Stocks Reversing Slightly Higher on Falling Inflation Expectations, Technical Buying, Apple(AAPL) Reversal, Tech/Retail Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 23.50 +1.2%

• Euro/Yen Carry Return Index 133.49 +.06%

• Emerging Markets Currency Volatility(VXY) 10.31 +1.88%

• S&P 500 Implied Correlation 47.58 +5.2%

• ISE Sentiment Index 98.0 +15.3%
  

• Total Put/Call 1.13 -.88%

• NYSE Arms 1.47 -28.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 81.95 +.01%
  

• America Energy Sector High-Yield CDS Index 679.0 -1.79%

• European Financial Sector CDS Index 111.47 +3.37%

• Italian/German 10Y Yld Spread 286.0 -2.25 basis points
  

• Asia Pacific Sovereign Debt CDS Index 9.98 +2.15%

• Emerging Market CDS Index 208.19 +.90%
  

• iBoxx Offshore RMB China Corporate High Yield Index 147.81 -.21%

• 2-Year Swap Spread 12.75 -3.25 basis points

• TED Spread 39.25 +2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -19.0 -3.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.84 -.48%

• 3-Month T-Bill Yield 2.38% -1.0 basis point

• Yield Curve 13.50 -.5 basis point

• China Iron Ore Spot 64.6 USD/Metric Tonne -.28%

• Citi US Economic Surprise Index -6.5 +.9 point

• Citi Eurozone Economic Surprise Index -48.90 +.3 point

• Citi Emerging Markets Economic Surprise Index -6.7 -2.1 points

• 10-Year TIPS Spread 1.87 -3.0 basis points

• 70.9% chance of Fed rate hike at Jan. 30th meeting, 76.8% chance at March 20th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +96 open in Japan 

• China A50 Futures: Indicating +36 open in China

• DAX Futures: Indicating +109 open in Germany

Portfolio: 

• Higher: On gains in my tech/medical/retail sector longs, index hedges and emerging market shorts

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.9%

Sector Underperformers:

• 1) Oil Service -2.7% 2) Energy -2.3% 3) Papers -2.1%

Stocks Falling on Unusual Volume: 

• TVTY, MGNX, QDEL, AB, BIG, MNTA, GMS and NAV

Stocks With Unusual Put Option Activity:

• 1) RAMP 2) KKR 3) AMLP 4) HCLP 5) HES

Stocks With Most Negative News Mentions:

• 1) MGNX 2) MPX 3) KEY 4) NFX 5) UNFI

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.1%

Sector Outperformers:

• 1) Semis +1.2% 2) Software +1.0% 3) Defense +.9%

Stocks Rising on Unusual Volume:

• NTRI, RARX, XPER, DOMO, JOE, OBNK, BG, FORM, KTOS, LASR, KNSA, RCUS, SYX, UBX, NFEC, MTN, EQT, SRRK, HI, KEP, FICO, LULU, TRHC and NTRI

Stocks With Unusual Call Option Activity:

• 1) EWJ 2) AFL 3) DVA 4) ISRG 5) TBT

Stocks With Most Positive News Mentions:

• 1) YELP 2) SFIX 3) RARX 4) SYX 5) AXSM

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +24.0% Above 100-Day Average
• 0 Sectors Rising, 11 Sectors Declining
• 22.5% of Issues Advancing, 75.1% Declining
• 5 New 52-Week Highs, 490 New Lows
• 22.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 41.6%
• Vix 24.7 +6.4%
• Total Put/Call 1.25 +9.7%
• TRIN/Arms 1.91 -.1%

Monday Watch

Today's Headlines

Bloomberg:   

• China's Weekend Data Signal Weakening Demand at Home and Abroad. 

• Trump Team Faces Awkward Balancing Act as China Raises Huawei Tensions.

• China Summons U.S. Envoy Over Huawei CFO.  

• May Sticks With Brexit Vote as Demands to Renegotiate Mount.     

• Macron Pressed on All Sides to End Crisis With a Grand Gesture.

• Railway Workers' Strike May Disrupt Travel Across Germany Monday. 

• Stocks Drop on Heightened Trade Worry; Yen Gains. U.S. stock futures declined with equities in Asia amid a potential escalationof tensions between Washington and Beijing, and after signs China’s economy remains under pressure. The yuan weakened with the Australian dollar, while Treasuries climbed with the yen as haven assets caught a bid. Futures on the S&P 500 Index dropped 0.8 percent and shares fell in Australia, Japan and South Korea, building on a weak Friday session when U.S. equities sank more than 2 percent. Yields on 10-year Treasury slid to 2.83 percent, the lowest in four months. Dampening the mood at the start of this week was news China’s vice foreign minister has summoned the U.S. ambassador Terry Branstad in protest over the arrest of Huawei Technologies Co.’s chief financial officer and weak data on China’s slowing economy. Japan’s Topix index fell 1.5 percent as of 9:02 a.m. in Tokyo. Australia’s S&P/ASX 200 Index lost 1.8 percent. FTSE China A50 futures slid 0.4 percent and Hang Seng Index futures were flat late Friday. Futures on the S&P 500 Index were down 0.8 percent.

