Stocks Reversing Slightly Higher into Final Hour on Diminished China Trade Tensions, Fed Rate-Cut Hopes, Oil Gain, Tech/Retail Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.9 -2.8%

• Euro/Yen Carry Return Index 122.64 -.38%

• Emerging Markets Currency Volatility(VXY) 8.27 +.49%

• S&P 500 Implied Correlation 41.19 +4.68%

• ISE Sentiment Index 90.0 unch.
  

• Total Put/Call 1.01 -2.88%

• NYSE Arms .99 -22.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 59.38 -.5%
  

• America Energy Sector High-Yield CDS Index 392.0 +4.28%

• European Financial Sector CDS Index 64.80 +2.55%

• Italian/German 10Y Yld Spread 141.25 -3.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 72.98 +1.09%
  

• Emerging Market CDS Index 206.79 +1.11%
  

• iBoxx Offshore RMB China Corporate High Yield Index 165.78 +.07%

• 2-Year Swap Spread -.25 -4.5 basis points

• TED Spread 23.75 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -4.25 -3.0 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.52 -.14%
• 3-Month T-Bill Yield 1.89% unch.

• Yield Curve .04 unch.

• China Iron Ore Spot 91.35 USD/Metric Tonne +1.11%

• Citi US Economic Surprise Index 44.70 +3.0 points

• Citi Eurozone Economic Surprise Index -67.30 -40.9 points

• Citi Emerging Markets Economic Surprise Index -7.9 +1.4 points

• 10-Year TIPS Spread 1.61 -1.0 basis point
• 76.0% chance of Fed rate cut at Dec. 11th meeting, 84.9% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -260 open in Japan 
• China A50 Futures: Indicating -11 open in China

• DAX Futures: Indicating +5 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth unch.

Sector Underperformers:

• 1) Healthcare Providers -.9% 2) Biotech -.4% 3) Agriculture -.4%

Stocks Falling on Unusual Volume: 

• FNKO, IPHI, PINC, IIVI, CMD, KTOS and OSTK

Stocks With Unusual Put Option Activity:

• 1) DBX 2) HLF 3) AKS 4) CAG 5) PNC

Stocks With Most Negative News Mentions:

• 1) WORK 2) VAL 3) ABMD 4) GDOT 5) GTT

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.5%

Sector Outperformers:

• 1) Semis +1.4% 2) Gold & Silver +1.4% 3) Retail +1.3%

Stocks Rising on Unusual Volume:

• DOVA, EXAS, SCS, CHWY, ULTA, TPC, JEF and EQIX

Stocks With Unusual Call Option Activity:

• 1) ADI 2) HRL 3) ADM 4) APC 5) DHI

Stocks With Most Positive News Mentions:

• 1) PTE 2) EXAS 3) NVDA 4) CREE 5) CHWY

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -12.8% Below 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 54.5% of Issues Advancing, 41.8% Declining
• 78 New 52-Week Highs, 10 New Lows
• 60.7% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.2%
• Vix 15.1 -1.3%
• Total Put/Call .97 -6.7%
• TRIN/Arms .98 -22.8%

Monday Watch

Today's Headlines

Bloomberg:

• ECB’s Knot Defends Going Public With QE Rebuke Amid Outcry.

• Deutsche Bank Nears Deal to Transfer Prime Assets to BNP.

• Trudeau Pledges to Cut Taxes for Middle Class, Lower Phone Bills.

• Yuan Gains With U.S. Stock Futures on Trade Talks. The yuan climbed along with U.S. equity futures as investors monitored signs of progress in trade discussions between America and China. The yen edged lower and stock futures pointed to a mixed start in Asia. China’s Ministry of Commerce said trade groups from the two nations held “constructive”    talks on relevant economic and trade issues of mutual concern in Washington last week. Also helping sentiment: China Business News reported that Vice Agriculture Minister Han Jun said his nation’s withdrawal from a planned visit to U.S. farm states had nothing to do with trade talks. Futures on the S&P 500 Index rose 0.4% as of 8:03 a.m. in Sydney. The underlying gauge fell 0.5% on Friday. Hang Seng Index futures slid 0.4%. Futures on Australia’s S&P/ASX 200 Index were little changed.

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

• Global Steadying, Sub-Zero Trump, Australia Fizzles: Eco Day.

• Oil Gains as Report Points to Slow Return of Lost Saudi Output.

Wall Street Journal:

• Is an M.B.A. Still Worth It?

• Why Trudeau Could Lose.

• ‘Opening the Door to Hell Itself’: Bahamas Confronts Life After Hurricane Dorian.

• Fannie, Freddie Poised to Keep Profits in an Initial Privatization Move.

• August’s Hot Recession Trade Is Cooling.

MarketWatch.com:

• ‘Apple(AAPL) a value stock?’ The Great Rotation takes a strange spin.

Fox News:  

• Pelosi suggests impeachment back on the table after 'Squad' member blasts Dem leadership.

• Biden’s bid likely coming to end, thanks to Ukraine bombshell, Nunes says. 

• HELEN RALEIGH: China has already lost the trade war. Here's why.

CNBC:

• Saudi oil attacks could be a precursor to cyberwarfare, with collateral damage for companies.

• SoftBank’s Masa Son is in favor of ousting WeWork CEO Adam Neumann.

• Here’s what one top economist sees ahead for the Fed and US-China trade.

Zero Hedge:      

• Democrats Panic Over Biden-Ukraine Scandal As MSM Hits Full Spin Cycle.

• Hong Kong Protesters Ratchet Up Violence; Mall Captured, Subway Stations Attacked.

• Secret FBI Subpoenas For Personal Data Go Far Beyond Previously Known.

• Stocks, Yuan, Oil Jump As Asia Trading Starts.

• Marijuana Vape Sales Plunge In Massachusetts Amid Mysterious Outbreak. 

• Oil Set To Spike After Report Saudi Repairs At Abqaiq May Take "Up To Eight Months".

• "What Were You Like At 17?": Bill Maher Defends Brett Kavanaugh In Fiery Exchange With Guest.

• It's Official: Bank of America Now Calls What Is Coming "QE4".

• South Korean Exports Collapse 21% - Biggest Drop In A Decade.

• Automation And The Crisis Of Work.

• Why Are So Many Top-Tier College Girls Turning To 'Soft Prostitution'?

• "This Is The Most Alarming Trend In The Market": 1 In 4 Luxury NYC Apartments Remain Unsold Over The Past 5 Years.

• Global Carmageddon Continues: Mexico Total Vehicle Exports Crushed 12.7% In August.

• These Are The Banks Where The Fed's $1.4 Trillion In Reserves Are Parked.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 71.5 +1.5 basis pionts.

• China Sovereign CDS 44.5 +4.5 basis points.

• Bloomberg Emerging Markets Currency Index 65.63 +.02%.

• FTSE 100 futures +.11%.

• S&P 500 futures +.49%.

• NASDAQ 100 futures +.64%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (CMD)/.61

After the Close:

• None of note

Economic Releases

8:30 am EST

• The Chicago Fed National Activity Index for August is estimated to rise to .13 versus -.36 in July.
  

9:45 am EST

• Preliminary Markit US Manufacturing PMI for Sept. is estimated at 50.3 versus 50.3 in August.

• Preliminary Markit US Services PMI for Sept. is estimated to rise to 51.4 versu s50.7 in August.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurozone PMI report, Ladenburg Thalmann Healthcare Conference, Oppenheimer Specialty Pharma Conference, Johnson Rice Energy Conference, Stephens Bank Forum and the (BABA) investor day could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by consumer 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.