Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 72.75 +.25 basis point.

• China Sovereign CDS 50.25 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 66.37 +.03%.

• S&P 500 futures +.11%.

• NASDAQ 100 futures +.15%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

Before the Open:

• None of note

After the Close:

• (ADBE)/1.78

• (JBL)/.57

• (LZB)/.64

Economic Releases

8:30 am EST

• Housing Starts for May is estimated to rise to 1240K versus 1235K in April.

• Building Permits for May is estimated to fall to 1293K versus 1296K in April.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PPI report, Eurozone ZEW Survey, Japan trade data report, weekly US retail sales reports, Oppenheimer Consumer Growth/E-Commerce Conference, JPMorgan Energy Conference and the Raymond James Life Sciences/MedTech Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly mixed. The Portfolio is 75% net long heading into the day.

Stocks Modestly Higher into Final Hour on Fed Rate-Cut Hopes, Buyout Speculation, Less Eurozone Debt Angst, Biotech/Oil Service Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Advancing
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 15.46 +1.18%

• Euro/Yen Carry Return Index 126.55 +.11%

• Emerging Markets Currency Volatility(VXY) 8.37 -.71%

• S&P 500 Implied Correlation 38.57 +2.23%

• ISE Sentiment Index 122.0 +34.1%
  

• Total Put/Call .93 -2.11%

• NYSE Arms .87 -17.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 60.66 -.91%
  

• America Energy Sector High-Yield CDS Index 633.0 +.86%

• European Financial Sector CDS Index 76.42 -2.92%

• Italian/German 10Y Yld Spread 254.25 -6.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 73.31 +.6%
  

• Emerging Market CDS Index 192.67 -.46%
  

• iBoxx Offshore RMB China Corporate High Yield Index 163.68 +.04%

• 2-Year Swap Spread 2.50 +.5 basis piont

• TED Spread 24.75 -2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -14.0 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.33 -.02%
• 3-Month T-Bill Yield 2.18% -1.0 basis point

• Yield Curve 22.25 -2.25 basis points

• China Iron Ore Spot 101.76 USD/Metric Tonne -1.06%

• Citi US Economic Surprise Index -63.20 -7.8 points

• Citi Eurozone Economic Surprise Index -14.7 +4.7 points

• Citi Emerging Markets Economic Surprise Index -29.50 -2.0 points

• 10-Year TIPS Spread 1.61 -3.0 basis points
• 83.3% chance of Fed rate cut at July 31st meeting, 95.7% chance of cut at Sept. 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -19 open in Japan 
• China A50 Futures: Indicating -48 open in China

• DAX Futures: Indicating +9 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech/biotech/retail sector longs

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

• Market Exposure: Moved to 50% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value +.1%

Sector Underperformers:

• 1) Airlines -1.1% 2) Steel -1.1% 3) Road & Rail -1.1%

Stocks Falling on Unusual Volume: 

• EBIX, PB, PAYS, ALV, EFAV, NVMI, AFI, RMR, ALGN, YMAB, BHVN, ATRO, COLL, ALLE and WAIR

Stocks With Unusual Put Option Activity:

• 1) CNX 2) ARRY 3) FTR 4) ZEN 5) ATVI

Stocks With Most Negative News Mentions:

• 1) EBIX 2) PYX 3) UNP 4) KFY 5) BIDU

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap +1.2%

Sector Outperformers:

• 1) Oil Service +2.8% 2) Biotech +2.8% 3) Internet +.9%

Stocks Rising on Unusual Volume:

• ARRY, BID, CTRV, LTXB, CJ, QURE, ACM, BPMC, OPI, AGIO, ITCI, PRVB, CLVS, VYGR, TPTX and IOVA

Stocks With Unusual Call Option Activity:

• 1) FOLD 2) LCI 3) DELL 4) YETI 5) CLDR

Stocks With Most Positive News Mentions:

• 1) CALA 2) BID 3) AMRH 4) SYMC 5) MMSI

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -19.8% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 56.2% of Issues Advancing, 39.8% Declining
• 97 New 52-Week Highs, 61 New Lows
• 51.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.3%
• Vix 15.8 -.2%
• Total Put/Call .83 -12.6%
• TRIN/Arms .98 -7.6%

Monday Watch

Today's Headlines

Bloomberg:

• As Many as Two Million Protesters Hit Hong Kong Streets.

