Stocks Plunging into Final Hour on Global Growth Fears, Trade War Worries, European/Emerging Market/US High-Yield Debt Angst, Transport/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 20.3 +23.3%

• Euro/Yen Carry Return Index 133.0 -.83%

• Emerging Markets Currency Volatility(VXY) 9.96 +2.57%

• S&P 500 Implied Correlation 45.22 +8.5%

• ISE Sentiment Index 70.0 -42.6%
  

• Total Put/Call .90 +18.4%

• NYSE Arms 2.32 +166.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 78.0 +4.05%
  

• America Energy Sector High-Yield CDS Index 659.0 -.86%

• European Financial Sector CDS Index 106.32 +4.86%

• Italian/German 10Y Yld Spread 289.25 +5.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.45 +1.40%

• Emerging Market CDS Index 208.04 +3.31%
  

• iBoxx Offshore RMB China Corporate High Yield Index 146.75 +.17%

• 2-Year Swap Spread 16.25 -1.25 basis points

• TED Spread 35.5 -4.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -23.0 +1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.18 -.46%

• 3-Month T-Bill Yield 2.41% +8.0 basis points

• Yield Curve 11.0 -4.75 basis points

• China Iron Ore Spot 65.56 USD/Metric Tonne +.43%

• Citi US Economic Surprise Index -3.1 -.3 point

• Citi Eurozone Economic Surprise Index -55.90 +1.7 points

• Citi Emerging Markets Economic Surprise Index -5.5 -1.1 points

• 10-Year TIPS Spread 1.94 -3.0 basis points

• 75.5% chance of Fed rate hike at Jan. 30th meeting, 87.1% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -356 open in Japan 

• China A50 Futures: Indicating -111 open in China

• DAX Futures: Indicating -155 open in Germany

Portfolio: 

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my emerging market shorts

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -3.4%

Sector Underperformers:

• 1) Banks -4.5% 2) Papers -3.9% 3) I-Banks -3.6%

Stocks Falling on Unusual Volume: 

• CONN, KRNT, COUP, HIFR, CBLK, DG, GMS, CVNA, BDC, VEEV, SBCF, FDX, UPS, ESTC, FRAC and DCI

Stocks With Unusual Put Option Activity:

• 1) DXJ 2) SIG 3) BBT 4) TOL 5) VNQ

Stocks With Most Negative News Mentions:

• 1) BLDR 2) AMD 3) FDX 4) OZK 5) OI

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -2.0%

Sector Outperformers:

• 1) Gold & Silver +1.0% 2) Utilities +.8% 3) Restaurants -.3%

Stocks Rising on Unusual Volume:

• RVNC, RH, APTX, CLVS, AVYA, MOV, CRON, AZO, UBX, MEI, STIM, SCG, MKTX, RCI, VGLT, KB, DTE, IEF, TLT, ES, AEM, AWK, D and APLS

Stocks With Unusual Call Option Activity:

• 1) RH 2) COUP 3) FDX 4) CVNA 5) TOL

Stocks With Most Positive News Mentions:

• 1) CLVS 2) RH 3) AZO 4) ATVI 5) JNJ

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +17.7% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 17.8% of Issues Advancing, 80.7% Declining
• 72 New 52-Week Highs, 280 New Lows
• 31.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.8%
• Vix 19.8 +20.6%
• Total Put/Call .84 +10.5%
• TRIN/Arms 1.72 +97.7%

Tuesday Watch

Evening Headlines

Bloomberg:

• Kudlow Says U.S. and China Are ‘Pretty Close’ to Deal on Tech Theft.

• Mnuchin Says He's Hopeful of China Policy Change in 90-Day Truce.    

• Korea’s Economic Growth Meets Estimate, Inflation on Target.

• The Case for a Stock Rally, Even After Emerging Markets’ Growth Story Buckled.

