Bear Radar

Style Underperformer:

• Large-Cap Value +1.0%

Sector Underperformers:

• 1) Road & Rail -.7% 2) Telecom -.3% 3) Restaurants unch.

Stocks Falling on Unusual Volume: 

• CSX, ACRS, LSXMK, WMGI, ORCL, RYAAY and GBT

Stocks With Unusual Put Option Activity:

• 1) SIRI 2) UA 3) RRC 4) SN 5) TJX

Stocks With Most Negative News Mentions:

• 1) FIT 2) RMAX 3) CRTO 4) CSII 5) SN

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +1.7%

Sector Outperformers:

• 1) Steel +2.0% 2) Defense +1.8% 3) Semis +1.5%

Stocks Rising on Unusual Volume:

• LNCE, IUSV, IHG, UNVR, GLPG, HZN, GLNG, UA, ACBI, WPP, RIOT, AMSF, HTLF, FBNC, TEVA, STBZ, BXP, ADBE, CVBF, SGRY, GHDX, WSFS, CROX, CMCO, OCFC, UAA, EVBG, OSTK, VRA, DISCA, FULT, AGX, TRMK, WTFC, COST, SBCF, CHFC, GEO, FMBI, CVBF, FCF, AVAV and SAIC

Stocks With Unusual Call Option Activity:

• 1) PAGP 2) MON 3) CREE 4) CSX 5) CLVS

Stocks With Most Positive News Mentions:

• 1) COST 2) SGRY 3) UAA 4) HEI 5) ADBE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +59.8% Above 100-Day Average
• 10 Sectors Rising, 0 Sectors Declining
• 70.2% of Issues Advancing, 25.9% Declining
• 65 New 52-Week Highs, 14 New Lows
• 59.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.0%
• Vix 9.8 -6.8%
• Total Put/Call 1.30 +62.5%
• TRIN/Arms .44 -67.4%

Friday Watch

Evening Headlines

Bloomberg:

• Confidence Among Japan’s Manufacturers Rises to a Decade High. Sentiment among large manufacturers rose to 25 from 22 three months ago (forecast 24), the highest level since 2006, according to the quarterly Tankan survey released by the Bank of Japan on Friday. The outlook among large manufacturers was unchanged at 19 (forecast 22). Large companies across all industries say they plan to raise fixed investment by 7.4 percent in the year through March 2018 (forecast 7.5%).
• As Tensions Ease, Beijing Keeps Building in the South China Sea. New satellite imagery shows China has built infrastructure covering 72 acres (28 hectares) in the Spratly and Paracel islands during 2017 to equip its larger outposts to be air and naval bases. The Washington-based Asia Maritime Transparency Initiative closely tracks developments in the South China Sea, where China and several Asian governments have conflicting territorial claims. It said Thursday there has been construction of hangars, underground storage, missile shelters, radar arrays and other facilities.
• Dollar Eyes Weekly Drop on Tax; Asia Stocks Fall. In Tokyo, the Topix index fell and was poised for its first weekly slide in four, while South Korea’s Kospi index gained. The Bloomberg dollar index edged higher, trimming a drop for the week. U.S. equities slid and the greenback erased gains as Republican Senator Marco Rubio’s spokeswoman said he told Senate leaders he’ll oppose tax legislation unless they agree to a larger child tax credit. The euro held onto a retreat after the European Central Bank remained cautious about the prospects of reaching its inflation goals, even as it reiterated a pledge to keep stimulus in place. The Topix index fell 0.9 percent, dragged lower by telecommunication and technology stocks and banks, as of 9:36 a.m. in Tokyo. The Nikkei 225 Stock Average declined 0.8 percent. Australia’s S&P/ASX 200 Index fell 0.2 percent and the Kospi index rose 0.8 percent. Futures on Hong Kong’s Hang Seng Index lost 0.3 percent.
• Five Things You Need to Know to Start Your Day.
• Retailers Are Hoping For the Best Christmas Sales Since the Recession. With consumer spending surging, retailers are hoping for something they haven’t seen since the last recession began a decade ago: a truly great Christmas. The Commerce Department reported better-than-expected U.S. retail sales for November and revised its October figures upward, bringing a fresh wave of optimism to a long-embattled industry. Holiday shoppers are snapping up Nintendo Switch devices and Fingerlings toys as their disposable income grows, according to Craig Johnson, head of the Customer Growth Partners. His research firm just boosted its forecast for holiday sales to 5.6 percent, well above the 4.3 percent it had targeted earlier.

Wall Street Journal:

• Several Republican Senators Press for Late Changes in Tax Bill. Marco Rubio says he will vote against overhaul unless child tax credit is expanded; GOP has little margin for defections.
• Americans Spend More Than Expected as Holiday Season Heats Up. November retail sales up 0.8% from prior month; economists saw 0.3% increase.
• FCC Votes to Dismantle Net-Neutrality Rules. Agency approved new policy that would unwind Obama-era regulations on internet traffic as part of regulatory rollback.