• Hong Kong's Leader Apologizes as Hundreds of Thousands Protest. 

• In Pictures: Streets Turn Into a Sea of Black .  

• Ross Downplays Prospect of Major Trade Deal at Trump-Xi Meeting.

• Argentina Isn’t Ruling Out a Cyberattack in Major Power Outage.

• Asia Stocks to Dip as Focus Turns to Central Banks. Futures pointed lower in Japan and Hong Kong, though ticked higher in Australia. S&P 500 Index futures were steady after U.S. shares dipped Friday. Treasury yields finished the week little changed as upbeat economic data left some doubts about a more dovish position from the Federal Reserve. Securities in Hong Kong will be closely watched after huge street protests over the weekend. Futures on the S&P 500 Index rose 0.1%. The underlying gauge slipped 0.2% Friday. Futures on Japan’s Nikkei 225 slid 0.3% in late Friday trading. Hang Seng futures slipped 0.4%. Futures on Australia’s S&P/ASX 200 Index rose 0.1%.  

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

• Fischer Sees Powell's End, Fed to Push BOJ, U.S. Record: Eco Day.

• Powell’s Concern Over Zero Rates Expected to Lower Bar for Fed Cut .

• Stanley Fischer Says Powell Out If Trump Re-Elected in 2020.

Wall Street Journal:

• As Tariffs Loom, U.S. Firms Say Buying American Not Viable.

• Trials Near for Boeing 737 MAX Fix.

• Case for Cutting Rates Can Be Found in Close Calls of the 1990s.

• Iran’s Elite Defense Force Finds New Funding as Tension Rises With U.S.

• China Biotechs Lure Industry Talent in the U.S.

MarketWatch.com:  

• Five things to watch in the pivotal Fed meeting. 

• As China exports slow, government might face growing labor unrest, researcher says.

CNBC:

• Hong Kong protest organizers say demonstrations swell to 2 million people.
  

Zero Hedge:      

• "Treason!" NYT Story Reveals US Cyber Ops Against Russian Power Grid Hidden From Trump.

• Deutsche Bank To Launch €50 Billion "Bad Bank" Housing Billions In Toxic Derivatives.

• US Govt's Entire Russia-DNC Hacking Narrative Based On Redacted Draft Of Crowdstrike Report.

• "It's Going To Be A Train Wreck": Farmers Say Corn Crop Far Worse Than USDA Estimates.

• OJ Simpson Joins Twitter On Nicole's Death Anniversary, Says He Has Some “Getting Even” To Do.

• Venker: The Future Of Men & Marriage Is Bleak.

• Two Million Protesters Flood Hong Kong Streets, Demand Lam Resign.

• Meet "Gekko": The Robot Bond Trader Being Developed By Quant Funds.  

Business Insider:

• Pete Buttigieg says he's to open raising children in White House with husband: 'It wouldn't be the first time children have arrived to a first couple'.

• Boeing(BA) CEO admits 'mistake' with 737 Max ahead of Paris Air Show, as analysts note 'ominous dark cloud' hanging over the entire industry.

• Apple(AAPL) CEO Tim Cook called out companies like Facebook(FB), Theranos, and YouTube in a speech pushing for responsibility in Silicon Valley.

Telegraph:

• Washington can pull the plug on Hong Kong's economic model at any moment.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 72.50 -.25 basis point.

• China Sovereign CDS 51.0 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 66.33 -.01%.

• FTSE 100 futures +.22%.

• S&P 500 futures +.22%.

• NASDAQ 100 futures +.31%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• None of note

After the Close:

• None of note

Economic Releases
8:30 am EST

• Empire Manufacturing for June is estimated to fall to 10.5 versus 17.8 in May.

10:00 am EST

• The NAHB Housing Market Index for June is estimated to rise to 67.0 versus 66.0 in May.

Afternoon

• Net Long-Term TIC Flows for April.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone Labor Data, Jefferies Steel/Metals Summit and the Jefferies Consumer Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the week.