• Asian Stock Rally Stalls; U.S. Curve Flattens. Asian stocks slipped Tuesday, signaling fading investor applause for the U.S.-China trade truce. A portion of the Treasury yield curve inverted for the first time in more than a decade. Stocks in Japan, Korea and Australia posted modest losses while Hong Kong futures pointed lower. Earlier, the S&P 500 Index closed higher on the trade news, while the dollar weakened and oil gained. In the Treasury market, three-year yields climbed above five-year ones, showing that traders are pricing in the end of the Federal Reserve’s interest-rate hike campaign. Ten-year yields steadied below 3 percent. The MSCI Asia Pacific Index fell 0.1 percent at 9:05 a.m. Tokyo time. Japan’s Topix Index fell 0.2 percent. Hang Seng futures fell 0.6 percent overnight. The S&P/ASX 200 fell 0.2 percent.   

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

• Fed's Powell Says Strong Economy Hasn't Reached All Americans.

Wall St. Journal:

• Trump Names Lighthizer to Run U.S.-China Negotiations.

• Qatar to Leave OPEC as Cartel Pressured to Cut Production.

• The Global Carbon Tax Revolt.

• Investors’ New Lifeline: The Trump Put.

• 50 Winning Presents—From Understated to Over the Top.

• WSJ. Magazine’s 2019 Luxury Gift Guide. 

• German Auto CEOs’ Planned U.S. Meeting Draws European Criticism

MarketWatch.com:

• Here are the best-performing U.S. stocks in Monday’s rally.

• Nigam Arora: This bullish technical pattern in the stock market supports Trump and Xi’s trade tango.

• December historically is the most wonderful time of the year for stocks.

• Key yield curve hits flattest in 11 years; 3-year and 5-year note invert for first time since 2007.

• Opinion: Bitcoin is close to becoming worthless.

• Bitcoin tumbles 8%, puts 14-month low at risk.

Fox News:

• President George H.W. Bush lies in state at US Capitol after heartfelt tributes, wreath-laying.

CNBC:         

• JP Morgan's market-moving strategist says rally has further to go: 'Pain trade is on the upside'.

• Cramer explains how to profit from China's trade concessions.

• Stocks making the biggest moves after hours: Restoration Hardware, Smartsheet and more.

• These two online retailers are blowing Amazon(AMZN) out of the water.

• Glenn Beck and Mark Levin form right-wing media outlet that could rival Fox News streaming service.

• Salesforce(CRM) co-CEO Block says he was skeptical of MuleSoft deal until a meeting with a big bank.

• Cramer: Caterpillar(CAT) stock charts show high-risk, high-reward chance of a 'snapback rally'. 

• Under Armour(UA) is on a hot streak, and charts point to more upside.

• Kudlow says progress in US-China trade will happen 'very quickly'.

• Citi: 90% probability market is higher at this time next year.

Zero Hedge:     

• Macron On Edge As Up To 120,000 Angry "Yellow Vests" Prepare To Storm The Bastille.

• Why Have Seattle's Police Become Enforcers For Antifa?

• Balyasny Fires 20% Of Its Staff As Hedge Fund Loses Billions; Einhorn Is Down 28% YTD.

• New Jersey Bill Would Allow Illegal Aliens To Obtain Driver's License.

• CNN's Jeff Zucker May Challenge Trump In 2020.

• There Is Suddenly A Far Bigger European Problem Than Brexit Or Italy.

• The Best And Worst Performing Assets In A "Brutal" November And YTD.

• Gold, Yuan, & Stocks Gain On Trump-Trade-Truce But Yield Curve Crashes.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 90.0 -3.75 basis points. 

• Asia Pacific Sovereign CDS Index 9.25 -1.0 basis point.

• Bloomberg Emerging Markets Currency Index 67.46 -.05%.

• FTSE 100 futures +.02%.

• S&P 500 futures -.26%.

• NASDAQ 100 futures -.32%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• (AZO)/12.22

• (AVYA)/.94

• (DG)/1.27

• (DCI)/.57

• (HDS)/.99

• (MOV)/1.12

After the Close:

• (HQY)/.25

• (HPE)/.43

• (MRVL)/.32

• (OLLI)/.31

• (TOL)/1.84

• (ZS)/-.05

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Pres. Trump meeting with German automakers, RBA rate decision, weekly US retail sales reports, Citi Consumer Conference, Goldman Financial Services Conference, (WDC) investor day and the (EW) investor conference could also impact trading today.

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