Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 81.0 +3.0 basis points. 

• Asia Pacific Sovereign CDS Index 13.75 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 69.58 unch.

• FTSE 100 futures +.42%.

• S&P 500 futures +.02%.

• NASDAQ 100 futures -.06%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (ATU)/.36

• (WGO)/.93

After the Close:

• (MU)/3.13

• (SCS)/.14

Economic Releases

8:30 am EST

• The 1Q Current Account Balance is estimated at -$129.0B versus -$128.2B in 4Q.

10:00 am EST

• Existing Home Sales for May are estimated to rise to 5.52M versus 5.46M in April.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,475,200 barrels versus a -4,143,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -615,200 barrels versus a -2,271,000 barrel decline the prior week. Distillate inventories are estimated to fall by -540,000 barrels versus a -2,101,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.09% versus a +.3% gain the prior week.
  

Upcoming Splits

• (ACGL) 3-for-1

• (TMSR) 2-for-1

Other Potential Market Movers

• The Japan Industry Index, weekly MBA Mortgage Applications report and the JMP Securities Life Sciences conference 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 lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Lower into Afternoon on Trade War Worries, Emerging Markets Debt Angst, Oil Decline, Gaming/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.07 +14.3%

• Euro/Yen Carry Return Index 132.53 -.93%

• Emerging Markets Currency Volatility(VXY) 10.11 +2.22%

• S&P 500 Implied Correlation 36.71 +7.1%

• ISE Sentiment Index 82.0 +30.2%
  

• Total Put/Call .87 -14.71%

• NYSE Arms .92 +10.21%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.66 +3.1%
  

• America Energy Sector High-Yield CDS Index 396.0 +1.22%

• European Financial Sector CDS Index 79.33 +.90%

• Italian/German 10Y Yld Spread 218.5 +3.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 13.88 +4.44%

• Emerging Market CDS Index 196.03 +1.35%
  

• iBoxx Offshore RMB China Corporate High Yield Index 149.94 -.01%

• 2-Year Swap Spread 25.75 -1.0 basis point

• TED Spread 40.0 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -5.5 +3.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.64 -.23%
• 3-Month T-Bill Yield 1.93% +1.0 basis point
  

• Yield Curve 34.75 -3.0 basis points

• China Iron Ore Spot 63.98 USD/Metric Tonne +.71%

• Citi US Economic Surprise Index 11.20 -1.0 point

• Citi Eurozone Economic Surprise Index -86.90 +3.6 points

• Citi Emerging Markets Economic Surprise Index -20.0 +1.9 points

• 10-Year TIPS Spread 2.12 -1.0 basis point
  
• 81.2% chance of Fed rate hike at Sept. 26th meeting, 82.2% chance at November 8th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -33 open in Japan 
• China A50 Futures: Indicating -64 open in China

• DAX Futures: Indicating +21 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech/industrial sector longs

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

•   Mid-Cap Growth -.8%

Sector Underperformers:

• 1) Steel -2.4% 2) Gaming -2.2% 3) Road & Rail -2.0%

Stocks Falling on Unusual Volume: 

• SOGO, PTCT, WVE, PAGS, DBX, WING, CBLK, BILI, ZS, SFIX, ZTO, XNET and BOX

Stocks With Unusual Put Option Activity:

• 1) AMLP 2) SRPT 3) SYF 4) CI 5) BHGE

Stocks With Most Negative News Mentions:

• 1) PAGS 2) SYX 3) SNAP 4) FTNT 5) MAT

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value unch.

Sector Outperformers:

• 1) Biotech +1.1% 2) Telecom +.5% 3) Utilities +.4%

Stocks Rising on Unusual Volume:

• GEVO, COTV, FMI, SLDB, CBIO, SRPT, FLT, EVRG, CQH, BOKF, UMRX, CGC, SIMO, SD, GOOS, CYD, GGAL, TPIV, BMA, DSLV, AIZ, PRA, RGNX, EGRX, EOLS, ACAD, SD, XEC and AIZ

Stocks With Unusual Call Option Activity:

• 1) ARNC 2) NXST 3) MIK 4) VWO 5) UNIT

Stocks With Most Positive News Mentions:

• 1) SRPT 2) FSLR 3) KMI 4) BHVN 5) INTU

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +9.2% Above 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 28.2% of Issues Advancing, 68.1% Declining
• 31 New 52-Week Highs, 73 New Lows
• 50.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.1%
• Vix 13.9 +12.5%
• Total Put/Call .91 -10.8%
• TRIN/Arms 1.05 +26.0%

Tuesday Watch

Evening Headlines

Bloomberg:  

• UBS Expects China to Ease Its Cash Crunch.

