Stocks Modestly Higher into Final Hour on Mid-Term Election Optimism, Less Emeging Markets Debt Angst, Bargain-Hunting, Energy/Financial Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Around Even
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 19.7 +.9%

• Euro/Yen Carry Return Index 134.40 +.26%

• Emerging Markets Currency Volatility(VXY) 10.09 -1.08%

• S&P 500 Implied Correlation 42.70 -.35%

• ISE Sentiment Index 88.0 -22.1%
  

• Total Put/Call 1.02 +9.7%

• NYSE Arms .70 -31.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 65.54 -1.17%
  

• America Energy Sector High-Yield CDS Index 541.0 +1.41%

• European Financial Sector CDS Index 86.58 -.69%

• Italian/German 10Y Yld Spread 289.75 +.5 basis point
  

• Asia Pacific Sovereign Debt CDS Index 9.91 -4.53%

• Emerging Market CDS Index 191.31 -1.06%
  

• iBoxx Offshore RMB China Corporate High Yield Index 148.03 +.39%

• 2-Year Swap Spread 19.5 -1.0 basis point

• TED Spread 26.75 +2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -39.5 -2.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.17 +.23%
• 3-Month T-Bill Yield 2.31% -1.0 basis point

• Yield Curve 29.25 -1.25 basis points

• China Iron Ore Spot 72.38 USD/Metric Tonne +.14%

• Citi US Economic Surprise Index 10.0 +3.9 points

• Citi Eurozone Economic Surprise Index -56.1 +.6 point

• Citi Emerging Markets Economic Surprise Index -10.0 -.9 point

• 10-Year TIPS Spread 2.07 +2.0 basis points
• 74.3% chance of Fed rate hike at Dec. 19th meeting, 75.7% chance at Jan. 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +167 open in Japan 
• China A50 Futures: Indicating +11 open in China

• DAX Futures: Indicating +11 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail/industrial sector longs and index hedges

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 75% Net Long

Morning Market Internals

NYSE Composite Index:

• Volume Running +3.1% Above 100-Day Average
• 8 Sectors Rising, 3 Sector Declining
• 63.6% of Issues Advancing, 33.4% Declining
• 21 New 52-Week Highs, 32 New Lows
• 28.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 43.0%
• Vix 20.5 +5.3%
• Total Put/Call .98 +5.4%
• TRIN/Arms .70 -31.4%

Monday Watch

Today's Headlines

Bloomberg:             

• Default Risks Rise in $355 Billion China Property Bond Market.  

• Hong Kong Housing May Be Headed for a Correction.   

• Euro-Area Finance Chiefs to Talk Italy as Sanctions Threat Looms.

• Asian Stocks Set for Lower Open; Pound Jumps. Asian stocks looked set for a weak start after a reversal in U.S. equities on Friday, amid concern over whether trade tensions with China can be mended. The pound jumped on news of further progress in Brexit negotiations. Futures pointed to losses in Japanese and Chinese shares. Australian shares opened lower and U.S equity-index futures slid. The dollar gained Friday, particularly against the yen, while 10-year U.S. Treasury yields rose to 3.21 percent on the strong jobs report. The pound strengthened after the Times reported Theresa May has secured concessions from Brussels that’ll allow her to keep all of Britain in a customs union with the EU and avoid a hard border in Northern Ireland. Futures on the Nikkei 225 Stock Average fell about 1 percent in Osaka. Australia’s S&P/ASX 200 fell 0.2 percent. Futures on the FTSE China A50 dropped 1.5 percent. Futures on the Hang Seng Index fell 2.4 percent. S&P 500 Index futures lost 0.3 percent.  

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

• Trump-Xi Trade Deal, China Expo, Australia Housing Woes: Eco Day.

• Bond Traders Prepare for Week Full of Risk by Dumping Treasuries.  

• Goldman to Name Smallest Class of New Partners in 20 Years.

Wall Street Journal:

• Trump’s Health-Care Progress.

• Apple: Still a Hardware Company.

• How Angela Merkel Foiled a Backroom Coup in One Late Display of Clout.

• What the Midterms Mean for Business.

Fox News:

• GOP push to flip seats in certain states could offer narrow path to hold House, deny Pelosi gavel.

• Gubernatorial candidate launches probe into party’s ‘possible cyber crimes’. 

• Migrant caravans swell to more than 10,000, get some help along the way.

CNBC: 

• Amazon is packing more stuff into warehouses: Here's why it matters.

Zero Hedge:       

• Georgia Investigating Democrats For Allegedly Hacking Voting System.
• VIX Positioning Flips Net Long; Seasonality Signals Dotcom Repeat.
• Here's China's Massive Plan To Retool The Web.
• Morgan Stanley: "The Pain Was Greater Than Many Investors Could Have Imagined".
• Theresa May Reveals "Secret" Brexit Deal After Winning Major Concession From EU.
• CNN Refuses To Play "Racist" Trump Ad Featuring Illegal Alien Cop Killer.
• Recent Brexit Trade Drama Shows that Europe Doesn't Really Want Free Trade.
• Partisanship Rules At The Midterms.
• 33 Trillion Reasons Why The New York Times Is Wrong About Russiagate.
• A Gun Capable Of Fitting Into A Wallet Is Being Sold By An American Arms Company.
• California Hit By 39 Quakes In 24 Hours As Scientists Warn Of "Movement Along The San Andreas Fault".

Night Trading

• Asian indices are -1.25% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 87.5 -3.0 basis points.

• Asia Pacific Sovereign CDS Index 10.25 unch.

• Bloomberg Emerging Markets Currency Index 67.02 +.01%.

