Stocks Mostly Lower into Final Hour on Eurozone Debt Angst, Yen Strength, Profit-Taking, Retail/Road & Rail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 12.0 unch.

• Euro/Yen Carry Return Index 136.47 -.57%

• Emerging Markets Currency Volatility(VXY) 10.26 +1.68%

• S&P 500 Implied Correlation 34.32 -1.15%

• ISE Sentiment Index 138.0 +58.6%
  

• Total Put/Call .80 -20.0%

• NYSE Arms .72 +16.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 59.16 +1.43%
  

• America Energy Sector High-Yield CDS Index 411.0 +7.96%

• European Financial Sector CDS Index 88.19 +3.81%

• Italian/German 10Y Yld Spread 303.0 +20.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.09 +3.12%

• Emerging Market CDS Index 192.03 -.75%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.78 +.08%

• 2-Year Swap Spread 17.25 +.5 basis point

• TED Spread 18.75 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -41.0 +.25 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.77 -.28%
• 3-Month T-Bill Yield 2.21% +1.0 basis point

• Yield Curve 24.25 -1.5 basis points

• China Iron Ore Spot 69.0 USD/Metric Tonne +.29%

• Citi US Economic Surprise Index -7.7 -.1 point

• Citi Eurozone Economic Surprise Index -29.30 -.6 point

• Citi Emerging Markets Economic Surprise Index -10.8 +.8 point

• 10-Year TIPS Spread 2.13 -1.0 basis point
• 77.2% chance of Fed rate hike at Dec. 19th meeting, 78.6% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -20 open in Japan 
• China A50 Futures: Indicating -193 open in China

• DAX Futures: Indicating -31 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 75% Net Long

Bull Radar

Style Outperformer:

• Large-Cap Value +.4%

Sector Outperformers:

• 1) Gold & Silver +2.9% 2) Utilities +1.6% 3) Homebuilders +1.3%

Stocks Rising on Unusual Volume:

• IGC, PYX, BKH, RNR, EEFT, AIMC, COL, GLMD, PAYX, AEM, PRT, RYAAY, OMER, CLVS, LW, BPT, CHGG, ATSG, VIAV, MLNX, GOLD, MKTX, LOPE, ORBK, SKY and PBR

Stocks With Unusual Call Option Activity:

• 1) HLT 2) MYL 3) CREE 4) INTC 5) PAYX

Stocks With Most Positive News Mentions:

• 1) PAYX 2) INTC 3) FLR 4) CLVS 5) MMSI

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +6.4% Above 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 39.9% of Issues Advancing, 56.8% Declining
• 31 New 52-Week Highs, 90 New Lows
• 47.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.5%
• Vix 11.9 -.9%
• Total Put/Call .85 -15.0%
• TRIN/Arms .99 +59.2%

Tuesday Watch

Evening Headlines

Bloomberg:              

• Trump’s New Nafta Deal Comes Just in Time for the Midterms.    

• The New Trade Deal Provides Relief for American Farmers.

• Emerging-Market September Landmarks Point to Rally Into Year-End.

• Top Iron Ore Shipper Warns China Is at ‘Peak Steel’.

• Oil Surges to Highest Since 2014 as Global Supply Concerns Mount.

• Asia Futures Mixed After Nafta Deal; Oil Gains. Asian stocks are looking at a mixed open, with Japan’s Nikkei 225 Stock Average set to extend an advance to its highest since 1991, after a muted U.S. trading session. Oil topped $75 a barrel in New York and the dollar steadied. Japanese futures were higher as were those in Australia. Hong Kong futures declined as traders return from a long weekend while China’s markets are shut throughout the week. The S&P 500 finished higher but more stocks fell than rose in the benchmark index. General Electric Co. surged after replacing its chief executive, while Tesla Inc. rallied after Elon Musk settled with regulators. The pound spiked following a report the U.K. is planning a compromise on Irish border rules. Canada’s dollar maintained gains after a last-minute new Nafta deal. Treasury yields ticked higher. Futures on the Nikkei 225 Stock Average rose 0.4 percent in Singapore.
  Australia’s S&P/ASX 200 Index futures added 0.1 percent. Hong Kong’s Hang Seng Index futures were down 0.6 percent.

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

Wall St. Journal:

• North American Trade Pact Soothes Investors, Businesses.

• How the New Nafta Would Affect Key Industries.

• Destroying Brett Kavanaugh.

• Kavanaugh’s Foes Politicize the FBI.

