Sell World's Largest Indoor Ski Resort 2 Weeks After It Opened.

• Looming Crypto 'Civil War' Sends Virtual Currencies Crashing, Ethereum Below $200.

• Tillerson Flies To Gulf To Resolve Qatar Crisis As Ties Emerge Between Kushner And Qatar's Richest Man.

• Consumer Credit Surges Most Since November 2016. (graph)

• The Last Time Hedge Funds Were This Short Gold, It Rallied 18% In A Month. (graph)

• VVIX Signals Trouble Ahead Amid Retail Rout, Bond-Buying, & Gold Gains. (graph)

Night Trading 

• Asian equity indices are +.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 88.0 -1.25 basis points. 

• Asia Pacific Sovereign CDS Index 22.25 -.75 basis point.

• Bloomberg Emerging Markets Currency Index 72.52 +.05%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PEP)/1.40

• (AIR)/.43

• (HCSG)/.29

Economic Releases 
6:00 am EST

• The NFIB Small Business Optimism Index for June is estimated to fall to 104.4 versus 104.5 in May.
  

10:00 am EST

• JOLTS Job Openings for May is estimated to fall to 5925 versus 6044 in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, Fed's Kashkari speaking, $24B 3Y T-Note auction, weekly US retail sales reports, Australia home loans report, (AMZN) Prime Day and SEMICON West could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and commodity shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.

Stocks Reversing Higher into Final Hour on Tax/Healthcare Reform Hopes, Less Emerging Markets Debt Angst, Oil Gain, Tech/Commodity Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.80 -3.49%

• Euro/Yen Carry Return Index 135.72 +.16%

• Emerging Markets Currency Volatility(VXY) 7.81 -1.26%

• S&P 500 Implied Correlation 34.86 -6.3%

• ISE Sentiment Index 89.0 +23.6%
  

• Total Put/Call .86 -7.83%

• NYSE Arms .74 -49.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.64 -.34%
  

• America Energy Sector High-Yield CDS Index 485.0 +2.62%

• European Financial Sector CDS Index 53.67 -2.83%

• Western Europe Sovereign Debt CDS Index 6.53 +8.55%

• Asia Pacific Sovereign Debt CDS Index 22.32 -2.7%

• Emerging Market CDS Index 201.53 -2.16%
  

• iBoxx Offshore RMB China Corporate High Yield Index 140.02 +.09%

• 2-Year Swap Spread 25.5 +1.0 basis point

• TED Spread 27.75 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -26.75 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.47 +.09%
• 3-Month T-Bill Yield 1.03% unch.
  

• Yield Curve 99.0 unch.

• China Import Iron Ore Spot $64.05/Metric Tonne +1.99%

• Citi US Economic Surprise Index -55.50 +3.0 points

• Citi Eurozone Economic Surprise Index 37.70 -2.4 points

• Citi Emerging Markets Economic Surprise Index 15.60 -2.7 points

• 10-Year TIPS Spread 1.73 -2.0 basis points
  
• 26.1% chance of Fed rate hike at Sept. 20 meeting, 27.6% chance at Nov. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +35 open in Japan 
• China A50 Futures: Indicating -68 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

• Higher: On gains in my tech sector longs 

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Today's Headlines

Bloomberg:

• U.K. Says EU Court May Hold Sway for ‘Limited’ Transition. The European Court of Justice may be able to make rulings that apply to the U.K. for a “limited” interim period after Britain’s withdrawal from the European Union, Prime Minister Theresa May’s spokesman said in yet another sign of the government’s softening of the country’s stance on Brexit. “He said the transition rules could involve the ECJ for a limited time, but obviously that’s all a matter for negotiation," the spokesman, James Slack, told reporters in London, referring to earlier remarks by May’s deputy, Damian Green, in a BBC radio interview.

• ECB Patience Endures as Villeroy Awaits Change of Season. (video) European Central Bank policy makers aren’t showing much of a rush to start tweaking their monetary policy as they count the days until their summer holidays. The Governing Council is likely to decide on the next change in its stimulus settings in the fall, according to comments on Saturday from Francois Villeroy de Galhau, the Bank of France governor. ECB Chief Economist Peter Praet, speaking in a newspaper interview released the same day, insisted that “we still need a long period of accommodative policy.”

• China Hedge Funds Bounce Back From Their Worst Year Since 2011.

• Merger Monday Arrives in Asia With $19 Billion Flurry of Deals. (video) Asian companies announced about $19 billion of transactions in less than 24 hours, making this the busiest start to a week for the region’s dealmaking in nearly a year, according to data compiled by Bloomberg. The day was led by billionaire Sun Hongbin, who sealed China’s biggest-ever property acquisition on Monday, rounded out by a deal to create the biggest shipping company plying the Pacific Ocean trade routes.

• Your Evening Briefing.

Wall Street Journal:

• Following Recess, GOP Health-Care Push Gets Trickier. Divisions within the party complicate McConnell’s path.

• New Fares and Fees Seen Lifting Airline Revenues. Carriers expect the first broad increase in three years in unit-revenue growth.

• California’s One-Party State. Democrats try to rig a recall election to keep a supermajority.

• Oil Up? Oil Down? Blame the Algorithms. As market moves confound analysts and longtime investors, many are pointing fingers at the rise of automated trading and algorithms.

• Jobless Rates for Hispanic and Black Workers Fall to Historic Lows. A decrease in unemployment rates coincides with better wage growth and labor-force participation.

• Chip Makers Feast on Phones Despite Slowing Sales. Smartphones are a maturing business, so selling more chips per phone is the right move.

Fox News:

• Donald Trump Jr., in sarcastic tweet, mocks report on Russia lawyer meeting. (video)

CNBC: 

• Second-quarter results will lift profits for US companies to a record, according to S&P.

• IPhone 8 price may start at $1,200, says a developer and blogger who closely follows Apple(AAPL). (video)

• Amazon(AMZN) is quietly rolling out its own Geek Squad to set up gadgets in your home.

• Goldman's(GS) earnings playbook: Don't bail on tech, careful with consumer and energy stocks.

Zero Hedge: 

• Trump Slams Congress On Obamacare Repeal As Senate Remains Deadlocked.

• The Breaking Point & Death Of Keynes.

• Trump: "Comey Leaked CLASSIFIED INFORMATION To The Media. This Is So Illegal".

• Macro Manager Massarce: "Financial Markets No Longer Make Sense".

• Merkel Migrant Blowback Begins: "Chechen Sharia Police Terrorize Berlin".

• FANG Stocks Break Above Key Technical Level (Again). (graph)

Seeking Alpha: 

• Peak retail bearishness/online bullishness? Leveraged short retail ETFs on the way.