Stocks Rising into Final Hour on Less Emerging Market Debt/Currency Angst, Lower Long-Term Rates, Technical Buying, Retail/Transport Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.82 -4.8%

• Euro/Yen Carry Return Index 138.02 -.17%

• Emerging Markets Currency Volatility(VXY) 11.39 -1.9%

• S&P 500 Implied Correlation 34.2 -1.44%

• ISE Sentiment Index 102.0 -5.56%
  

• Total Put/Call .83 -5.7%

• NYSE Arms 1.38 +35.35%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.53 -3.04%
  

• America Energy Sector High-Yield CDS Index 429.0 +8.39%

• European Financial Sector CDS Index 79.63 -1.35%

• Italian/German 10Y Yld Spread 233.25 -.25 basis point
  

• Asia Pacific Sovereign Debt CDS Index 9.28 -4.03%

• Emerging Market CDS Index 193.59 -2.69%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.61 -.05%

• 2-Year Swap Spread 17.0 unch.

• TED Spread 17.75 +1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -16.25 -2.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.86 +.42%
• 3-Month T-Bill Yield 2.20% unch.

• Yield Curve 24.25 -1.5 basis point

• China Iron Ore Spot 68.40 USD/Metric Tonne +.06%

• Citi US Economic Surprise Index -.3 -.1 point

• Citi Eurozone Economic Surprise Index -25.20 -.1 point

• Citi Emerging Markets Economic Surprise Index -9.4 -.3 point

• 10-Year TIPS Spread 2.15-1.0 basis point
• 77.5% chance of Fed rate hike at Dec. 19th meeting, 78.4% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -43 open in Japan 
• China A50 Futures: Indicating +97 open in China

• DAX Futures: Indicating -19 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.1%

Sector Underperformers:

• 1) Gold & Silver -1.2% 2) Homebuilders -.9% 3) Oil Service -.9%

Stocks Falling on Unusual Volume: 

• UMRX, WOR, ATU, HRTX, GPOR, HCLP, OMER, CHGG and TEVA

Stocks With Unusual Put Option Activity:

• 1) ASNA 2) GPRO 3) M 4) NLSN 5) SIRI

Stocks With Most Negative News Mentions:

• 1) PES 2) COG 3) PAYC 4) MANH 5) LCI

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.5%

Sector Outperformers:

• 1) Retail +1.5% 2) Airlines +1.5% 3) Biotech +1.0%

Stocks Rising on Unusual Volume:

• ALDX, VNDA, XOMA, ANAB, AIR, GOOS, PZZA, BATRK, UBX, ALXN, MMYT, I, DMLP, THG, PLNT, HSIC, WU, AVRO, AIZ, CATS, CMTL, RYTM, SCG, AZN and LSXMK

Stocks With Unusual Call Option Activity:

• 1) IP 2) KBH 3) KMX 4) HON 5) IR

Stocks With Most Positive News Mentions:

• 1) ALDX 2) GPRO 3) AIR 4) ALXN 5) EBAY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -6.2% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 46.4% of Issues Advancing, 49.0% Declining
• 41 New 52-Week Highs, 75 New Lows
• 49.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.4%
• Vix 11.9 -4.3%
• Total Put/Call .82 -6.8%
• TRIN/Arms 1.37 +34.3%

Wednesday Watch

Evening Headlines

Bloomberg:        

• China Says It’s Open to U.S. Talks, But Not With a Knife at Its Throat.  

• China Unlikely to Follow Fed Rate Hike as Economy Slows: Survey.  

• MSCI Considers Boosting China A-Share Weighting, Adding ChiNext.

• Trump Attacks Iranian Leaders and Defends Exit From Nuclear Deal.  

