Bull Radar

Style Outperformer:

• Small-Cap Growth +.4%

Sector Outperformers:

• 1) Steel +1.7% 2) Homebuilders +1.1% 3) Banks +1.1%

Stocks Rising on Unusual Volume:

• KNL, PII, CAT, GPK, CONN, GLW, PRTY, YNDX, MMM, UHAL, TLRD, CIFS, MLNX, ALXN, SEIC, HAS, SNDR, JBT, LITE, GM, KW, WAB, SWP, SWK, PEB, OSTK, RMBS, SEM and HUN

Stocks With Unusual Call Option Activity:

• 1) PRU 2) CAT 3) MMM 4) HYG 5) GLW

Stocks With Most Positive News Mentions:

• 1) CAT 2) FCAU 3) VFC 4) MCD 5) ITW

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +10.4% Above 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 51.4% of Issues Advancing, 43.9% Declining
• 151 New 52-Week Highs, 37 New Lows
• 47.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.8%
• Vix 10.8 -2.9%
• Total Put/Call .85 -12.4%
• TRIN/Arms 1.0 -35.3%

Tuesday Watch

Evening Headlines

Bloomberg:

• China's Total Debt Rises to About 260% of Economy. (video) 

• BOE Policy Makers Will be Wary of Making a Premature Hike. As the Bank of England considers raising interest rates for the first time in a decade in November, policy makers will be mindful that the history of central banking is littered with premature hikes. Banks including UBS AG and UniCredit have expressed concern that tightening now would be a mistake, and business groups such as the British Chambers of Commerce have called on the BOE to wait. If Governor Mark Carney raises and history proves unkind, he would join the European Central Bank and the Bank of Japan in the pantheon of those who damaged economies by moving too soon.

• Asia Stocks Mixed After U.S. Drop; Yen Near Low. Asian equities were mixed after U.S. stocks fell and a gauge of equity volatility climbed, with investors assessing the recent rally in global stocks before a slew of earnings reports. The dollar was steady while the yen hovered near a three-month low. Japan’s Nikkei 225 Stock Average paused after a 15-day rally that lifted it to the highest level since 1996 after the S&P 500 Index and Dow Jones Industrial Average both fell Monday, pulled down by technology and industrial stocks. The euro remained weaker as Catalan separatists planned their response to Spain Prime Minister Mariano Rajoy’s moves to stamp his authority on the region. In China, all eyes turn to the succession plan for President Xi Jinping as the Party Congress wraps up Wednesday. Japan’s Topix index was up 0.2 percent as of 9:28 a.m. in Tokyo. The Nikkei 225 was flat. Australia’s S&P/ASX 200 Index was little changed and South Korea’s Kospi index was up 0.2 percent. Futures on the Hang Seng Index slid 0.3 percent.

• Five Things You Need to Know to Start Your Day. (video)

• House Conservatives Say Tax Bill Draft Is Coming Within Days. House and Senate leaders laid out an ambitious schedule for drafting and releasing tax legislation over the next few weeks -- a set of deadlines that must be met to try to achieve President Donald Trump’s goal of delivering major tax-rate cuts by year’s end. House Freedom Caucus Chairman Mark Meadows said Monday he’s been promised that the House Ways and Means Committee will release its plan about seven days after this Thursday’s scheduled vote on a budget resolution. That would mean a bill text would be published on or before Friday, Nov. 3.

Wall Street Journal:

• U.S. Revises Timeline on Niger Battle. Military describes what happened in the Oct. 4 ambush which marked the single deadliest U.S. military combat toll during the Trump administration.

• Republicans Face Tough Decision on Bipartisan Health Bill. Legislation has enough support to pass, but President Donald Trump opposes it, and that could prevent a floor vote.

• Supersized Family Farms Are Gobbling Up American Agriculture.

• Whirlpool(WHR) Cuts Guidance, Citing Rising Costs. Shares fell sharply in after-hours trading.

• Palladium Prices Soar in Sign of Global Growth and Auto Demand. The price of the rare metal, a key component in gasoline engines, exceeded $1,000 a troy ounce for the first time in 16 years earlier this month.

Fox News:

• Family of Las Vegas victim 'wants answers,' lawyer says, as authorities remain tight-lipped.

• Podesta news should rattle Dems on Russia. (video)

CNBC:

• 8 tax changes for 2018 you need to know.

• Venezuela's unpaid debt just grew to nearly $600 million, days before a make-or-break bill.

Zero Hedge:

• Do Shifting Democrat Talking Points Confirm That "Trump Is Unlikely To Be Implicated" In Russia Probe?

• Inventory Levels Of These GM(GM) Plants Still In "Danger Zone" Even After 2 Hurricanes And 6,000 Job Cuts.

• Uranium Deal Turns Spotlight on Hillary Clinton But Not the Way She Wanted.

• The "Nightmare Scenario" For Publishers: Facebook Is Testing A 'Pay-To-Play' Model.

• CLOs – "Safe" CDOs – Are Booming Again.

• The 4 Possible Channels For A Chinese Financial Crisis.

• The US Stock Market Just Did Something It Has Never Done Before. (graph)

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 74.75 +.25 basis point. 

• Asia Pacific Sovereign CDS Index 15.75 unch.

• Bloomberg Emerging Markets Currency Index 73.32 +.08%.

• S&P 500 futures +.08%.

• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (MMM)/2.21

• (BIIB)/5.70

• (CAT)/1.27

• (CLW)/.41

• (LLY)/1.03

• (FITB)1.49

• (GM)/1.11

• (JBLU)/.52

• (LMT)/3.27

• (MCD)/1.77

• (PCAR)/1.08

• (PII)/1.23

• (PHM)/.59

• (RF)/.25

• (R)/1.31

• (SCHN)/.62

• (SHW)/4.69

• (SWK)/1.87

• (AMTD)/.46

• (UTX)/1.69

• (WAT)/1.75

• (AMD)/1.07

• (AKAM)/.59

• (T)/.75

• (COF)/2.16

• (CMG)/1.65

• (ESRX)/1.90

• (ILMN)/.99

• (IRBT)/.51

• (JNPR)/.55

• (NBR)/-.33 

• (RHI)/.70

• (TXN)/1.15

Economic Releases 

9:45 am EST

• The Preliminary Markit US Manufacturing PMI for October is estimated to rise to 53.5 versus 53.1 in September.

• The Preliminary Markit US Services PMI for October is estimated to fall to 55.2 versus 55.3 in September.
  

10:00 am EST

• The Richmond Fed Manufacturing Index for October is estimated to fall to 17 versus 19 in September.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Manufacturing PMI report and the weekly US retail sales 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 modestly higher and to weaiken into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Lower into Final Hour on Geopolitical Concerns, Profit-Taking, Technical Selling, Metals & Mining/Airline Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.20 +2.31%

• Euro/Yen Carry Return Index 139.18 -.16%

• Emerging Markets Currency Volatility(VXY) 8.16 +.99%

• S&P 500 Implied Correlation 14.62 unch.

• ISE Sentiment Index 165.0 +35.25%
  

• Total Put/Call .95 +15.85%

• NYSE Arms 1.34 +38.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.29 -.43%
  

• America Energy Sector High-Yield CDS Index 384.0 +.42%

• European Financial Sector CDS Index 58.18 -1.0%

• Western Europe Sovereign Debt CDS Index 4.77 +2.14%

• Asia Pacific Sovereign Debt CDS Index 15.62 +.26%

• Emerging Market CDS Index 174.32 +1.40%
  

• iBoxx Offshore RMB China Corporate High Yield Index 144.46 -.12%

• 2-Year Swap Spread 23.75 -.5 basis point

• TED Spread 26.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -42.50 -1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.25 -.27%

• 3-Month T-Bill Yield 1.09% -1.0 basis point
  

• Yield Curve 81.0 +1.0 basis point

• China Import Iron Ore Spot $62.0/Metric Tonne -.74%

• Citi US Economic Surprise Index 3.0 +1.5 points

• Citi Eurozone Economic Surprise Index 52.90 -1.2 basis points

• Citi Emerging Markets Economic Surprise Index 16.90 -.3 basis point

• 10-Year TIPS Spread 1.87 -1.0 basis points
  

• 84.2% chance of Fed rate hike at Dec. 13 meeting, 84.8% chance at Jan. 31 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +58 open in Japan 

• China A50 Futures: Indicating -13 open in China

• DAX Futures: Indicating -14 open in Germany

Portfolio: 

• Higher: On gains in my medical/tech/retail sector longs and emerging market shorts

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

• Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:

• Trump Says He’s ‘Very, Very Close’ to Naming Fed Chair Nominee. (video) President Donald Trump told reporters Monday he is “very, very close” to announcing his nominee for chairman of the Federal Reserve. Trump gave the timeline in answer to a reporter’s question at the start of an Oval Office meeting with Singapore Prime Minister Lee Hsien Loong, but he didn’t elaborate.
• Pimco Sees China Refraining From Broad Deleveraging in Next Year. China’s deleveraging campaign will create pockets of pain in markets over the coming year, without curtailing borrowing to the extent that debt actually declines, according to Pimco. Pacific Investment Management Co. predicts that Chinese companies will be able to refinance most of their borrowings in the next 12 months as the authorities refrain from carrying out broad-based deleveraging. This will contribute to debt expanding faster than nominal gross domestic product, said Luke Spajic, head of portfolio management for emerging Asia at Pimco, which manages $1.7 trillion.
• Your Evening Briefing. (video)

Wall Street Journal:

• Trump Says ‘No Change’ to 401(k) Plans Under Forthcoming Tax Proposal. Congressional Republicans said to be weighing limits in pretax contributions for retirement savings.
• Japanese Official Warns North Korean Threat Critical, Imminent. Defense minister tells Asian counterparts, Defense Secretary Jim Mattis that Japan supports U.S. position that “all options are on the table”.
• Central Bankers Cling to Stimulus Amid Weak Inflation. Officials at Washington conference say low wages and consumer prices make it tough to remove measures quickly, despite global economic upturn.

Fox News:

• Report: Mueller probe expands to Democratic lobbyist Tony Podesta's dealings. (video)

CNBC:

• China central bank chief raises new worry in China: Mortgage-driven household debt.
• Amazon(AMZN) will soon let you order from restaurants using the Amazon app on your phone.
• Obamacare's 'original sin' is still the biggest problem with US health care.

Zero Hedge:

• Ray Dalio: "This Is The Most Important Economic, Political And Social Issue Of Our Time".
• Mueller Probe Targets Democrat Lobbying Firm Podesta Group.
• Bitcoin Tumbles After Saudi Prince Calls Crypto - "Enron In The Making".
• "No Leadership In NFL" - Trump Slams Continued Kneeling "Disrepect".
• Catalan Separatists Plan Human Shield, "Civil Disobedience" To Block Spanish Takeover.
• Gold Spikes On Massive Volume After Trump's Fed Chair Comments.
• Options Traders Haven't Been This Worried About The Dow In 17 Years. (graph)