Friday Watch

Night Trading 

• Asian equity indices are -.25% to +.50% on average.

• Asia Ex-Japan Investment Grade CDS Index 81.0 -.75 basis point. 

• Asia Pacific Sovereign CDS Index 20.25 -.75 basis point.

• Bloomberg Emerging Markets Currency Index 74.02 -.05%.

• S&P 500 futures -.02%.

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BIG)/.62

Economic Releases 

8:30 am EST

• Durable Goods Orders for July are estimated to fall -6.0% versus a +6.4% gain in June.
• Durables Ex Transports for July are estimated to rise +.4% versus a +.1% gain in June.
• Cap Goods Orders Non-Defense Ex-Air for July are estimated to rise +.4% versus unch. in June.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Jackson Hole Fed Conference and German GDP report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Less Economic Optimism, Rate-Hike Worries, Oil Decline, Food/Airline Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.37 +.98%

• Euro/Yen Carry Return Index 134.70 +.32%

• Emerging Markets Currency Volatility(VXY) 7.16 -.83%

• S&P 500 Implied Correlation 36.91 +21.1%

• ISE Sentiment Index 83.0 +10.7%
  

• Total Put/Call 1.10 +19.6%

• NYSE Arms .78 -3.47%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.62 -.70%
  

• America Energy Sector High-Yield CDS Index 480.0 +.57%

• European Financial Sector CDS Index 55.98 -1.39%

• Western Europe Sovereign Debt CDS Index 5.80 +.70%

• Asia Pacific Sovereign Debt CDS Index 20.99 -.40%

• Emerging Market CDS Index 187.47 -1.04%
  

• iBoxx Offshore RMB China Corporate High Yield Index 141.05 -.02%

• 2-Year Swap Spread 24.0 -.75 basis point

• TED Spread 31.75 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -26.75 -1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 74.08 +.07%
• 3-Month T-Bill Yield 1.01% +1.0 basis point
  

• Yield Curve 85.0 -1.0 basis point

• China Import Iron Ore Spot $77.16/Metric Tonne -.85%

• Citi US Economic Surprise Index -36.20 +1.0 point

• Citi Eurozone Economic Surprise Index 19.0 +11.9 points

• Citi Emerging Markets Economic Surprise Index 17.0 -.6 basis point

• 10-Year TIPS Spread 1.76 unch.
  
• 17.6% chance of Fed rate hike at Nov. 1 meeting, 42.2% chance at Dec. 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +33 open in Japan 
• China A50 Futures: Indicating +15 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 100% Net Long

Today's Headlines

Bloomberg:

• China Liquidity Stress Signs Build as Fund Cost Jumps at Auction. Chinese lenders paid the highest interest rate in more than two years to borrow short-term government funds on Thursday, adding to recent signs of a mismatch between the demand and supply of cash. The People’s Bank of China auctioned 80 billion yuan ($12 billion) of three-month treasury deposits on behalf of the Ministry of Finance at 4.51 percent, according to a statement on its website. That’s the most expensive since December 2014.
• Your Evening Briefing.
• U.S. Consumer Comfort Is at a 16-Year High. (graph)
• Big News for Stock Pickers: You Only Lost $100 Billion This Year. (video) For active equity managers, this is what passes for good news nowadays. Investors are pulling money out of their funds and depositing cash in ETFs at only about half the rate they were in the previous two years. And all it took was the best stock picking in a decade.
• Abercrombie & Fitch(ANF) Shares Surge.

Wall Street Journal:

• U.S. Navy Calls Off Sea Search For Missing USS John S. McCain Sailors. Crews in the Seventh Fleet also begin operational pause for safety review.
• Bull Market in Uncertainty Propels Gold Rush. The precious metal is rising faster than the S&P 500 for the first time in six years.
• Sears(SHLD) to Close Another 28 Kmart Stores as Sales Slump Continues. Struggling retailer’s quarterly loss narrows amid efforts to rein in costs.
• OPEC Keeps Options Open, Including Extending Output Cuts. Inventories have been slow to decline despite the producers’ cut.

MarketWatch.com:

• Nvidia(NVDA) and AMD(AMD) are deluged with orders for PC graphics cards.
• Mortgage rates plunge to 2017 low.
• European stocks post cautious gains as central bankers gather in Jackson Hole.

Fox News:

• ACLU backs down in face of Twitter’s wrath for pic of white baby holding US flag.
• Ryan tamps down Trump's talk of gov't shutdown if no border wall. (video)

CNBC:

• Paul Ryan shrugs off Trump jab, assures that debt ceiling will get raised. (video)
• Dallas Fed president says US needs more immigrants to fill open jobs. (video)
• Retail stocks bounce back in relief as earnings come in better than feared.

Zero Hedge:

• The Cost Of Market Crash Insurance Just Hit A Record High. (graph)
• $20 Oil? Forget OPEC, China Controls Oil Prices.
• ESPN Prez Defends Idiotic Decision To Create A National Controversy That Never Existed.
• One Trader Says "Don't Fight The Fed...Or SWFs, Or SNB, Or Buybacks". (graph)
• Amazon(AMZN) Vs Maersk: The Clash Of Titans Shaking The Container Industry.
• Existing Home Sales Slump To 11-Month Lows; NAR Warns "Prices Are Rising Way Too Fast". (video)
• Trump Warns Of Debt Ceiling "Mess"; Blames McConnell, Ryan.
• Hurricane Harvey, First Since 2008, Set To Wreak Havoc On Texas Crude Production.

Business Insider: 

• Hurricane Harvey could devastate parts of Texas — here's what you need to know.
• Starbucks(SBUX) is closing its online store as a 'seismic shift' hits the retail industry.
• Amazon(AMZN) Prime members will get special discounts at Whole Foods(WFM).

PredictIt:

• The odds the US government will be shut down on October 2 are rising +2% to 27%.

The Telegraph: 

• We cannot be fooled by the myth of EU economic success.

Bear Radar

Style Underperformer:

• Large-Cap Growth unch.

Sector Underperformers:

• 1) Foods -.9% 2) Airlines -.9% 3) Coal -.5%

Stocks Falling on Unusual Volume: 

• SJM, HRL, TTC, CHU and BITA

Stocks With Unusual Put Option Activity:

• 1) WSM 2) CBL 3) DPZ 4) HRL 5) SIG

Stocks With Most Negative News Mentions:

• 1) TOPS 2) SJM 3) CSX 4) PG 5) ZG

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.4%

Sector Outperformers:

• 1) Retail +1.8% 2) Hospitals +1.8% 3) Steel +1.7%

Stocks Rising on Unusual Volume:

• BOLD, IIVI, BECN, SIG, GES, ANF, PETS, WSM, MIK, NTP, DLTR, BURL, IMMU, AIRG, CHCT, PERY, ITCI, PVH, JBSS, INSW, PDCO, ACIA, GIII, MOMO, BECN, SC, COL, CAL, LITE, HPQ and MTSI

Stocks With Unusual Call Option Activity:

• 1) GNW 2) CZR 3) XME 4) GES 5) ACIA

Stocks With Most Positive News Mentions:

• 1) SQM 2) DLTR 3) AEHR 4) HPQ 5) CMG

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -18.0% Below 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 58.4% of Issues Advancing, 35.9% Declining
• 65 New 52-Week Highs, 16 New Lows
• 38.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 32.9%
• Vix 12.2 -1.0%
• Total Put/Call 1.07 +16.3%
• TRIN/Arms .75 -4.8%