Stocks Reversing Sharply Higher into Afternoon on Diminished Mideast Tensions, US Economic Data, Technical Buying, Tech/Homebuilding Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 13.2 -4.0%

• Euro/Yen Carry Return Index 125.94 +.3%

• Emerging Markets Currency Volatility(VXY) 6.70 +.6%

• S&P 500 Implied Correlation 39.9 -3.7%

• ISE Sentiment Index 111.0 -23
  

• Total Put/Call .77 -6.1%

• NYSE Arms 1.48 +45.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 4535 -2.26%
  

• America Energy Sector High-Yield CDS Index 516.0 +2.97%

• European Financial Sector CDS Index 52.67 -2.79%

• Italian/German 10Y Yld Spread 162.0 -4.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 55.52 -.44%
  

• Emerging Market CDS Index 180.35 -1.53%
  

• iBoxx Offshore RMB China Corporate High Yield Index 168.33 +.09%

• 2-Year Swap Spread 6.5 -.75 basis point

• TED Spread 34.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.25 -4.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.64 +.42%
• 3-Month T-Bill Yield 1.53% +1.0 basis point

• Yield Curve .28 unch.

• China Iron Ore Spot 93.90 USD/Metric Tonne +.43%

• Citi US Economic Surprise Index .3 +4.6 points

• Citi Eurozone Economic Surprise Index 43.70 +.9 point

• Citi Emerging Markets Economic Surprise Index -7.5 +.9 basis point

• 10-Year TIPS Spread 1.76 +1.0 basis point
• 4.7% chance of Fed rate cut at March 18th meeting, 12.1% chance of cut at April 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +390 open in Japan 
• China A50 Futures: Indicating +172 open in China

• DAX Futures: Indicating +65 open in Germany

Portfolio:

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

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging markets shorts

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value +.2%

Sector Underperformers:

• 1) Oil Service -3.5% 2) Gold & Silver -3.1% 3) Energy -1.7%

Stocks Falling on Unusual Volume: 

• LPG, WBA, GBX, TEN and ITCI

Stocks With Unusual Put Option Activity:

• 1) AMLP 2) WBA 3) SKT 4) ENPH 5) MNK

Stocks With Most Negative News Mentions:

• 1) LTHM 2) GLUU 3) FEYE 4) CVS 5) SPR

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +1.0%

Sector Outperformers:

• 1) Airlines +1.5% 2) Homebuilders +1.4% 3) Software +1.3%

Stocks Rising on Unusual Volume:

• WW, COL, RAD, SDC, DERM, SGMS, SSYS, ZS, MAXR, TREX, LPSN, NTLA, SKT, SQ, TSLA, MHO, LSCC, BEAT, EOLS, HALO, TENB,VRTX, MOH, STZ,PRPL, DIN, SPAR, CMC, RCKT and TMHC

Stocks With Unusual Call Option Activity:

• 1) GRPN 2) STZ 3) LEN 4) ADS 5) KRE

Stocks With Most Positive News Mentions:

• 1) VSTM 2) LEN 3) CCL 4) STZ 5) M

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +9.9% Above 100-Day Average
• 10 Sectors Rising, 1 Sector Declining
• 64.0% of Issues Advancing, 33.7% Declining
• 155 New 52-Week Highs, 8 New Lows
• 64.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.5%
• Vix 12.9 -6.0%
• Total Put/Call .83 +1.2%
• TRIN/Arms 1.58 +54.9%

Wednesday Watch

Night Trading 

• Asian equity indices are -2.0% to -1.0% on average.

• Asia Ex-Japan Investment Grade CDS Index 58.75 +2.75 basis points.

• China Sovereign CDS 34.5  +1.25 basis points.

• Bloomberg Emerging Markets Currency Index  66.25 -.16%.
• FTSE 100 futures -1.0%.

• S&P 500 futures -1.5%.

• NASDAQ 100 futures -1.8%.

Morning Preview Links

Earnings of Note 

Company/Estimate

Before the Open:

• (STZ)/1.85
• (GBX)/.43
• (LEN)/1.89
• (SCHN)/-.16
• (WBA)/1.41

After the Close:

• (BBBY)/.03

Economic Releases  

8:15 am EST

• The ADP Employment Change for Dec. is estimated to rise to 160K versus 67K in Nov.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -3,185,000 barrels versus a -11,463,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +2,700,780 barrels versus a +3,212,000 barrel gain the prior week. Distillate inventories are estimated to rise by +3,956,780 barrels versus a +8,776,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.06% versus a +1.2% gain prior.
  

3:00 pm EST

• Consumer Credit for Nov. is estimated to fall to $16.0B versus $18.91B in Oct.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Brainard speaking, German Factory Orders report, $24B 10Y T-Note auction, weekly MBA Mortgage Applications report and the (COST) Dec. sales results could also impact trading today.

Market Hours

Normal:

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are lower, weighed down by consumer and financial shares in the region. I expect US stocks to open lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Final Hour on Mideast Tensions, Oil Decline, Profit-Taking, REIT/Energy Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Slightly Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.5 -2.3%

• Euro/Yen Carry Return Index 125.57 -.3%

• Emerging Markets Currency Volatility(VXY) 667 -.15%

• S&P 500 Implied Correlation 40.5 -2.7%

• ISE Sentiment Index 134.0 +20
  

• Total Put/Call .68 -17.1%

• NYSE Arms 1.01 +3.06%

Credit Investor Angst:

• North American Investment Grade CDS Index 46.23 +.66%
  

• America Energy Sector High-Yield CDS Index 503.0 -2.01%

• European Financial Sector CDS Index 54.18 -.76%

• Italian/German 10Y Yld Spread 166.25 +1.75 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 55.75 -2.08%
  

• Emerging Market CDS Index 182.95 +1.26%
  

• iBoxx Offshore RMB China Corporate High Yield Index 168.19 -.02%

• 2-Year Swap Spread 7.25 +.75 basis point

• TED Spread 35.25 -1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 1.25 +1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.38 -.14%
• 3-Month T-Bill Yield 1.52% unch.

• Yield Curve .28 +3.0 basis points

• China Iron Ore Spot 93.35 USD/Metric Tonne +.63%

• Citi US Economic Surprise Index -4.3 +2.7 points

• Citi Eurozone Economic Surprise Index 44.60 +1.6 points

• Citi Emerging Markets Economic Surprise Index -8.4 +1.2 basis points

• 10-Year TIPS Spread 1.75 -2.0 basis points
• 6.6% chance of Fed rate cut at March 18th meeting, 17.4% chance of cut at April 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -155 open in Japan 
• China A50 Futures: Indicating -12 open in China

• DAX Futures: Indicating -28 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long