Stocks Falling into Final Hour on China Trade Deal Concerns, Yen Strength, Profit-Taking, Tech/REIT Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.0 +10.9%

• Euro/Yen Carry Return Index 125.34 +.08%

• Emerging Markets Currency Volatility(VXY) 6.81 -.29%

• S&P 500 Implied Correlation 43.85 +8.6%

• ISE Sentiment Index 75.0 +3
  

• Total Put/Call .98 unch.

• NYSE Arms .74 -53.4%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.11 +2.37%
  

• America Energy Sector High-Yield CDS Index 621.0 +.16%

• European Financial Sector CDS Index 57.08 +.97%

• Italian/German 10Y Yld Spread 163.25 +4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 64.38 +.04%
  

• Emerging Market CDS Index 206.10 +1.02%
  

• iBoxx Offshore RMB China Corporate High Yield Index 168.41 +.11%

• 2-Year Swap Spread 2.0 +2.0 basis points

• TED Spread 33.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -3.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.30 +.27%
• 3-Month T-Bill Yield 1.57% unch.

• Yield Curve .22 +6.0 basis points

• China Iron Ore Spot 86.30 USD/Metric Tonne -.12%

• Citi US Economic Surprise Index 8.7 -4.4 basis points

• Citi Eurozone Economic Surprise Index -3.40 +5.5 points

• Citi Emerging Markets Economic Surprise Index -25.90 +1.2 basis points

• 10-Year TIPS Spread 1.66 +3.0 basis points
• 16.1% chance of Fed rate cut at Jan. 29th meeting, 26.7% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -329 open in Japan 
• China A50 Futures: Indicating -40 open in China

• DAX Futures: Indicating +40 open in Germany

Portfolio:

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

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.1%

Sector Underperformers:

• 1) Internet -1.6% 2) Networking -1.3% 3) REITs -1.2%

Stocks Falling on Unusual Volume: 

• CNST, GSHD, BPMC, ARWR, OLLI, TTD, ROKU, APA and MTEM

Stocks With Unusual Put Option Activity:

• 1) XLB 2) MAT 3) SIG 4) WDAY 5) APA

Stocks With Most Negative News Mentions:

• 1) AQMS 2) LXRX 3) APA 4) ROKU 5)ADT

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value -.4%

Sector Outperformers:

• 1) Steel +2.4% 2) Gold & Silver +.6% 3) Energy +.2%

Stocks Rising on Unusual Volume:

• KOD, RVNC, PBYI, DRNA, CLVS, CDLX, EVER, SCPL, ICPT, FIXX, EIX, AQUA, ZUMZ, GBT, SKT and PGNY

Stocks With Unusual Call Option Activity:

• 1) NLOK 2) XLB 3) FOSL 4) OLED 5) APC

Stocks With Most Positive News Mentions:

• 1) GEVO 2) IHRT 3) DENN 4) ULTA 5) ORLY

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.5% Above 100-Day Average
• 1 Sector Rising, 10 Sectors Declining
• 29.1% of Issues Advancing, 67.9% Declining
• 49 New 52-Week Highs, 30 New Lows
• 58.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.5%
• Vix 14.9 +18.2%
• Total Put/Call 1.0 +2.0%
• TRIN/Arms .67 -59.0%

Monday Watch

Today's Headlines

Bloomberg:    

• China Financial Warning Signs Are Flashing Almost Everywhere.  

• China’s Manufacturing Is Back in Expansion.     

• Australia Says Citizen’s ‘Interrogation’ by China Unacceptable.

• PBOC’s Yi Signals Policy to Stay Cautious Amid Uncertain Data.

• Hong Kong Unrest Rages On as Police Clash With Protesters.  

• South Korean Consumer Prices Eke Out Growth in November.

• Merkel’s Tenure on the Line as Coalition Partner Veers Left.  

• U.S. Traders Bet Most in Two Years That Europe Has Bottomed Out.

• The Way Out for a Global Economy Hooked On Debt? Even More Debt. 

• Stocks Set for Muted Start; Treasury Futures Dip. Stocks in Asia were set for a muted start to December as investors weighed data on China’s economy that showed a bright spot for manufacturing and the latest news on the trade front. Australian bond yields rose. S&P 500 futures edged up and contracts pointed marginally higher in Tokyo and Hong Kong. The S&P 500 Index dipped on Friday. On U.S.-China trade: the Global Times reported that China’s government wants tariffs to be rolled back as part of the phase one trade deal with the U.S. Oil recovered a sliver of Friday’s slide after Iraq said OPEC and its allies will consider deeper production cuts. Futures on the S&P 500 rose 0.1% as of 8:05 a.m. in Tokyo. The underlying gauge slipped 0.4% on Friday. Futures on Japan’s Nikkei 225 added 0.2%. Hang Seng Index futures rose 0.2%. Australia’s S&P/ASX 200 Index advanced 0.1%.   

