Stocks Surging into Final Hour on Economic Optimism, Yen Weakness, Short-Covering, Biotech/Tech Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 9.89 -10.42%

• Euro/Yen Carry Return Index 141.1 +.08%

• Emerging Markets Currency Volatility(VXY) 7.96 +.89%

• S&P 500 Implied Correlation 36.23 -10.6%

• ISE Sentiment Index 99.0 +26.9%
  

• Total Put/Call .85 -22.0%

• NYSE Arms .50 -66.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 48.53 -1.15%
  

• America Energy Sector High-Yield CDS Index 375.0 +2.11%

• European Financial Sector CDS Index 44.38 +1.16%

• Western Europe Sovereign Debt CDS Index 3.96 n/a

• Asia Pacific Sovereign Debt CDS Index 12.75 -1.32%

• Emerging Market CDS Index 116.91 -2.16%
  

• iBoxx Offshore RMB China Corporate High Yield Index 146.17 +.08%

• 2-Year Swap Spread 18.0 -.5 basis point

• TED Spread 27.25 -4.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -18.0 +2.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 74.76 +.68%
• 3-Month T-Bill Yield 1.40% +2.0 basis points
  

• Yield Curve 53.75 +1.75 basis points

• China Iron Ore Spot 490.50 CNY/100 Metric Tonnes n/a

• Citi US Economic Surprise Index 71.90 -3.8 points

• Citi Eurozone Economic Surprise Index 45.80 -3.5 basis points

• Citi Emerging Markets Economic Surprise Index -2.60 +.7 point

• 10-Year TIPS Spread 2.01 +3.0 basis points
  
• 72.5% chance of Fed rate hike at March 21 meeting, 74.2% chance at May 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +40 open in Japan 
• China A50 Futures: Indicating +60 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value +.4%

Sector Underperformers:

• 1) Utilities -1.1% 2) Insurance -1.0% 3) Gaming -.6%

Stocks Falling on Unusual Volume: 

• VRS, TSRO, PLNT, AROC and RCII

Stocks With Unusual Put Option Activity:

• 1) MNK 2) NLY 3) ESRX 4) ACWI 5) BSX

Stocks With Most Negative News Mentions:

• 1) PLNT 2) WIN 3) SIRI 4) AWK 5) ALL

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.9%

Sector Outperformers:

• 1) Steel +4.5% 2) Social Media +2.8% 3) Gold & Silver +2.6%

Stocks Rising on Unusual Volume:

• RENN, APLP, WATT, EDGE, CASA, FDT, LIVE, NETE, INSY, IJT, QTEC, CRSP, EGN, ZKIN, MTRN, ATHM, HAE, MGPI, XENT, WTW, LILAK, AMGP, MTEM, BITA, EDIT, CMC, CNSL, CATM, XON, BAX, APPN, ABT and UCTT

Stocks With Unusual Call Option Activity:

• 1) ZTS 2) JWN 3) SEE 4) WM 5) XME

Stocks With Most Positive News Mentions:

• 1) HAE 2) TGT 3) JWN 4) GMED 5) BRC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +5.9% Above 100-Day Average
• 8 Sectors Rising, 2 Sectors Declining
• 63.3% of Issues Advancing, 34.1% Declining
• 149 New 52-Week Highs, 15 New Lows
• 61.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.0%
• Vix 9.99 -9.5%
• Total Put/Call .86 -21.1%
• TRIN/Arms .62 -57.57%

Tuesday Watch

Today's Headlines

Bloomberg:

• Trump Calls for Change in ‘Failing’ Iran as Protests Turn Fatal. "Iran is failing at every level despite the terrible deal made with them by the Obama administration," Trump said Monday morning in one of several New Year’s Day tweets, including one that was critical of Pakistan. "The great Iranian people have been repressed for many years. They are hungry for food & for freedom. Along with human rights, the wealth of Iran is being looted. TIME FOR CHANGE!" 

• The Biggest Threats to China’s Economy in 2018.

• South Korea Exports Climb to Record in 2017 on Semiconductors. South Korea’s exports in 2017 expanded to the highest level in at least six decades, boosted by shipments of semiconductors, machinery and petrochemicals, according to a statement from the trade ministry. Exports in December missed estimates. Exports surged 15.8 percent to $574 billion in 2017 from a year earlier. The trade surplus widened to $96 billion from $89 billion in 2016. Exports rose 8.9 percent in December from the same month a year earlier. The median estimate of economists was for a 9.8 percent increase. Imports climbed 13 percent in December, compared with an estimate of 12 percent, leaving trade surplus of $5.8 billion. Shipments of semiconductors jumped 57.4 percent to $98 billion in 2017.

• Five Things You Need to Know to Start Your Day.

• How China Will Shake Up the Oil Futures Market. China, the world’s biggest oil buyer, is on the verge of opening a domestic market to trade futures contracts. It’s been planning one for years, only to encounter delays. The Shanghai International Energy Exchange, a unit of Shanghai Futures Exchange, will be known by the acronym INE and will allow Chinese buyers to lock in oil prices and pay in local currency. Also, foreign traders will be allowed to invest -- a first for China’s commodities markets -- because the exchange is registered in Shanghai’s free trade zone. There are implications for the U.S. dollar’s well-established role as the global currency of the oil market.

