Stocks Surging into Final Hour on Diminished China Trade Deal Tensions, US Economic Data, Less European/Emerging Markets/US High-Yield Debt Angst, Tech/Healthcare Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 17.9 -3.2%

• Euro/Yen Carry Return Index 123.77 +.9%

• Emerging Markets Currency Volatility(VXY) 8.7 +.8%

• S&P 500 Implied Correlation 43.4 -10.4%

• ISE Sentiment Index 92.0 +24.3%
  

• Total Put/Call .92 -23.3%

• NYSE Arms .88 -58.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.3 -6.65%
  

• America Energy Sector High-Yield CDS Index 402.0 +1.0%

• European Financial Sector CDS Index 70.25 -5.7%

• Italian/German 10Y Yld Spread 222.75 -6.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 69.27 -.55%
  

• Emerging Market CDS Index 203.44 +2.1%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.85 +.03%

• 2-Year Swap Spread -1.0 -.25 basis point

• TED Spread 19.5 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -19.75 -5.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.11 +.19%
• 3-Month T-Bill Yield 1.99% +2.0 basis points

• Yield Curve 2.0 -4.5 basis points

• China Iron Ore Spot 89.25 USD/Metric Tonne +2.82%

• Citi US Economic Surprise Index -19.8 +7.0 points

• Citi Eurozone Economic Surprise Index -62.90 -10.1 points

• Citi Emerging Markets Economic Surprise Index -15.9 -.2 point

• 10-Year TIPS Spread 1.64 +3.0 basis points
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +260 open in Japan 
• China A50 Futures: Indicating +153 open in China

• DAX Futures: Indicating +33 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value +1.0%

Sector Underperformers:

• 1) Gold & Silver -1.6% 2) Agriculture +.3% 3) REITs +.3%

Stocks Falling on Unusual Volume: 

• CVET, EAT, WK, TWNK and CIT

Stocks With Unusual Put Option Activity:

• 1) NEM 2) TXMD 3) MAT 4) TPR 5) SIG

Stocks With Most Negative News Mentions:

• 1) BE 2) ATRC 3) FICO 4) OXY 5) TRBC

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +2.0%

Sector Outperformers:

• 1) Papers +4.3% 2) Steel +3.4% 3) Semis +3.1%

Stocks Rising on Unusual Volume:

• DCPH, DGLD, AGS, GMAB, GGAL, TNAV, JD, BMA, PAM, KLXE, PLMR, NOBL, CORR, NTES, IIVI, ROKU, AVYA, BBY, DLTR, EXPD, AAPL, PUK, FTCH, TNAV, GTLS, CDLX, SHOO, MUR, TLND, MAT, FRPT, PVH, HAS, AXGN, ATRO, AERI, GPS and IAA

Stocks With Unusual Call Option Activity:

• 1) GNW 2) XRT 3) BBY 4) CME 5) FAST

Stocks With Most Positive News Mentions:

• 1) MBIO 2) DCPH 3) JD 4) NVDA 5) GE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +41.6% Above 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 76.4% of Issues Advancing, 20.9% Declining
• 136 New 52-Week Highs, 202 New Lows
• 49.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.1%
• Vix 17.9 -15.4%
• Total Put/Call .81 -32.5%
• TRIN/Arms .97 -54.5%

Tuesday Watch

Evening Headlines

Bloomberg:    

• Hong Kong’s Next Crisis May Be Economic as Protest Fallout Grows.

• Macri Refuses to Throw in Towel After Losing Argentine Primaries.

• Stocks Slide to Extend to Asia as Treasuries Rally. Asian stocks looked set to follow their U.S. counterparts lower as political unrest in Hong Kong and Argentina added to trade concerns and fueled a rally in global bonds. The yen and gold climbed. Risk assets were pummeled and Treasury yields sank after authorities closed Hong Kong’s airport and a Chinese official said the city was at a “critical juncture.” Futures indicated markets will open lower in Tokyo when traders return from a holiday Monday, as well as in Sydney. Hong Kong futures dropped more than 1% after regular trading closed Monday. The S&P 500 Index retreated for a second day and now sits almost 5% below its all-time high. Futures on the Nikkei 225 fell 1.2% in Singapore. Hong Kong’s Hang Seng Index futures lost 1.2% earlier. Australia’s S&P/ASX 200 Index contracts declined 0.8%.  

• Five Things You Need to Know to Start Your Day   

• Oil Steadies After Solid Aramco Result Offsets Demand Concerns.

• Corn Futures Post Worst Rout Since 2013 on U.S. Acreage Surprise.

• U.S. Long-Bond Yield Nears All-Time Low as Global Anxiety Grows.  

• After Crushing the London Whale, a Hedge-Fund Star Lost His Way.

• SEC Delays Cryptocurrency ETF Decisions, Citing Market Concerns.

Wall Street Journal:

• GM, Volkswagen Say Goodbye to Hybrid Vehicles.

