Stocks Rising into Final Hour on Diminished China Trade Tensions, Earnings Optimism, Technical Buying, Tech/Road & Rail Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 12.6 +.24%

• Euro/Yen Carry Return Index 127.11 +.52%

• Emerging Markets Currency Volatility(VXY) 6.40 unch.

• S&P 500 Implied Correlation 37.8 -8.1%

• ISE Sentiment Index 80.0 -13
  

• Total Put/Call .73 -15.1%

• NYSE Arms 1.25 -3.1%

Credit Investor Angst:

• North American Investment Grade CDS Index 44.32 +.37%
  

• America Energy Sector High-Yield CDS Index 534.0 +.19%

• European Financial Sector CDS Index 51.02 +1.31%

• Italian/German 10Y Yld Spread 153.5 +1.5 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 53.43 -1.06%
  

• Emerging Market CDS Index 180.95 +.16%
  

• iBoxx Offshore RMB China Corporate High Yield Index 168.75 +.07%

• 2-Year Swap Spread 6.0 -.5 basis point

• TED Spread 30.75 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -3.75 -1.0 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.58 +.02%
• 3-Month T-Bill Yield 1.54% +1.0 basis point

• Yield Curve .25 unch.

• China Iron Ore Spot 93.39 USD/Metric Tonne +.27%

• Citi US Economic Surprise Index 2.0 +1.5 points

• Citi Eurozone Economic Surprise Index 41.80 -1.5 points

• Citi Emerging Markets Economic Surprise Index -5.20 +.8 basis point

• 10-Year TIPS Spread 1.77+1.0 basis point
• .7% chance of Fed rate cut at March 18th meeting, 10.5% chance of cut at April 29th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +95 open in Japan 
• China A50 Futures: Indicating +86 open in China

• DAX Futures: Indicating +11 open in Germany

Portfolio:

• Higher: On gains in my tech/retail/industrial 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 +.4%

Sector Underperformers:

• 1) Gold & Silver -1.7% 2) Biotech -1.5% 3) Healthcare Providers -.9%

Stocks Falling on Unusual Volume: 

• PTLA, ICPT, ACAD, NBIX, BPMC, CONE, AXNX, IOVA, EXAS, AXGN, ABMD, FIVE and INGN

Stocks With Unusual Put Option Activity:

• 1) FIVE 2) GPRO 3) JCP 4) AMLP 5) W

Stocks With Most Negative News Mentions:

• 1) FIVE 2) JCP 3) CLRO 4) EQT 5) SPOT

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.8%

Sector Outperformers:

• 1) Alt Energy +3.4% 2) Steel +2.5% 3) Video Gaming +2.1%

Stocks Rising on Unusual Volume:

• PRMW, CDLX, BYND, TODC, CDNA, DDD, NVTA, TERP, APPN, SDC, MNTA, TSLA, HXL, NSTG, SPCE, LVGO, ZS, RRGB, EHC, INMD, NEO, PHNY, TROX, CYRX, TTD, NUAN, RVNC, STAA, HRTX, ALB, XENT, DDOG, CRWD, BAX, VRNS, ANF, RARE, APLS, WWD, ZUO, FSCT, CCC and RH

Stocks With Unusual Call Option Activity:

• 1) ABMD 2) EWT 3) UTX 4) ON 5) TDOC

Stocks With Most Positive News Mentions:

• 1) HXL 2) LULU 3) NVDA 4) ULTA 5) NFLX

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +2.4% Above 100-Day Average
• 9 Sectors Rising, 2 Sectors Declining
• 57.6% of Issues Advancing, 37.8% Declining
• 129 New 52-Week Highs, 17 New Lows
• 64.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 48.8%
• Vix 12.8 +1.9%
• Total Put/Call .71 -17.4%
• TRIN/Arms 1.49 +15.5%

Monday Watch

Today's Headlines

Bloomberg:

• Fury at Air Crash Cover-Up Puts Iran’s Leaders Back on Defensive.

• Trump Trade Deal Raises Issue of Trusting China to Deliver.  

• Goldman(GS) Plans to Double China Headcount to 600 in Five Years.

• Most Gulf Equity Markets Gain as Iran Risk Eases: Inside EM.  

