Stocks Reversing Higher into Final Hour on China Trade Deal Optimism, Technical Buying, Short-Covering, Tech/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 12.6 +4.3%

• Euro/Yen Carry Return Index 124.92 +.13%

• Emerging Markets Currency Volatility(VXY) 7.19 -.42%

• S&P 500 Implied Correlation 26.44 unch.

• ISE Sentiment Index 80.0 +1
  

• Total Put/Call .92 +13.6%

• NYSE Arms 1.20 +122.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.12 -.87%
  

• America Energy Sector High-Yield CDS Index 548.0 -1.64%

• European Financial Sector CDS Index 58.66 -.78%

• Italian/German 10Y Yld Spread 154.50 -13.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 63.72 -1.15%
  

• Emerging Market CDS Index 200.58 +1.63%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.92 +.06%

• 2-Year Swap Spread 1.0 -2.0 basis points

• TED Spread 34.25 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.0 +1.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.36 -.03%
• 3-Month T-Bill Yield 1.56% unch.

• Yield Curve .22 -2.0 basis points

• China Iron Ore Spot 83.30 USD/Metric Tonne -.01%

• Citi US Economic Surprise Index -5.7 +.4 basis point

• Citi Eurozone Economic Surprise Index -13.80 -3.1 points

• Citi Emerging Markets Economic Surprise Index -27.20 -1.3 basis points

• 10-Year TIPS Spread 1.65 +1.0 basis point
• 21.7% chance of Fed rate cut at Jan. 29th meeting, 34.6% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -6 open in Japan 
• China A50 Futures: Indicating -30 open in China

• DAX Futures: Indicating +11 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.3%

Sector Underperformers:

• 1) Oil Service -2.4% 2) Energy -1.4% 3) Agriculture -1.0%

Stocks Falling on Unusual Volume: 

• SWAV, IIVI, BSM, UBSI, VNOM, AXNX and ABMD

Stocks With Unusual Put Option Activity:

• 1) MJ 2) MNST 3) ITCI 4) OSTK 5) CGC

Stocks With Most Negative News Mentions:

• 1) GPOR 2) QD 3) CGC 4) QUAD 5) ITGR

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.4%

Sector Outperformers:

• 1) Homebuilders +1.6% 2) Social Media +1.1% 3) Steel +1.1%

Stocks Rising on Unusual Volume:

• DRNA, INMD, GSX, MDCO, ESPR, PGNY, MED, PTON, MAXR, ADPT, CNNE, SNAP, LYFT, CLNC, ROKU, SERV, NVDA, PD, DISCA, MOH, SPLK, LOCO, TVTY, BOOT, COLD, FNLX, CORT, FIVE, RETA, RRR and SPAR

Stocks With Unusual Call Option Activity:

• 1) WU 2) WDAY 3) DHR 4) JNPR 5) UNH

Stocks With Most Positive News Mentions:

• 1) SPLK 2) KRTX 3) FTNT 4) HFC 5) NVDA

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -.9% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 41.6% of Issues Advancing, 55.0% Declining
• 85 New 52-Week Highs, 57 New Lows
• 58.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.7%
• Vix 12.7 +5.1%
• Total Put/Call .99 +22.2%
• TRIN/Arms 1.30 +140.7%

Monday Watch

Today's Headlines

Bloomberg:

• Hong Kong Braces for More Disruption as Violence Escalates.  

• Police Move to Clear Protesters at University: Hong Kong Update.

• Trump Tells North Korea’s Kim That Biden Isn’t a ‘Rabid Dog’.

• World Economy Recovery on the Cards in First Quarter of 2020.

• Big Bets in Asia on Fed Cuts Have Traders Guessing Who’s Paying.

• Prince Andrew Bombs in BBC Interview Over Sex Claims.

• Saudi Arabia Cuts Aramco Valuation, Boosts Loans to Get IPO Done. 