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

• Huawei Factor, China Easing Scope, Japan Taper Quickens: Eco Day.

• Treasuries Rally Must Clear $78 Billion Hurdle, Inflation Report.

• The Markets Have Become Slaves to False Narratives.

Wall Street Journal:

• Silicon Valley Helped Build Huawei. D.C. Could Dismantle It.

• All the Taxes in France.

• V.P. Aide Nick Ayers Won’t Be Next White House Staff Chief.

• Details Emerge in U.S.’s Trade Truce With China. 

• Riots Resurface Across France, Piling Pressure on Macron.

• Oil’s Sharp Swings Are a Symptom of a Changing Market.

• The Market’s Latest Problem: Hesitation to Buy the Dip.

• Hospital Beds Get Digital Upgrade.

• Facebook Censors at Random.

MarketWatch.com:

• Barron’s: How subscriptions are remaking corporate America.

• Jeff Reeves: These 5 stocks are surprising winners amid the market’s wild swings.

• Bridge to nowhere? Some doubts on U.S. economy justified, doom and gloom is not.

Fox News:

• Fired FBI director tells GOP lawmakers he deliberately kept Trump meeting details from DOJ.

• ANDREW McCARTHY: How Cohen memo makes it likely Trump will be indicted.

• VICTORIA TOENSING: Why has Mueller ignored Obama administration crimes?

CNBC: 

• Wall Street is expecting a two-year pause in big media and telecom deals after a crazy 2018.

• Google has huge plans for its home city — here's a look at the massive development.

• A wintry storm hammering the Southeast grounds more than 1,400 flights, as airlines waive change fees. 

• China's real endgame in the trade war runs through Europe.

• Money manager debunks bear market fears, calls turmoil a 'messy correction'.

• Ford and VW considering an expansive alliance likely to echo across the global auto industry.   

• Treasury Secretary Steven Mnuchin is under consideration to become Trump's next chief of staff.

Zero Hedge:    

• China Summons US Ambassador Over Huawei Arrest, Threatens "Further Action".

• "Economic Catastrophe": Yellow Vest Protests Cripple French Businesses; Foreign Minister Slams Trump.

• It's Not Working! Charting China's Loosening Policy Path.

• Despite Comey's Struggle With Amnesia, Ex-FBI Director Confirms Dossier Totally Unverified.

• Lighthizer Sees March "Hard Deadline" For Trade Talks; Navarro: "China Predatory Behavior Is Over".

• These Are The Three Things Goldman's Clients Are Most Worried About.

• US Futures Dive At Open, Take Out Thursday's Lows.

• China CPI Misses; PPI Inflation Is Lowest In Two Years.

• Japan GDP Tumbles After Biggest CapEx Collapse Since Financial Crisis.

• State Of Emergency Declared As "Historic Winter Storm" Pounds Carolinas; 100,000 Without Power.

• Trump: Comey Told 245 Lies During Friday's Congressional Testimony.

• Watch: New Video Surfaces Of Russian Combat Laser As US Threatens To Abandoned INF Treaty.

• Why China Should Remove All Trade Tariffs.

• Jeff Bezos Earns More In 30 Seconds Than The Average Worker Makes In A Year.

• 125,000 French Take To Streets As Trump Trolls Macron; Protester's Hand Blown Off In Graphic Video.

• 9 Signals That The Market Has Finally Bottomed... And 5 That The Bottom Is A Lot Lower.

Business Insider:

• This graph shows 90% of political donations from big tech workers went to the Democrats, with Googlers leading the charge.

Night Trading

• Asian indices are -1.75% to -.75% on average.

• Asia Ex-Japan Inventment Grade CDS Index 97.75 +3.0 basis points.

• Asia Pacific Sovereign CDS Index 9.75 unch.

• Bloomberg Emerging Markets Currency Index 67.17 +.02%.

• FTSE 100 futures -.92%.

• S&P 500 futures -.75%.

• NASDAQ 100 futures -.81%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• None of note

After the Close:

• (CASY)/1.64

• (NX)/.43

• (SFIX)/.03

Economic Releases
10:00 am EST

• JOLTS Job Openings for October.
  

Upcoming Splits

• (ROL) 3-for-2
  

Other Potential Market Movers

• The (IDCC) investor day could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by financial and technology shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon.  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 technical buying, stable long-term rates and seasonal strength offset global growth fears, trade war worries and rising European/Emerging Markets/US High-Yield debt angst. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.