• Asian Stocks Look Set for Mixed Start to Week: Markets Wrap. Asian stocks looked set for a mixed session Monday after a decline in U.S. shares following Friday’s lackluster employment report. Australian shares slipped along with futures in South Korea, while contracts in Hong Kong pointed higher. Japanese markets are closed for a holiday. U.S. futures inched higher after the S&P 500 dropped from record levels Friday with the latest jobs report delivering mixed signals on the strength of the economy. The yen ticked lower. Australia’s S&P/ASX 200 Index declined 0.7% as of 8:12 a.m. in Tokyo. Hong Kong’s Hang Seng Index futures rose 0.4%. S&P 500 Index futures gained 0.1%. The benchmark fell 0.3% Friday.  

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

• Oil Comes Back to Haunt Asian Currencies as Volatility Increases.

• Trusting China, EM Easing, Philippine Volcano Eruption: Eco Day.

• Mnuchin Says Boeing Woes Could Lop a Half-Point from U.S. GDP.

• Citi’s Morse Sees Better Year for Commodities But Flags 7 Risks.

Wall Street Journal:

• Iran Faces Growing Criticism at Home, Abroad Over Downing of Plane.

• Bets on Global-Growth Rebound Power Stock Gains.

• Philadelphia’s Top Prosecutor Pursues ‘Social,’ Not Actual, Justice.

• America’s Conservative Plurality.

• Manufacturers Increase Perks to Get New Hires to Move.

• Bristol’s Merger With Celgene Is Already Paying Dividends, CEO Says.

• Soleimani’s Latin America Terror.

• ‘Cancel Culture’ Comes to Science.

• Inside Google’s Quest for Millions of Medical Records.

MarketWatch.com:

• Happy New Year! The U.S. economy has entered 2020 ‘with a little more zip’.

Fox News:

• Pelosi insists clinging to impeachment articles worked, says McConnell ‘cover-up’ exposed.

• McCarthy tells Maria what he thinks was behind Pelosi’s gambit.

• US troops in Baghdad see Iran general's threat differently from DC, GOP senator says.

CNBC:

• Trump tells Iranian protesters he stands with them and warns Tehran: ‘The world is watching’.

• ‘Our enemy is here’: Iran protesters demand leaders quit after military admits it shot down plane.

• Start-ups join Google, SpaceX and OneWeb to bring new technologies to space.

• Dell just put out a mammoth 43-inch monitor for traders — and we tried it for a week.

Zero Hedge:   

• What Are The Odds Of No Winner In The Democratic Primaries?

• Universal Basic Income: A Dream Come True For Despots.

• Carter Page Says FBI's SpyGate Is "Just The Tip Of The Iceberg", Hints At Future Legal Action.

• Facebook Glitch Reveals Greta Thunburg's Father Posting As Teenage Climate Activist.

• The Blue-State Exodus Gains Momentum.

• "Death To Liars!" Iran Swept By Wave Of Protests Demanding Ayatollah Quit Over Airplane Downing.

• Walmart Testing Robots For Fulfilling Grocery Orders. 

Business Insider:

• How the Strait of Hormuz, a narrow stretch of water where ships carry $1.2 billion of oil every day, is at the heart of spiraling tensions with Iran.

Seeking Alpha:

• It's 2013 All Over Again. Fast forward to January 2020 and we can see there are no signs of the type of excessive enthusiasm that always accompany the final stages of a blow-off rally. Quite the opposite, in fact, for the latest AAII survey showed that bullish sentiment among its members had fallen by 4% for the week ending January 8 to 33%. This is well below the long-term bullish average of 38%. And it’s certainly well under the types of readings we should be seeing right now if the market was truly vulnerable to a collapse.
  

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 54.0 unch.

• China Sovereign CDS 32.0 +1.25 basis points.

• Bloomberg Emerging Markets Currency Index 66.56 +.01%.

• FTSE 100 futures n/a.

• S&P 500 futures +.12%.

• NASDAQ 100 futures +.14%.

Morning Preview Links

Earnings of Note

Company/Estimate
Before the Open:

• (SJR)/.34

After the Close:

• None of note

Economic Releases
2:00 pm EST

• The Monthly Budget Statement for Dec. is estimated at $0.0B versus $208.8B in Nov.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The UK Trade Balance report, China Trade Balance report, UBS Midstream/MLP/Utilities Conference and the JPMorgan Healthcare Conference could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST

BOTTOM LINE: Asian indices are slightly lower, weighed down by commodity and consumer 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 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 mixed as global growth optimism, earnings outlooks and diminished Mideast tensions offset oil weakness, technical selling and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.