Stocks Loweri into Final Hour on China Trade Deal Concerns, Global Growth Worries, Profit-Taking, Energy/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 16.2 +8.7%

• Euro/Yen Carry Return Index 124.89 -.35%

• Emerging Markets Currency Volatility(VXY) 6.96 +2.05%

• S&P 500 Implied Correlation 46.1 +2.6%

• ISE Sentiment Index 90.0 +15
  

• Total Put/Call 1.21 +22.2%

• NYSE Arms 1.23 +35.2%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.36 +2.1%
  

• America Energy Sector High-Yield CDS Index 636.0 +2.55%

• European Financial Sector CDS Index 58.11 +1.81%

• Italian/German 10Y Yld Spread 163.5 +.25 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 65.15 +1.46%
  

• Emerging Market CDS Index 206.10 +1.79%
  

• iBoxx Offshore RMB China Corporate High Yield Index 168.24 -.10%

• 2-Year Swap Spread 1.25 -.75 basis point

• TED Spread 34.5 +.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -15.5 +2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.32 unch.
• 3-Month T-Bill Yield 1.56% -1.0 basis point

• Yield Curve .18 -4.0 basis points

• China Iron Ore Spot 85.79 USD/Metric Tonne -.22%

• Citi US Economic Surprise Index 6.2 -2.5 basis points

• Citi Eurozone Economic Surprise Index -2.30 +1.1 points

• Citi Emerging Markets Economic Surprise Index -27.0 +1.1 basis points

• 10-Year TIPS Spread 1.65 -1.0 basis point
• 14.5% chance of Fed rate cut at Jan. 29th meeting, 32.7% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -249 open in Japan 
• China A50 Futures: Indicating -82 open in China

• DAX Futures: Indicating +46 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.9%

Sector Underperformers:

• 1) Road & Rail -2.1% 2) Oil Service -2.1% 3) Steel -2.0%

Stocks Falling on Unusual Volume: 

• DRNA, VMW, HMSY, OLLI, APA, ELF, CCMP, CLVS and sCARA

Stocks With Unusual Put Option Activity:

• 1) AKS 2) ASHR 3) MAC 4) PLUG 5) CPB

Stocks With Most Negative News Mentions:

• 1) APA 2) PLT 3) CBRL 4) HAL 5) WMB

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth -.2%

Sector Outperformers:

• 1) Gold & Silver +1.7% 2) Biotech +.7% 3) REITs +.7%

Stocks Rising on Unusual Volume:

• BOLD, LE, AXSM, ARWR, RGNX, ENPH, FIXX, NXTC, APLS, SGMO, VYGR, IOVA, RARE, DFIN, ILPT, SAFE, REGI, ROKU, BPMP, BLUE, GBT, PTCT, TTD, PINC, AXTA, XNCR and CUB

Stocks With Unusual Call Option Activity:

• 1) KKR 2) AXSM 3) XLI 4) XLP 5) APC

Stocks With Most Positive News Mentions:

• 1) LE 2) ROKU 3) MACK 4) ADBE 5) MRK

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +14.3% Above 100-Day Average
• 2 Sectors Rising, 9 Sectors Declining
• 26.9% of Issues Advancing, 70.5% Declining
• 16 New 52-Week Highs, 55 New Lows
• 56.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 46.1%
• Vix 17.3 +16.3%
• Total Put/Call 1.33 +34.3%
• TRIN/Arms 1.20 +31.9%

Tuesday Watch

Evening Headlines

Bloomberg: 

• China Spares Trade in First Retaliation to U.S.’s Hong Kong Law.  

• Europe Set for Green Deal That Will Radically Change Its Economy.

• U.S. Proposes Duties on $2.4 Billion of French Goods Over Tech Tax.  