MarketWatch.com:

• Adobe(ADBE) shares rise after fourth-quarter earnings beat.
• Costco(COST) shares rise after retailer's Q1 earnings beat.
• Jabil(JBL) shares gain 4% after company reports better-than-expected earnings, sales.

Fox News: 

• Comey edits revealed: Remarks on Clinton probe were watered down, documents show. (video)

CNBC:

• Marco Rubio opposes current GOP tax plan; Mike Lee is undecided. (video)
• Here are 25 companies that will benefit the most from the GOP tax plan. (video)
• Oracle(ORCL) falls despite earnings beat. (video)
• Trump could get 3 percent, and maybe even 4 percent, GDP growth this quarter.

Zero Hedge:

• Chicken Wing Spot Prices Collapse 30% As NFL Protests Take Their Toll. (graph)
• It's Time To Rethink Education – Part 2 (Unschooling).
• Global Deflation Alert: Chinese Credit Creation Tumbles To 27 Month Low.
• Fan Sues Saints, Wants Season Ticket Refund Over NFL Players Protest.
• Court Filing Confirms Fusion GPS Hired DOJ Official's CIA Wife To Dig Up Dirt On Trump.
• California Moves One Step Closer To "Mileage Tax"; Could Require Tracking Your Cell Phone Movements.
• Nobel Laureate 'Discovers' Cause Of Opioid Crisis: Complete Economic Destruction Of The "White Working Class".
• Robots Purge Homeless From San Francisco Sidewalks.
• Stocks, Yield Curve Slammed After China Hike, Draghi Taper, & Tax Tumult. (graph)

Night Trading 

• Asian equity indices are -.75% to +.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 71.0 +.75 basis point. 

• Asia Pacific Sovereign CDS Index 13.75 unch.

• Bloomberg Emerging Markets Currency Index 73.06 +.06%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.12%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases

8:30 am EST

• Empire Manufacturing for Dec. is estimated to fall to 18.8 versus 19.4 in November.

9:15 am EST

• Industrial Production MoM for November is estimated to rise +.3% versus a +.9% gain in October. 
• Capacity Utilization for November is estimated to rise to 77.2% versus 77.0% in October.
• Manufacturing Production for November is estimated to rise +.3% versus a +1.3% gain in October. 

4:00 pm EST

• Net Long-Term TIC Flows for October.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Trade Balance report, (CNC) investor day and the (MET) company update could also impact trading today.

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

Stocks Reversing Lower into Final Hour on Tax Reform Worries, Profit-Taking, Yen Strength, Telecom/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 10.3 +1.4%

• Euro/Yen Carry Return Index 137.86 -.63%

• Emerging Markets Currency Volatility(VXY) 7.68 +.52%

• S&P 500 Implied Correlation 37.47 +1.9%

• ISE Sentiment Index 143.0 -12.8%
  

• Total Put/Call .80 +6.67%

• NYSE Arms 1.03 -21.82%

Credit Investor Angst:

• North American Investment Grade CDS Index 50.72 +.84%
  

• America Energy Sector High-Yield CDS Index 377.0 +.69%

• European Financial Sector CDS Index 46.87 +1.60%

• Western Europe Sovereign Debt CDS Index 3.33 -2.2%

• Asia Pacific Sovereign Debt CDS Index 13.82 -.07%

• Emerging Market CDS Index 126.49 +1.26%
  

• iBoxx Offshore RMB China Corporate High Yield Index 145.54 +.01%

• 2-Year Swap Spread 19.5 -1.25 basis point

• TED Spread 25.75 +1.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -77.25 -10.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.06 -.21%
• 3-Month T-Bill Yield 1.31% +1.0 basis point
  

• Yield Curve 53.5 -3.75 basis points

• China Iron Ore Spot 485.0 CNY/100 Metric Tonnes -1.12%

• Citi US Economic Surprise Index 74.20 +10.8 points

• Citi Eurozone Economic Surprise Index 72.0 +18.7 basis points

• Citi Emerging Markets Economic Surprise Index 2.40 -.8 point

• 10-Year TIPS Spread 1.89 unch.
  
• 100.0% chance of Fed rate hike at Jan. 31 meeting, 100.0% chance at March 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -118 open in Japan 
• China A50 Futures: Indicating +21 open in China

• DAX Futures: Indicating -37 open in Germany

Portfolio: 

• Lower: On losses in my retail/biotech sector longs

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -1.2%

Sector Underperformers:

• 1) Retail -2.3% 2) Telecom -1.7% 3) Biotech -1.7%

Stocks Falling on Unusual Volume: 

• CRTO, CSTE, ABM, SAFM, VRX, ARRS, QTNA, JUNO and PPC

Stocks With Unusual Put Option Activity:

• 1) SN 2) FEYE 3) WBA 4) GBT 5) JCP

Stocks With Most Negative News Mentions:

• 1) PIR 2) VRX 3) CRTO 4) QD 5) RCII

Charts:

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