• Bitcoin Starts a New Year by Tumbling, First Time Since 2015. For the first time since 2015, the cryptocurrency began a new year by tumbling, extending its slide from a record $19,511 reached on Dec. 18. The virtual coin traded at $13,440 as of 3:55 p.m. in New York, down 6.1 percent from Friday, according to data compiled by Bloomberg. That’s also a fall from the $14,156 it hit Sunday, according to coinmarketcap.com, which tracks daily prices.

Wall Street Journal: 

• On Iran, Trump Administration Encourages Support for Protestors. Washington considers new sanctions amid debate about whether forceful stance helps or harms demonstrators’ cause.

• Two More Dead as Iran Protests Appear Set to Continue. Country’s most widespread demonstrations in almost a decade.

• In Cities With Low Unemployment, Wages Finally Start to Get Bigger. Ending an economic riddle, pay is moving higher and could point to improved incomes nationally in 2018.

• Miners Look to Cash In on Cobalt Demand. Firms step up operations as battery makers seek new sources of the metal.

• Eight Things to Watch in Markets in 2018.

• The Limits of Amazon(AMZN). The tech giant is very good at delivering what customers need, but is it as well positioned to sell them things they want?

MarketWatch.com:

• Hiring like it’s 1999: U.S. jobs market hasn’t been this good in decades.

Fox News: 

• CNN revels in pot smoke during New Year's Eve report from Denver.

CNBC:

• Asian shares kick off the first trading day of the year.

• Tech trends for 2018: From helpful robots to voice-controlled TVs. (video)

• 18 stocks that could rise 25% in 2018.

• Stocks to rally 10 percent or more in 2018, Wall Street veteran Art Hogan predicts. (video)

• Bitcoin fever to burn out in ‘spectacular crash,’ David Stockman warned. "It's basically a class of really stupid speculators who have convinced themselves that trees grow to the sky," he told CNBC's "Futures Now" last week. "It will burn out in a spectacular crash. All of these latter-day speculators will have their hands burned to a crisp, and they will learn the proper lesson."

• 2017 marks safest year on record for commercial passenger air travel, watchdogs say.

• Iranian protesters attack police stations, raise stakes in unrest.

• Tax on medical devices to resume after 2-year suspension.

• Here are three key global themes set to dominate markets in 2018.

• Democrats in high-tax states plot to blunt impact of new tax law.

• Costa Rican plane crash kills 12, including 10 US citizens.

Zero Hedge:

• Iran's "Iron Fist" Unleashed: Revolutionary Guards Take Over Security As Israel Praises "Freedom Fighters".

• Trump Blasts Pakistan For "Giving Safe Haven To Terrorists"; Threatens To Pull Aid.

• Kim Jong Un: "A Nuclear Button Is Always On My Office Desk". 

• "We Got Some Folks Fired": Minimum Wage Is Going Up In These 18 States Today.

• David Brock And Clinton Pal Funneled $700K To Fund Trump Sexual Harassment Accusers.

• Einhorn: "None Of The Problems From The Crisis Have Been Solved" - Full Q&A.

• California Kicks Off 2018 With Statewide Pot Legalization.

• 12 Killed In Iran, Security Forces Accused Of Opening Fire.

• A "Monster Of A Storm" Could Hit The East Coast Next Week.

• 2017 Greatest Hits: Presenting The Most Popular Articles Of The Past Year.

• California Prosecutes Man For Posting Anti-Muslim Messages On Facebook.

• Crisis For Mueller: Lindsey Graham Demands New Special Counsel To investigate Trump Dossier & FBI.

• Iran's Revolutionary Guards Vow To Crush Dissent As Protests Extend Into Fourth Day.

• South Korea Seizes 2nd Ship Suspected Of Violating UN Sanctions On Oil Sales.

• Australian Banks Reportedly Freeze Accounts Of Bitcoin Users.

• Military & Political Trends Of 2017 That Will Shape 2018.

• Despite Bluster Of The Left, Mexican Deportations Have Actually Plunged Under Trump. (graph)

• Goldman Answers The 10 Most-Important Questions For 2018.

Business Insider:

• PREDICTIONS: The most important things that will happen in tech in 2018.

• Here's everything you need to know about the protests rocking Iran.

• Trump tweets Happy New Year to his 'enemies, haters, and even the very dishonest Fake News Media'.

• In China, cash is dead.

• A tsunami of store closings is about to hit the US — and it's expected to eclipse the retail carnage of 2017.

• 300 top Hollywood women reveal sweeping anti-harassment action plan with a $13 million legal defense fund.

Telegraph:

• Serious risks, yes, but I see growth continuing in the global economy.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 67.0 +.25 basis point.

• Asia Pacific Sovereign CDS Index 13.0 unch.

• Bloomberg Emerging Markets Currency Index 74.31 +.06%.

• S&P 500 futures +.14%.

• NASDAQ 100 futures +.21%.

Morning Preview Links

Earnings of Note

Company/Estimate

• None of note

Economic Releases  

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone PMI report could also impact trading today.

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

Weekly Outlook

• Wall St. Week Ahead by Reuters. 
• Stocks to Watch Next Week by Seeking Alpha.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as oil gains, seasonal strength and economic optimism offset profit-taking, technical selling and yen strength. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.