Stocks Surging into Final Hour on China Trade Deal Hopes, Diminished Brexit Pessimism, Less European/Emerging Market/US High-Yield Debt Angst, Tech/Retail Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 15.9 -9.6%

• Euro/Yen Carry Return Index 124.35 +.85%

• Emerging Markets Currency Volatility(VXY) 8.17 -.97%

• S&P 500 Implied Correlation 37.4 -11.5%

• ISE Sentiment Index 110.0 +11.1%
  

• Total Put/Call .96 -4.0%

• NYSE Arms .65 -7.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 57.16 -5.22%
  

• America Energy Sector High-Yield CDS Index 516.0 -1.21%

• European Financial Sector CDS Index 61.03 -7.27%

• Italian/German 10Y Yld Spread 138.25 -4.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 74.97 -4.29%
  

• Emerging Market CDS Index 204.08 -2.67%
  

• iBoxx Offshore RMB China Corporate High Yield Index 166.39 +.03%

• 2-Year Swap Spread 5.50 +2.5  basis points

• TED Spread 33.0 -1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -18.0 +8.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.68 +.36%
• 3-Month T-Bill Yield 1.66% -1.0 basis point

• Yield Curve .13 +1.0 basis point

• China Iron Ore Spot 88.00 USD/Metric Tonne +3.1%

• Citi US Economic Surprise Index 15.30 +4.3 points

• Citi Eurozone Economic Surprise Index -78.1 +.9 point

• Citi Emerging Markets Economic Surprise Index -17.90 -5.3 points

• 10-Year TIPS Spread 1.57 +5.0 basis points
• 80.6% chance of Fed rate cut at Dec. 11th meeting, 93.7% chance of cut at Jan. 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +362 open in Japan 
• China A50 Futures: Indicating +94 open in China

• DAX Futures: Indicating -21 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth +1.5%

Sector Underperformers:

• 1) Gold & Silver -2.7% 2) Utilities -.2% 3) Foods +.2%

Stocks Falling on Unusual Volume: 

• MTCH, GNRC, CRWD and RGLD

Stocks With Unusual Put Option Activity:

• 1) FXE 2) PLNT 3) TUR 4) FIZZ 5) MAT

Stocks With Most Negative News Mentions:

• 1) CRWD 2) FSLY 3) OSTK 4) FNMA 5) CGC

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +2.2%

Sector Outperformers:

• 1) Oil Service +4.3% 2) Steel +3.7% 3) Gaming +3.5%

Stocks Rising on Unusual Volume:

• AERI, FAST, SAVE, RETA, DSSI, SLDB, X, AAN, GWW, DECK, SKT, TTD, MSM, RUTH, WORK, RDFN, TEX, CTB, MDP, PHR, ROKU, FUL, BBBY, OZK, WYNN, INSW, SF, KFY, EBIX, CAT, KRA, ALK, ITW, FTV, URGN, MXL, WEN, LILAK, SAIA, LII, FOCS, SPB, KEM, VLY, MMM, CNO, CFR, RXN and RVLV

Stocks With Unusual Call Option Activity:

• 1) FAST 2) ETN 3) KWEB 4) XRT 5) XLI

Stocks With Most Positive News Mentions:

• 1) FAST 2) SAVE 3) NTRR 4) SES 5) TK

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +18.9% Above 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 78.9% of Issues Advancing, 19.5% Declining
• 83 New 52-Week Highs, 16 New Lows
• 49.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 44.2%
• Vix 16.1 -8.5%
• Total Put/Call .84 -16.0%
• TRIN/Arms .60 -14.3%

Friday Watch

Evening Headlines

Bloomberg:   

• Trump Says Day One of U.S.-China Trade Talks Went Very Well.

• China to Ask U.S. to End Sanctions on Its Biggest Shipping Company China Hit by EU Tariffs as High as 66%.

• Europe Says It’s Ready for a Trade War If Pressured by the U.S. 