• FTSE 100 futures -.01%.

• S&P 500 futures -.26%.

• NASDAQ 100 futures -.27%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• (DO)/-.35

• (L)/.97

• (SOHU)/-1.61

• (SYY)/.92

After the Close:

• (ANDE)/.15

• (CAR)/3.54

• (MTW)/.12

• (MAR)/1.31

• (MOS)/.65

• (MYL)/1.19

• (NBIX)/.49

• (OXY)/1.53

• (RCII)/.28

• (THC)/.12

Economic Releases
10:00 am EST

• The ISM Non-Manufacturing Index for October is estimated to fall to 59.0 versus 61.6 in September.
  

Upcoming Splits

• (TJX) 2-for-1
  

Other Potential Market Movers

• The China Services PMI report, CSFB China Investment Conference, Oil sanctions against Iran, $37B 3Y T-Note auction, BofA Merrill Future of Financials Conference and the (MDR) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 25% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters. 
• Weekly Market Outlook by Yahoo. (video)
• 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 bargain-hunting, less political uncertainty and yen weakness offset oil declines, Fed rate-hike fears and trade war worries. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg:   

• Trump Says U.S. Open to New Iran Deal as Sanctions Set to Return.  

• Xi to Face World Tired of Empty Promises at Big China Trade Fair.

• May Has EU Concessions to Keep U.K. in Customs Union: Times.

• North Korea Threatens to Resume Nuclear Program, Slams Sanctions.   

• Brexit Silence Can’t Hide Hints That a Deal Is Getting Closer.

• Private Equity Controls the Gatekeepers of American Democracy.  

• Reversals in the Stock Market Are Landing With Record Force.  

• U.S. Manufacturing Forges Own Path Amid Global Slowdown.

• Buffett Puts Cash to Work Buying Back $928 Million in Shares.  

• It’s Not Just About Congress. Here Are Tuesday’s Biggest Ballot Measures.

Wall Street Journal:

• Workers’ Wages Rise as Hiring Accelerates.

• Behind Saudi Prince’s Crackdown Was Confidant Tied to Khashoggi Killing.

• As New Iran Sanctions Loom, U.S. Aims to Plug Gaps.

• Early Turnout Surges as Parties Make Final Push.

• Hate Speech on Live Chats Tests YouTube.

• Facing iPhone Troubles, Apple Tries to Change the Story.

• ‘Kind of Like the NBA’: Esports Mount Full-Court Press in China.

Barron's:

• Had bullish commentary on (NOC), (GPS), (COST), (IR), (LII), (MPC), (LUV), (MU), (GOOGL), (LMT) and (RTN).

MarketWatch.com:

• How U.S.- China trade talks are the biggest catalyst for the stock market.

• Apple(AAPL) is a ‘buy buy buy’ right now, and other FAANG stocks are bargains, too.

• This is the closing pitch GOP candidates should be making in the midterm elections.

CNBC:  

• Paul Tudor Jones: Rising rates typically cause bear markets, but it's not at the tipping point yet.

• The iPhone has reached its peak, and now it's time to change how you think about Apple(AAPL).

• Apple(AAPL) is getting crushed – here's what market experts have to say about the move.    

• Amazon(AMZN) said to be in advanced stages of naming Crystal City Virginia as its 2nd headquarters.

• FDA panel recommends Sage's(SAGE) postpartum depression treatment. 

• Nvidia(NVDA) and two other chip names could be a buy amid the big tech volatility.

• Slightly heavier than a toothpick, the first wireless insect-size robot takes flight.

Zero Hedge:    

• 2nd Kavanaugh Accuser Admits She Lied; Referred For Criminal Prosecution; Kamala's Office Involved.

• In California, Home Sales Are Plunging Like It Is 2008 All Over Again.

• Hot-Tempered Alec Baldwin Arrested After Parking Lot Assault.

• Global Shipping Rates Sink As Trade Runs Aground.

• UK: Terror Investigations An "Inconvenience"?

• CNN's Don Lemon Doubles Down On "White Men" Terror Threat.

• The Danger In Media Telling Only Half The Story On Political Violence.

• "Your Pet Will Be Confiscated!": A Shocking Glimpse Inside China's New Social Credit System.

• Was Anti-Semitic New York Graffiti Attacker A Liberal-Media-Darling Obama Volunteer?

• Hackers Claim Breach Of 120 Million Facebook Accounts; Put Private Messages Up For Sale.

• As Overdose Deaths Soar To Record Highs, FDA Approves New Painkiller That's 1,000X More Powerful Than Morphine.

• Soros Partners With Mastercard To Hand Out Money To Migrants.

• Obama's CIA Secretly Intercepted Congressional Communications About Whistleblowers.

• The Next Generation Of Warfare: Genetically-Engineered Viruses.

• Kunstler: The Midterm Endgame & Democrats' "Perpetual Hysteria".

• Feds Crack Down On Traders "Spoofing" To Manipulate Prices Amid Record Number Of Cases.

• Fed's Balance Sheet Shrinks The Most Since Start Of QT; QE Unwind Hits $321 Billion.

• Oil Prices Plunge As Storm Clouds Gather Over Global Economy.

• Weekend Reading: October Exposed The Passive Problem.

• Stocks Soar On Biggest Weekly Short-Squeeze Since Election, Bonds Bloodbath.

Business Insider:

• How Democrats plan to make Trump’s life a living hell after the election.

• 'I was angry, and I sent it out': Woman admits she fabricated a claim about writing an anonymous letter that accused Brett Kavanaugh of sexual assault.

• Angela Merkel failed, and history won't judge her kindly for it.