• Asia Stocks Set for Mixed Open; Treasuries Fall. Asian futures pointed to a mixed session Wednesday, with Japan on track to continue a rally that lifted the Topix index to an almost eight-month high and Chinese stocks set to remain subdued. U.S. Treasuries fell as the Federal Reserve started its two-day policy meeting. Australian contracts ticked higher with Hong Kong futures little changed as traders return from a holiday. U.S. stocks were mixed as oil drillers rallied with crude while industrial shares lagged. President Donald Trump told the United Nations that the trade deficit with China “is just not acceptable,” stoking fears of greater trade tensions. Benchmark Treasury yields touched 3.1 percent and the dollar weakened slightly. Brent oil climbed to a four-year high. Futures on the Nikkei 225 Stock Average rose 0.4 percent in Singapore. Futures on Australia’s S&P/ASX 200 Index rose 0.1 percent. Futures on Hong Kong’s Hang Seng Index were little changed. FTSE China A50 futures rose 0.1 percent.

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

• Nike(NKE) Gross Margins Disappoint for Quarter Before Kaepernick Controversy.

Wall St. Journal:

• #MeToo Becomes a Political Ploy.

• Trump Considers Retaining Rosenstein, Advisers Say.

• Shoppers Love Rewards Credit Cards. Retailers Hate Them.

• Trump Blasts Democrats Over Kavanaugh Turmoil.

• U.S. Consumer Confidence Hits 18-Year High.

• Trade Deal Could Move Ahead Without Canada, U.S. Official Says.

• Twitter Proposes Banning Dehumanizing Content.

MarketWatch.com:

• Square(SQ) stock posts best day in 19 months after company is likened to the FANGs.

• Here’s how the Fed’s statement, dot plot and forecast may shift.

• Why stock investors shouldn’t fear rising interest rates, in one chart.

Fox News:

• Feinstein can’t guarantee Kavanaugh accuser shows, as Ford bristles over role of woman attorney.

CNBC:   

• Fed expected to raise interest rates and signal more hikes are coming.

• Amazon makes first investment in a homebuilder, backing start-up focused on prefabricated houses.

• After-hours buzz: NKE, CTAS & more. 

• Nike(NKE) CEO Mark Parker says he's 'very proud' of the Kaepernick ad campaign.

• Salesforce(CRM) co-CEO Marc Benioff: The economy is 'ripping'.

• Trump tells world leaders: 'We will no longer tolerate abuse' on trade.

• SurveyMonkey prices above range at $12 per share. 

• Facebook(FB) has a talent drain problem, says Yale's Jeffrey Sonnenfeld.

Zero Hedge:

• "I Don't Give A Shit If It's A Crime": Fourth Veritas Video Reveals IRS Still Targeting Conservatives.

• Grassley Schedules Kavanaugh Vote For Friday Morning. 

• Iran Truck Drivers Go On Strike, Crippling Oil Infrastructure.

• Sweden Manhunt Underway After Car Accelerates Into 'Crowd Of 100 Children And Teachers'.

• Nike(NKE) Tumbles After Missing On Gross Margins; China, Latin America Sales.

• WTI Drops After Surprise Crude, Gasoline Build.

• Dow Drops, Silver Pops, & Bond-Sellers Stop.

Business Insider:

• 'I'm confident we're going to win': Republicans are now bullish about confirming Brett Kavanaugh very soon.

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 83.0 +.5 basis point. 

• Asia Pacific Sovereign CDS Index 9.75 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.60 +.02%.

• FTSE 100 futures -.21%.

• S&P 500 futures +.09%.

• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (ATU)/.35

• (KMX)/1.23

• (WOR)/1.02

After the Close:

• (BBBY)/.51

• (CMTL)/.26

• (FUL)/.90

Economic Releases

10:00 am EST

• New Home Sales for August are estimated to rise to 630K versus 627K in July.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,125,770 barrels versus a -2,057,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +405,500 barrels versus a -1,719,000 barrel decline the prior week. Distillate inventories are estimated to rise by +268,000 barrels versus a +839,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.65% versus a -2.2% decline prior.
  

2:00 pm EST

• The FOMC is expected to raise the benchmark Fed Funds Rate 25.0 basis points to 2.0-2.25%.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The FOMC Press Conference, Japan Machine Orders report, tech companies testifying to Senate Commerce Committtee, weekly MBA Mortgage Applications report, (F) investor meeting, (CRM) investor day, CIBC Institutional Investor Conference,  could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 100% net long heading into the day.