• Stocks Rise as Trade Talks Head Into Second Day. Stocks in Asia gained as high-level U.S.-China trade talks progressed into a second day and optimism grew that a truce can be achieved. Treasury yields edged back after jumping overnight. Shares opened higher in Seoul, Tokyo and Sydney, while S&P 500 futures rose after President Donald Trump said discussions with Chinese counterparts are going “really well” and that they will continue on Friday. Ten-year Treasury yields dipped after rising rose to the highest in a week and the yuan steadied after its climb. The pound retained its advance spurred by talk of a Brexit deal. Futures on the S&P 500 Index gained 0.1% as of 10:10 a.m. in Tokyo. The underlying gauge rose 0.6% Thursday. Japan’s Topix index advanced 0.5%. South Korea’s Kospi index gained 1%. Australia’s S&P/ASX 200 Index advanced 1%.

• Oil Jumps as U.S-China Trade Talks Lift Gloom Over Demand.

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

• Dark Shops, Spotty Phones, Rotting Fish: This Is Life in California's Mass Blackout.

• Nonsense Market Moves Have Investors ‘Exhausted’ by Trade Talks.

Wall Street Journal:

• A Hostile Climate for Children.

• Two Men Who Helped Giuliani on Ukraine Arrested.

• Political Campaigns Know Where You’ve Been. They’re Tracking Your Phone.

• Ukraine Smoke and Mirrors.

• NBA China Game Goes On as Tensions Persist.

• Trump to Meet With China’s Top Trade Negotiator on Friday.

• Those Probiotics May Actually Be Hurting Your ‘Gut Health’.

Fox News:

• These celebs are joining the fight over Ellen DeGeneres' friendship with President Bush.

• DAVID BOSSIE: Americans are witnessing an impeachment conclusion.

MarketWatch.com:  

• For hedge funds, software-as-a-service stocks are the new FAANG.

CNBC:

• SAP CEO Bill McDermott stepping down after over nine years leading software giant.

• More than two dozen now dead from vaping lung illness as outbreak spreads, CDC says.

• Apple deferred to the Chinese government long before the Hong Kong protests.

• Florida is scooping up data on schoolchildren, from security cam footage to social media.

• Stocks making the biggest moves after hours: Roku, Walmart, Slack and more.

Zero Hedge:  

• US China Business Council: A Deal Is Coming (But It Will Be Small).

• Watch: CNN Reporter Abruptly Muzzled While Asking NBA Stars About China.

• Climate Alarmists Superglue Themelves To Street, Get Arrested After Bringing Times Square To Standstill.

• Humor? NBA Now Requiring All Players To Stand For Chinese National Anthem.

• Pound Rallies On Report Johnson And Varadkar Nearing Brexit Deal.

• New Vaccines Are In Our Future That Will "Literally Change Your DNA".

• US Futures Spike On Trump Trade Talks Comments.

• America 2019: Even The Wealthy Are Poorer In Everything That Matters.

• After Overnight Chaos, Trump Trade Tweet Sparks Stock Buying-Panic.

Business Insider:

• Apple CEO Tim Cook addressed employees to explain why he stands by the company's decision to remove an app that Hong Kong protesters were using to track police.

• Austin's homeless crisis is so dire, a nonprofit built an $18 million tiny home village to get the chronically homeless off the streets. Take a look inside Community First Village.

Night Trading 

• Asian equity indices are +.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 78.0 -.75 basis point.

• China Sovereign CDS 46.75 -1.25 basis points.

• Bloomberg Emerging Markets Currency Index  65.46 -.01%.

• FTSE 100 futures n/a.

• S&P 500 futures +.31%.

• NASDAQ 100 futures +.36%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (FAST)/.36

• (INFY)/9.38

After the Close:

• None of note

Economic Releases
8:30 am EST

• The Import Price Index MoM for Sept. is estimated unch. versus a -.5% decline in Aug. 

• The Export Price Index MoM for Sept. is estimated to fall -.1% versus a -.6% decline in Aug.

10:00 am EST

• Preliminary Univ. of Mich. Consumer Sentiment for Oct. is estimated to fall to 92.0 versus 93.2 in Sept.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Canada Unemployment Rate, Bloomberg Oct. US Economic Survey and the (WEN) investor day could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and financial 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 day.