Stocks Slightly Lower into Afternoon on China Trade Deal Concerns, Profit-Taking, Oil Decline, Gaming/Healthcare Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.7 +5.1%

• Euro/Yen Carry Return Index 124.90 -.06%

• Emerging Markets Currency Volatility(VXY) 7.27 +1.68%

• S&P 500 Implied Correlation 29.63 -2.2%

• ISE Sentiment Index 98.0 -27
  

• Total Put/Call .92 -2.13%

• NYSE Arms 1.08 +20.0%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.47 +.21%
  

• America Energy Sector High-Yield CDS Index 531.0 -.84%

• European Financial Sector CDS Index 58.24 -2.1%

• Italian/German 10Y Yld Spread 150.5 +5.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 64.04 +1.61%
  

• Emerging Market CDS Index 193.24 -.36%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.67 +.07%

• 2-Year Swap Spread 4.25 -.25 basis point

• TED Spread 35.75 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -16.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.82 -.18%
• 3-Month T-Bill Yield 1.54% unch.

• Yield Curve .24 unch.

• China Iron Ore Spot 77.0 USD/Metric Tonne +.63%

• Citi US Economic Surprise Index 5.0 -2.2 points

• Citi Eurozone Economic Surprise Index -22.80 +2.5 points

• Citi Emerging Markets Economic Surprise Index -22.10 -.7 basis point

• 10-Year TIPS Spread 1.73 unch.
• 18.7% chance of Fed rate cut at Jan. 29th meeting, 30.5% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +51 open in Japan 
• China A50 Futures: Indicating +123 open in China

• DAX Futures: Indicating +21 open in Germany

Portfolio:

• Slightly Higher: On gains in my tech sector longs

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.4%

Sector Underperformers:

• 1) Gaming -.9% 2) Healthcare Providers -.9% 3) Steel -.8%

Stocks Falling on Unusual Volume: 

• CLNC, MSG, BLUE, SGMS, ASMB, MYOK, FGEN and NXTC

Stocks With Unusual Put Option Activity:

• 1) ITCI 2) MED 3) HUM 4) CARB 5) NTNX

Stocks With Most Negative News Mentions:

• 1) LPCN 2) CRR 3) SGMS 4) RLGY 5) ACRX

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.3%

Sector Outperformers:

• 1) Homebuilders +2.2% 2) Education +1.1% 3) Alt Energy +.3%

Stocks Rising on Unusual Volume:

• CARB, INMD, CNST, SWCH, TTD, QRTEA, NVTA, TPIC, FSCT, MED, CWH, KOD, FWONK, WBA, ACAD, BNFT, CORT, CURO, ROKU, BA, XLRN, UI, SVMK, YELP, TWLO, GRUB, LILAK, NKTR, EAF, NSP and SQ

Stocks With Unusual Call Option Activity:

• 1) BAX 2) LB 3) NBIX 4) APC 5) IBB

Stocks With Most Positive News Mentions:

• 1) BELFA 2) SPWR 3) BRBR 4) FOLD 5) NKTR

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -14.9% Below 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 39.1% of Issues Advancing, 58.7% Declining
• 63 New 52-Week Highs, 39 New Lows
• 60.1% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.1%
• Vix 13.0 +7.8%
• Total Put/Call .77 -18.1%
• TRIN/Arms 1.53 +70.0%

Monday Watch

Today's Headlines

Bloomberg:

• China Says Only Patriots Can Lead Hong Kong as Tensions Rise.  

• Two Hong Kong Teenagers Shot By Police During Morning Rush Hour: Apple Daily.  

• Look Within for China’s True Growth Threat.

• Bolivian President Evo Morales Resigns After Army Tells Him to Go. 

• Stocks Edge Up in Asia With S&P 500 at Record. Stocks in Asia nudged higher and U.S. equity futures were steady as investors parsed the latest developments in the trade conflict and kept an eye on Alibaba’s Singles’ Day for a gauge of consumer health in China. Shares opened modestly higher in Tokyo and Sydney, while South Korean equities were little changed. Contracts on the S&P 500 were flat after the U.S. benchmark index eked out another record high on Friday, as Treasuries continued to decline. The 10-year yield ended the week at 1.94%. Veterans Day in the U.S. means no Treasuries trading. President Donald Trump said trade talks with China are moving along “very nicely” and Beijing wants a trade deal “much more than I do.” The offshore yuan was steady after five weeks of gains. Futures on the S&P 500 were little changed as of 9:03 a.m. in Tokyo. The underlying gauge added 0.3% on Friday. Australia’s S&P/ASX 200 Index added 0.5%. Japan’s Topix index advanced 0.3%. South Korea’s Kospi was flat.  

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

• Hard Seltzer Craze Makes White Claw Maker a Multibillionaire.

• Spain’s Socialists Fall Short in an Election Gamble Gone Wrong.

Wall Street Journal:

• Unloved Assets Join Market Rally in New Sign of Optimism.

• Aramco’s Profit Slide Shows Scale of Risk for Investors.

• Warren Is the WeWork Candidate.

• Cold Welcome for Veterans on Campus.

• Mexico Loses Its Sovereignty to Cartels.

• Rising Yields Quiet Bond Market’s Key Recession Alarm.

MarketWatch.com:

• Get ready for another Santa Claus rally to boost stocks, Fundstrat’s Tom Lee says

• Nikki Haley says top White House advisers tried to subvert Trump 

Fox News:

• Trump Jr. says Mueller probe led to eye-opening revelation about Dems.

CNBC:

• Alibaba(BABA) Singles’ Day sales hit $13 billion in first hour.

• These 4 franchises are getting new life on Disney(DIS)+.

Zero Hedge:     

• The Long March Has Paid Off: Millennials Love Socialism.

• California Approves $3.2 Billion Bond For High Speed Train To Nowhere.

• McKinsey Under Federal Criminal Investigation Over Its Work Advising Bankrupt Companies.

• Will Durham Investigation Tank Impeachment Efforts?

• Iran Finds New Oil Field With Over 50 Billion Barrels: Rouhani.

• Saudi Arabia's Final Attempt To Boost Aramco's Valuation.

• Bezos Begged Bloomberg To Run In 2020.

• Broke Bond Markets Mounting: Italy Surpasses Greece As Europe's Riskiest Sovereign.

Business Insider:

• Child porn runs rampant on big tech platforms despite detection and prevention methods, according to New York Times investigation.

Telegraph:

• Economy to escape recession scare in pre-election boost for Boris Johnson.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 63.25 -1.5 basis points.

• China Sovereign CDS 36.25 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 65.90 -.07%.

• FTSE 100 futures -.02%.

• S&P 500 futures -.23%.

• NASDAQ 100 futures -.28%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• None of Note

After the Close:

• (FGEN)/-.57

• (TDW)/-.29

• (ICUI)/1.62

Economic Releases

• None of note

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The UK GDP report and the Credit Suisse Healthcare Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 100% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters.

• Global Economy Week by Bloomberg. 

• The Week Ahead 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 modestly higher on China trade deal hopes, fewer global growth concerns, earnings optimism, technical buying, oil strength and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.