• IPO Market Has Never Been This Forgiving to Money-Losing Firms.

• Robots Head for the Fields.

• A Glut of Used Hogs Is a Drag on Harley-Davidson.

• Italy’s Bonds Fall Further on Budget Concerns.

• Chinese Warship Harassed a U.S. Vessel, Pentagon Says.

• Interest Wanes in Earning an M.B.A., Even From Harvard.

MarketWatch.com:

• Nvidia’s(NVDA) stock ends at record high as chip sector extends gains. 

• Trump gets rare praise from Schumer after deal to replace Nafta.

• Netflix(NFLX) to add choose-your-own-ending option to shows like ‘Black Mirror’.

Fox News:

• WATCH LIVE: President speaks at 'Make America Great Again' rally in Tennessee.

• Senate GOP leader hits Dems for probe demands, fighting ‘shifting’ goalposts.

CNBC:      

• Stitch Fix shares crater as revenue, active clients miss estimates.

• After-hours buzz: SFIX, PZZA & more.

• Canadian dairy farmers fume new US trade deal too generous, could cost about $240 million annually.

• Study: Limiting kids' screen time improves brain function.

Zero Hedge:

• China Cancels US Security Summit As Military Tensions Escalate.

• Mike Pento Warns Global Central Banks Are Entering The Danger Zone.

• McConnell: Kavanaugh To Get Senate Vote "This Week".

• Here's What Inside Trump's "Historic" Trade Deal With Canada And Mexico.

• 'Sunday Night Football' Ratings Hit Season Low As Stadiums Fail To Fill Seats.

• Stocks Swoon As Trump Trade Deal Euphoria Fades, Small Caps Slammed.

Business Insider:

• There’s even more evidence that artificial sweeteners like aspartame could be dangerous.

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 79.50 -.5 basis point. 

• Asia Pacific Sovereign CDS Index 8.75 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 66.95 -.02%.

• FTSE 100 futures -.08%.

• S&P 500 futures -.04%.

• NASDAQ 100 futures -.01%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (PAYX)/.66

• (PEP)/1.57

After the Close:

• None of note

Economic Releases

Afternoon

• Wards Total Vehicle Sales for September is estimated to rise to 16.8M versus 16.6M in August.
  

Upcoming Splits

• (CASH) 3-for-1

Other Potential Market Movers

• The Fed's Powell speaking, Fed's Quarles speaking, Eurozone PPI report, weekly US retail sales reports, (GM) quarterly sales report, (MSFT) product event, Wolfe Utilities/Power Leaders Conference, Ladenburg Thalmann Healthcare Conference, Leerink Partners Rare Disease/Oncology Roudtable, (WDAY) analyst day and the (JBLU) investor day 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.

Stocks Rising into Final Hour on Diminishing Trade War Fears, Economic Optimism, Oil Gain, Commodity/Industrial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.9 -1.7%

• Euro/Yen Carry Return Index 137.24 +.02%

• Emerging Markets Currency Volatility(VXY) 10.16 -1.84%

• S&P 500 Implied Correlation 34.23 -2.14%

• ISE Sentiment Index 87.0 -31.5%
  

• Total Put/Call .96 -7.69%

• NYSE Arms .59 -49.49%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.92 -2.44%
  

• America Energy Sector High-Yield CDS Index 381.0 -1.51%

• European Financial Sector CDS Index 84.55 +1.55%

• Italian/German 10Y Yld Spread 282.75 +15.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 8.83 -.56%

• Emerging Market CDS Index 193.27 +.10%
  

• iBoxx Offshore RMB China Corporate High Yield Index 150.65 unch.

• 2-Year Swap Spread 16.75 unch.

• TED Spread 19.5 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -41.25 +.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.95 +.10%
• 3-Month T-Bill Yield 2.20% +1.0 basis point

• Yield Curve 25.75 +2.0 basis points

• China Iron Ore Spot 68.03 USD/Metric Tonne unch.

• Citi US Economic Surprise Index -7.6 -2.4 points

• Citi Eurozone Economic Surprise Index -28.70 +3.2 points

• Citi Emerging Markets Economic Surprise Index -11.6 -4.0 points

• 10-Year TIPS Spread 2.14 -1.0 basis point
• 71.5% chance of Fed rate hike at Dec. 19th meeting, 72.7% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +220 open in Japan 
• China A50 Futures: Indicating +34 open in China

• DAX Futures: Indicating -29 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long