• 10% Tariffs Were Manageable. At 25%, Businesses Are Squirming.

• Schools Fight Websites That Sell Homework Help.

• Cashierless Stores Make Inroads in U.S.

• Attorney General Cites ‘Serious Irregularities’ at Federal Jail Where Epstein Died.

• Hong Kong Cancels Flights as Protesters Shut Down Airport.

Fox News:

• GREGG JARRETT: FBI was running an operation against Trump, docs show.

MarketWatch.com:

• A Tiananmen ‘solution’ in Hong Kong would destroy its economy: Minxin Pei.

• Goldman: Huawei deadline could further escalate a ‘full-blown economic conflict’ between U.S., China.

CNBC:

• Cramer: Hong Kong protests ‘more serious’ than US-China trade war for global markets.

Zero Hedge:

• llinois' Shrinking Tax Base: Residents Are Leaving & Taking Their Incomes With Them.

• 7 Unanswered Questions About Epstein's Death That The Mainstream Media Is Not Talking About.

• Complete List Of Clinton Associates Who Allegedly Died Mysteriously Or Committed Suicide Before Testimony.

• Epstein's Death May Be A "Turning Point In The Public's Willingness To Accept Official Bullshit".

• Global Times Shows Dramatic Video Of Chinese Army Preparing For Hong Kong Invasion

• Elizabeth Warren Takes The Lead In Online Betting Markets.

• More Bad News Out Of Beijing: China's Credit Engine Breaks Down.

• US Surpasses Entire 2018 Budget Deficit With Two More Months To Go In 2019.

• Macri Massacre Cuts Stocks In Half Today As Argentina Slides Into The Abyss.

• Israel Would "Spark War" By Joining US Flotilla In Gulf: Iran's Navy Chief.

• Trump Tweets Concern Over "Air Around The Facility" After Russian Nuclear Accident.

• Geopolitical Chaos Slams Stocks As Traders Flood Into Safe-Havens.

Business Insider:

• Uber confirms a hiring freeze in the US and Canada as the ride-hailing giant ramps up cost-cutting efforts

Night Trading 

• Asian equity indices are -1.25% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 70.0 +3.0 basis points.

• China Sovereign CDS 53.5 +2.75 basis points.

• Bloomberg Emerging Markets Currency Index  65.98 -.01%.

• FTSE 100 futures -.20%.

• S&P 500 futures +.25%.

• NASDAQ 100 futures +.25%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (AAP)

• (EAT)/1.34

• (ELAN)/.26

• (IIVI)/.66

• (JD)/.54

After the Close:

• (MYGN)/.48

• (TLRY)/-.27

Economic Releases
6:00 am EST

• The NFIB Small Business Optimism Index for July is estimated to rise to 104.0 versus 103.3 in June.

8:30 am EST

• The CPI MoM for July is estimated to rise +.3% versus a +.1% gain in June.

• The CPI Ex Food and Energy MoM for July is estimated to rise +.2% versus a +.3% gain in June.

• Real Avg. Weekly Earnings YoY for July.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI report, German ZEW Index, weekly US retail sales reports, Susquehanna's Energy/Industrials/Airlines Conference, JPMorgan Auto Conference and the Wedbush PacGrow Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by industrial and financial shares in the region. I expect US stocks to open mixd and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Falling into Final Hour on China/Hong Kong Tensions, Emerging Markets Debt Angst, Technical Selling, Agriculture/Financial Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 20.1 +11.8%

• Euro/Yen Carry Return Index 122.61 -.27%

• Emerging Markets Currency Volatility(VXY) 8.65 +3.22%

• S&P 500 Implied Correlation 46.57 +11.5%

• ISE Sentiment Index 78.0 -11.4%
  

• Total Put/Call 1.20 +20.0%

• NYSE Arms 2.23 +21.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.45 +4.3%
  

• America Energy Sector High-Yield CDS Index 398.0 +1.5%

• European Financial Sector CDS Index 74.45 +2.6%

• Italian/German 10Y Yld Spread 229.5 -8.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 69.94 +3.53%
  

• Emerging Market CDS Index 200.69 +12.8%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.81 +.06%

• 2-Year Swap Spread -.75 +.5 basis point

• TED Spread 19.5 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -14.25 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.0 -.36%
• 3-Month T-Bill Yield 1.97% -2.0 basis points

• Yield Curve 6.5 -3.25 basis points

• China Iron Ore Spot 87.18 USD/Metric Tonne -1.08%

• Citi US Economic Surprise Index -26.8 +4.1 points

• Citi Eurozone Economic Surprise Index -52.80 +1.3 points

• Citi Emerging Markets Economic Surprise Index -15.7 +4.4 points

• 10-Year TIPS Spread 1.61 -5.0 basis points
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -414 open in Japan 
• China A50 Futures: Indicating -248 open in China

• DAX Futures: Indicating -69 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 50% Net Long