• Asia Stocks See Muted Start; Treasuries Hold Gains. Stocks saw a muted open to the week in Asia as investors await fresh developments on the U.S.-China trade front. Treasuries stabilized after advancing last week. Japanese and South Korean equities were little changed in early trading, while those in Australia dropped. U.S. futures were flat after the S&P 500 Index on Friday reached another record in a sixth week of gains, the longest streak in two years. White House economic adviser Larry Kudlow’s comment that U.S.-China talks were nearing final stages had given markets impetus Friday, though a mixed bag of retail sales and factory numbers in the U.S. weighed on the dollar. The Topix index was flat as of 9:11 a.m. in Tokyo. Australia’s S&P/ASX 200 Index dropped 0.5%. Hong Kong’s Hang Seng Index futures added 0.4% earlier. Futures on the S&P 500 Index were little changed.  

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

• Oil Holds Gains Near 2-Month Highs on U.S.-China Trade Hopes.

• PG&E Says It May Cut Power to 180,000 in Northern California.

Wall Street Journal:

• China and the Swamp Are 5G Allies.

• Europe’s New Jobs Lack Old Guarantees—Stoking Workers’ Discontent.

• Aramco IPO Aims to Value Energy Giant At Up to $1.7 Trillion.

• Elizabeth Warren Loves ‘Billionaire Tears’.

• Cyclical Shares Propel Stock Market to Latest Milestone.

• Airlines Turn Away From Big Jets.

• Hong Kong Police Threaten to Open Fire on Protesters at University.

• U.S. Struggles to Stem Chinese Efforts to Recruit Scientists.

• Iran’s Supreme Leader Seeks to Calm Deadly Anger Over Fuel Price Rises.

• Why China’s Smaller Banks Are Wobbling.

• Impeachment and Public Opinion.

• Speech and Sanctimony at Twitter.

• Sanders’s Tax Would Hit Small Investors.

MarketWatch.com:

• Opinion: Walmart’s(WMT) stock is now outperforming Amazon’s(AMZN) — here’s how it happened.

• Dow, S&P and Nasdaq finish at records after retail sales, trade optimism rebound.

Fox News:

• Texas congressman says upcoming IG report on FISA warrant likely to prompt criminal probes.

• Dem smear campaign against Trump led to deeper WH involvement in Ukraine, Nunes says.

CNBC:

• China and US had ‘constructive discussions’ about phase-one trade deal, state media says.

• HP board unanimously rejects Xerox’s bid to acquire the company.

• Trade update, Aramco IPO pricing and retail earnings: 3 things to watch for in the markets on Monday.

• White House confirms Trump will visit Apple’s manufacturing plant in Austin.

Zero Hedge:        

• Hong Kong Police Storm Into University After Violent Standoff With Student "Rioters".

• Hedge Fund: It Is Astonishing That MSCI And Bloomberg/Barclays Index Force Global Pensioners To Fund China's Communist Party.

• Here's The Real Reason Why Hong Kong Authorities Are Desperate To Regain Control Of University.

• Social Media Censorship Reaches New Heights As Twitter Permanently Bans Dissent.

• This Is How The Chinese Are Evading Capital Controls And Secretly Getting Money Out Of The Country.

• Pope Proposes New Sin: Thou Shalt Not Destroy The Harmony Of The Environment.

• Morgan Stanley Capitulates: Upgrades Global Stocks To Neutral, No Longer Sees A Recession In 2020.

• Prince Andrew's Epstein-Related BBC Interview Was "Catastrophic Mistake".

• Top NSC Official Told Secret Impeachment Panel Nothing Improper Transpired During Trump-Zelensky Call.

• Saudis Admit Aramco Not Worth $2 Trillion: "It's A Much Tougher Sell Now".

•   Hong Kong Police Officier Shot With Arrow As Fiery University Standoff Rages

• "Voters Don't Want To See Crazy Stuff" - Obama Asks WTF Are 2020 Democrats Doing.

Business Insider:

• 40 Big Tech Predictions for 2019.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 63.75 -.5 basis point.

• China Sovereign CDS 38.0 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 65.68 unch.

• FTSE 100 futures +.09%.

• S&P 500 futures -.04%.

• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• None of Note

After the Close:

• (CRMT)/1.77

Economic Releases
10:00 am EST

• The NAHB Housing Market Index for November is estimated at 71.0 versus 71.0 in October.

4:00 pm EST

• Net Long-Term TIC Flows for September.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The RBA Minutes, JPMorgan TMT Conference and the (LRG) investor day could also impact trading today.

BOTTOM LINE: Asian indices are slightly lower, weighed down by commodity and consumer shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  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.