• Oil Recovers as China Data Offers Hope for Global Demand.

• Five Things You Need to Know to Start Your Day

• Billions Minted: It Will Be Hard to Top Stocks in 2019.

• Online Sales Break Black Friday Record as Clicks Beat Queues.  

• Republican Says Schiff Should Testify in Impeachment Hearing.  

• Not Even a Blockbuster Jobs Report Will Move the Needle for Treasury Bulls.  

• Bitcoin Set to Post Worst Month of 2019.

Wall Street Journal:

• Saudis Push for Longer-Lasting OPEC Cuts as Aramco IPO Approaches.

• Huawei Manages to Make Smartphones Without U.S. Chips.

• Investors Bet on More Pain for Retailers.

• U.S., Europeans Clash Over How to Handle Islamic State Detainees.

• Highways Give Way to Homes as Cities Rebuild.

• Impeachment Fight at Home Hangs Over Trump’s NATO Trip.

• Private-Equity Cash Piles Up as Takeover Targets Get Pricier.

• U.S. Growth Enters Fourth Quarter on More Solid Footing.

• Retailers Revamp Staffing as Shopping Shifts Online.

• China and Russia Are Partners—and Now Have a $55 Billion Pipeline to Prove It.

MarketWatch.com:

• Disney(DIS) is giving us Baby Yoda toys for Christmas.  

• Will a Santa Claus rally power the S&P 500 and Dow to their best years in a generation?

Barron's:

• Had bullish commentary on (IBM), (SU), (SKT) and (GOOS).

Fox News:

• 21 killed, including police officers, as bullets fly during cartel gunbattle near Texas.

• NEWT GINGRICH: Plot against Trump is real – and bigger than many think.

CNBC:

• Black Friday shoppers spend record $7.4 billion in second largest online sales day ever.

• 5G broadband is an existential threat to cable companies, but execs and investors aren’t worried.

• ‘Tax Cuts 2.0’ could include a rate reduction for the middle class. Here’s who would benefit most.

Zero Hedge:           

• London Bridge Killer Was Released From Prison Early On Prior Terrorism Charge.

• In Shocking Blow To Merkel, Germany's SPD Elects Leftist Leaders, Risking Coalition Government Collapse.

• CTAs Caught In A Tug Of War Between Bonds And Stocks As Year-End Looms.

• Newsweek Reporter Fired After Peddling Fake News That Trump Golfed On Thanksgiving.

• Schwab Abandons High-Tax San Francisco For New $100 Million Mega-HQ In Dallas.

• BET Founder Says 2020 Election Is "Trump's To Lose".

• Two Storms One Weekend: 50 Million Under Winter Alerts As Travelers Return From Thanksgiving .

• Hong Kong Plunges Into Post-Election Chaos; Pro-Democracy Protesters Thank Trump For Signing Bill.

Business Insider:

• Another winter storm could spell trouble for return Thanksgiving travels across US. Here's the latest.

• Joe Biden nibbled on his wife's finger in a bizarre campaign stop moment.

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 64.50 unch.

• China Sovereign CDS 38.50 -.5 basis point.

• Bloomberg Emerging Markets Currency Index 65.14 +.01%.

• FTSE 100 futures +.16%.

• S&P 500 futures +.29%.

• NASDAQ 100 futures +.32%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (DSX)/.02

After the Close:

• (COUP)/.06

Economic Releases
10:00 am EST

• The ISM Manufacturing Index for Nov. is estimated to rise to 49.2 versus 48.3 in Oct.

• The ISM Prices Paid Index for Nov. is estimated to rise to 47.0 versus 45.5 in Oct.

• The ISM Employment Index for Nov. is estimated to rise to 48.3 versus 47.7 in Oct.

• Construction Spending MoM for Oct. is estimated to rise +.3% versus a +.5% gain in Sept.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Eurzone PMI report, USTR report on France's digital tax, RBA meeting, Goldman Sachs Industrials Conference, Wells Fargo TMT Summit, Citi Basic Materials Conference and the CSFB Tech/Media/Telecom Conference could also impact trading today.

BOTTOM LINE: Asian indices are higher, boosted by technology and commodity shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon.  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, seasonal strength and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.