• Asian Stocks Head for Mixed Start; Oil Rebounds: Markets Wrap. Asian stocks were poised for a mixed start to trading that sees Chinese markets reopen for the first time since trade tensions with the U.S. escalated. Oil rose before this week’s OPEC meeting and the dollar steadied. Futures signal losses for Hong Kong shares as traders return from a holiday, while Japanese stocks point to a more muted start. The S&P 500 Index posted a small retreat and Treasury yields were little changed after trading near the lowest this month. Emerging-market equities extended a drop after their worst weekly performance in a month, while commodity currencies weakened amid renewed concern over trade protectionism. The S&P 500 fell 0.2 percent. Futures on Japan’s Nikkei 225 were flat in Singapore trading. Hang Seng futures were about 0.6 percent lower. 

• Fed's Williams Sees Rosy Economy, Bank Culture Still Needs Work.

Wall Street Journal:

• Mergers Would Make AT&T, Comcast World’s Most Indebted Companies.

• Merkel’s Government Avoids Collapse Over Migrant Battle, at Least for Now.

• Google Invests $550 Million in Chinese Online Shopping Site JD.com.

• Are the Tax Cuts Working? What to Watch in 12 Charts.

• Nashville Residents Fear It Is the Next Atlanta.

MarketWatch.com:

• Headlines focusing on stock market risks ignore powerful catalysts.

• Senate rejects Trump deal, reinstates ban against ZTE.

• Improving market breadth could indicate stock strength ahead.

Fox News:

• DHS boss grilled by media on immigration 'crisis,' demands policy changes in tense briefing.

CNBC:     

• Trump says he has asked USTR to identify $200 billion in Chinese goods for additional tariffs at 10% rate.

• Goldman Sachs(GS): Chances of a Democrat 'blue wave' in November are diminishing.  

• After-hours buzz: TELL, AMC & more.  

• Market in 'earnings void right now,' but it will bounce back, says investor.

Zero Hedge: 

• Horowitz Reveals That Comey Is Under DOJ Investigation Over Mishandling Classified Info.

• Musk Accuses Mystery Employee Of "Extensive And Damaging Sabotage".

• US Futures Plunge After Trump Calls For $200 Billion More Tariffs On China.

• Senate: Two-Tiered Justice System In FBI Clinton/Trump Investigations.

• Surprise! Taxpayers Have Been Footing The Bill For Sexual Misconduct In Congress.

• Bonds, Commodities, & Dollar Go Nowhere As Tech Stocks Shrug Off Trade War Turmoil. 
  

• $250MM Hedge Fund Started By Passport Alum Closes After Just One Year.

Business Insider:

• Trump's approval rating just reached its highest level yet in the gold standard of presidential indicators.

• 'Gaming disorder' has been classified as a mental health condition by the World Health Organization — here's what that means.

• Russia could be storing nuclear weapons less than 50 miles from the Polish border.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 78.0 +.5 basis point 

• Asia Pacific Sovereign CDS Index 13.25 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 69.78 -.02%.

• FTSE 100 futures -.22%.

• S&P 500 futures -.45%.

• NASDAQ 100 futures -.45%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• None of note

After the Close:

• (FDX)/5.69

• (LZB)/.64

• (ORCL)/.94

Economic Releases

8:30 am EST

• Housing Starts for May are estimated to rise to 1311K versus 1287K in April.

• Building Permits for May are estimated to fall to 1350K versus 1352K in April.

Upcoming Splits

• (ACGL) 3-for-1

• (TMSR) 2-for-1

Other Potential Market Movers

• The RBA Minutes, US weekly retail sales reports, Oppenheimer Consumer Growth Conference, Jefferies Consumer Conference, JMP Securities Financial Services Conference and the (MKSI) analyst day could also impact trading today.

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