Thursday Watch

Night Trading 

• Asian equity indices are -1.0% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 84.75 +2.75 basis points. 
• Asia Pacific Sovereign CDS Index 10.5 -.25 basis point.
• Bloomberg Emerging Markets Currency Index 66.37 -.14%.
• FTSE 100 futures +.42%
• S&P 500 futures -.04%.
• NASDAQ 100 futures -.07%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (JCP)/-.03
• (JD)/.71
• (WMT)/1.22

After the Close:

• (AMAT)/1.16
• (DDS)/-.45
• (JWN)/.84
• (NVDA)/1.85
• (ZOES)/-.05

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 215K versus 213K the prior week.
• Continuing Claims are estimated to fall to 1740K versus 1755K prior.
• Philly Fed Business Outlook Index for August is estimated to fall to 22.0 versus 25.7 in July.
• Housing Starts for July are estimated to rise to 1260K versus 1173K in June.
• Building Permits for July are estimated to rise to 1310K versus 1273K in June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Trade Balance report, Bloomberg Economic Expectations Index for August, weekly Bloomberg Consumer Comfort Index and EIA weekly natural gas inventory report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by commodity 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 Falling into Final Hour on Trade War Fears, Rising European/Emerging Markets/US High-Yield Debt Angst, Oil Decline, Commodity/Gaming Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 16.12 +21.2%

• Euro/Yen Carry Return Index 130.53 -.47%

• Emerging Markets Currency Volatility(VXY) 12.74 +4.9%

• S&P 500 Implied Correlation 35.65 +11.9%

• ISE Sentiment Index 115.0 -9.45%
  

• Total Put/Call 1.15 +25.0%

• NYSE Arms 1.86 +118.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.64 +2.0%
  

• America Energy Sector High-Yield CDS Index 398.0 +3.12%

• European Financial Sector CDS Index 89.12 +4.22%

• Italian/German 10Y Yld Spread 286.5 +16.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 10.55 -.75%

• Emerging Market CDS Index 213.22 +3.96%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.89 -.07%

• 2-Year Swap Spread 19.0 -.75 basis point

• TED Spread 25.0 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -10.0 +1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.42 +.17%
• 3-Month T-Bill Yield 2.06% -1.0 basis point

• Yield Curve 25.0 -1.25 basis points

• China Iron Ore Spot 66.69 USD/Metric Tonne -.67%

• Citi US Economic Surprise Index -6.20 +4.2 points

• Citi Eurozone Economic Surprise Index -18.60 +.9 point

• Citi Emerging Markets Economic Surprise Index -7.30 -.7 point

• 10-Year TIPS Spread 2.09 -1.0 basis point
  
• 92.3% chance of Fed rate hike at Nov. 8th meeting, 97.9% chance at Dec. 19th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -189 open in Japan 
• China A50 Futures: Indicating -110 open in China

• DAX Futures: Indicating +13 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.5%

Sector Underperformers:

• 1) Gold & Silver -5.3% 2) Steel -4.3% 3) Oil Service -4.0%

Stocks Falling on Unusual Volume: 

• HOLI, FANG, STZ, CASA, PFGC, M, CRZO, CREE, SCHN, VERI, WTW, EYE, JD, WUBA, SWCH, EAF, NEM, OSTK, FCX and CENX

Stocks With Unusual Put Option Activity:

• 1) EPI 2) M 3) CREE 4) A 5) GD

Stocks With Most Negative News Mentions:

• 1) CYTX 2) MCS 3) APC 4) TSRO 5) WTW

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.7%

Sector Outperformers:

• 1) Utilities +.9% 2) REITs +.7% 3) Education +.5%

Stocks Rising on Unusual Volume:

• PETQ, CGC, KMG, EGN, TUR, ERI, MSGN, ADNT, MMYT, HABT, SIMO, HTA, SCOR, ABCD, BSX, CMG, KMB, TFX, NEWA, CLI, EHTH, BKH and MHO

Stocks With Unusual Call Option Activity:

• 1) NTAP 2) M 3) XLB 4) AEO 5) JWN

Stocks With Most Positive News Mentions:

• 1) XRF 2) PETQ 3) TLRY 4) CMG 5) TERP

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +23.4% Above 100-Day Average
• 4 Sectors Rising, 7 Sectors Declining
• 21.7% of Issues Advancing, 75.5% Declining
• 34 New 52-Week Highs, 133 New Lows
• 52.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.3%
• Vix 16.7 +25.1%
• Total Put/Call 1.47 +59.8%
• TRIN/Arms 2.01 +135.6%

Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 82.0 -2.25 basis points. 

• Asia Pacific Sovereign CDS Index 10.75 unch.

• Bloomberg Emerging Markets Currency Index 66.22 -.14%.

• FTSE 100 futures +.21%

• S&P 500 futures -.04%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

Before the Open:

• (M)/.50

After the Close:

• (BGG)/.41

• (CACI)/1.75

• (CSCO)/.69

• (NTAP)/.80

Economic Releases 
8:30 am EST

• Empire Manufacturing for August is estimated to fall to 20.0 versus 22.6 in July. 

• Preliminary 2Q Non-Farm Productivity is estimated to rise +2.4% versus a +.4% gain in 1Q.

• Preliminary 2Q Unit Labor Costs are estimated unch. versus a +2.9% gain in 1Q.

• Retail Sales Advance MoM for July are estimated to rise +.1% versus a +.5% gain in June.

• Retail Sales Ex Autos MoM for July are estimated to rise +.3% versus a +.4% gain in June.
  

9:15 am EST

• Industrial Production MoM for July is estimated to rise +.3% versus a +.6% gain in June.

• Capacity Utilization for July is estimated to rise to 78.2% versus 78.0% in June.

• Manufacturing Production for July is estimated to rise +.3% versus a +.8% gain in June.
  

10:00 am EST

• Business Inventories for June are estimated to rise +.1% versus a +.4% gain in May. 

• The NAHB Housing Market Index for August is estimated to fall to 67.0 versus 68.0 in July.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,885,820 barrels versus a -1,351,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -76,000 barrels versus a +2,900,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,038,600 barrels versus a +1,230,000 barrel build the prior week. Finally, Refinery Utilization is estimated to fall by -.36% versus a +.5% gain prior.
  

4:00 pm EST

• Net Long-Term TIC Flows for June.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China New Home Price report, weekly MBA Mortgage Applications report, Citi MLP Infrastructure Conference and the (IDXX) Investor Day could also impact trading today.

BOTTOM LINE:  Asian indices are slightly lower, weighed down by industrial and consumer 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.