• Stocks Drop, Yen Holds Gain as Tariff Man Returns. Asian stocks slumped Tuesday after a sell-off on Wall Street triggered by fresh tariffs announced by President Donald Trump, renewing concerns about global trade tensions. Japan’s currency held gains after its biggest jump since October on Monday in the wake of Trump slapping steel tariffs on Brazil and Argentina. Shares in Japan, Australia and South Korea opened with a thud. Hong Kong futures were down. U.S. stock futures were little changed after the S&P 500 Index slumped 0.9% Monday, when disappointing U.S. manufacturing data added to the risk-off tone. Treasuries were the odd asset out, falling on Monday amid a global retreat from bonds. Topix index declined 1.1% as of 9:01 a.m. in Tokyo. Australia S&P/ASX 200 Index lost 1.8%. South Korea’s Kospi index fell 0.9%. Hang Seng Index futures fell 0.6%. Futures on the S&P 500 Index were little changed.

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

• New Trump Tariffs, ISM Factory Gauge, Hong Kong Slump: Eco Day.

• A $25 Trillion Stock Rally Was Built on GDP Growth No Better Than This.  

• Bitcoin Matches Record Losing Run in Fall to Six-Month Low.

• Biden Doesn’t See ‘Great Enthusiasm’ for Elizabeth Warren.

Wall Street Journal:

• FBI Warns FaceApp Could Pose Counterintelligence Threat.

• U.S. Dominance in Global Services Is Starting to Weaken.

• Trump to Put Tariffs on Brazil, Argentina, Citing Currencies.

• Trump Wins the Populist Patriots.

• As Suicides Rise, Attention Turns to the People Left Behind.

• A Guide to 50 Holiday Gifts: Functional vs. Fun?

CNBC:

• That big fourth-quarter growth scare looks like it’s not happening.

• Markets are counting down to the Dec. 15 trade deadline and could be choppy until then.

• Recent market sell-off is an ‘early Christmas gift,’ says Wall Street bull Jeff Saut.

• Stocks making the biggest moves after hours: Coupa Software, Arrowhead Pharmaceuticals & more.

Zero Hedge:

• "Where Are They Lisa?": Trump Blasts Former FBI 'Lovebird' Over Scrubbed Texts After Puff-Piece Interview.

• China Bans US Military Visits To Hong Kong, Sanctions US NGOs Over Support For Protest.

• US Threatens 100% Tariffs On $2.4 Billion In French Goods Including Champagne Over Digital Tax.

• PA County Election Turned Into "Nightmare" After Voting Machines Malfunctioned.

• Artificial Intelligence Is Watching Our Every Move & Judging Us.

• Hillary Clinton Shut Out Ronan Farrow As Soon As She Learned Of His Weinstein Investigation.

• 47% Of GDP – This Is Definitely The Scariest Corporate Debt Bubble In U.S. History.

• In Stuttering, Stumbling Address Christine Lagarde Vows To Link QE To Climate Change.

• Planes, Trains, & Automobiles: Commuters Crushed As Huge Winter Storm Slams Northeast.

• Trump Committed "No Quid Pro Quo, Bribery, Extortion, Or Abuse Of Power," House Republicans Find.

• Every Single Asset Tracked By Deutsche Bank Is Up For The Year.

• Stocks, Bonds, & The Dollar Dumped On Dismal-Data & Trade-Tensions.

Business Insider:

• 18 powerful images from the biggest news of the US military in 2019.

Night Trading 

• Asian equity indices are -1.25% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 64.5 unch.

• China Sovereign CDS 38.75 -.25 basis point.

• Bloomberg Emerging Markets Currency Index  65.30 -.02%.

• FTSE 100 futures +.18%.

• S&P 500 futures +.04%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (BMO)/2.41

• (DCI)/.53

• (LE)/.09

After the Close:

• (AVAV)/.29

• (HQY)/.23

• (MRVL)/.17

• (CRM)/.66

• (WDAY)/.37

• (ZS)/.01

Economic Releases
  
Afternoon:

• Wards Total Vehicle Sales are estimated to rise to 16.9M versus 16.55M in Oct.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The NATO Summit, Eurozone PPI report, Australia GDP report, US weekly retail sales reports, Morgan Stanley Consumer/Retail Conference, Piper Jaffray Healthcare Conference, CSFB Industrials Conference, (UNH) investor conference, (BDC) investor day, (GES) investor day and the Scotiabank Mining Conference could also impact trading today.

BOTTOM LINE: Asian indices are lower, weighed down by commodity 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 75% net long heading into the day.