Stocks Higher into Afternoon on Global Central Bank Stimulus Hopes, Oil Gain, Short-Covering, Biotech/Homebuilding Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 21.8 -1.0%

• Euro/Yen Carry Return Index 130.37 -.32%

• Emerging Markets Currency Volatility(VXY) 11.17 -.09%

• S&P 500 Implied Correlation 44.1 -3.8%

• ISE Sentiment Index 104.0 +16.0 points

• Total Put/Call .71 -6.6%

• NYSE Arms 1.53 +98.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.02 -1.24%
  

• US Energy High-Yield OAS 772.41 +.92%

• European Financial Sector CDS Index 64.57 +.09%

• Italian/German 10Y Yld Spread 140.5 -1.0 basis point
  

• Asia Ex-Japan Investment Grade CDS Index  65.68 +.2%
  

• Emerging Market CDS Index 188.57 -.93%
  

• iBoxx Offshore RMB China Corporate High Yield Index 177.08 +.05%

• 2-Year Swap Spread 8.0 -1.0 basis point

• TED Spread 18.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -.75 -.5 basis point
  
• MBS  5/10 Treasury Spread  91.0 +4.0 basis points
  
• IHS Markit CMBX BBB- 6 68.75 +.25 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 60.15 -.34%
• 3-Month T-Bill Yield .09% unch.

• Yield Curve 53.0 -1.5 basis points
  

• China Iron Ore Spot 118.78 USD/Metric Tonne +1.61%

• Citi US Economic Surprise Index 239.3 -14.0 points

• Citi Eurozone Economic Surprise Index 190.20 -13.2 points

• Citi Emerging Markets Economic Surprise Index 19.4 +2.3 points

• 10-Year TIPS Spread 1.65 -1.0 basis point
• 100.0% chance of no change at Nov. 5th meeting, 100.0% chance of no change at Dec. 16th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +133 open in Japan 
• China A50 Futures: Indicating -14 open in China

• DAX Futures: Indicating -11 open in Germany

Portfolio:

• Slightly Higher: On gains in my biotech/medical/tech/consumer staple sector longs
  

• Disclosed Trades: None
  

• Market Exposure: 50% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.2%

Sector Underperformers:

• 1) Airlines -2.9% 2) Banks -1.7% 3) Energy -.8%

Stocks Falling on Unusual Volume: 

• MTCH, STL, WEN, EXPI, ORCC, AHCO, QRTEA, RVLV, IMUX, SPCE, STMP, CUK, ZYXI, PRTS, OXY, XPEL, NKLA, LYFT, DENN, PSN, DDS, PLT, ENV and APLT
  

Stocks With Unusual Put Option Activity:

• 1) EWW 2) BK 3) FL 4) ADI 5) XRT
  

Stocks With Most Negative News Mentions:

• 1) UBX 2) REV 3) BHI 4) EXC  5) CNX
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +1.0%

Sector Outperformers:

• 1) Gold & Silver +5.2% 2) Homebuilding +3.3% 3) Biotech +1.9%

Stocks Rising on Unusual Volume:

• GRWG, OSTK, PRNB, OOMA, BTAI, UCTT, TDOC and TCDA
  

Stocks With Unusual Call Option Activity:

• 1) DLTR 2) KKR 3) CLVS 4) AAP 5) UNP

Stocks With Most Positive News Mentions:

• 1) ABX 2) PRNB 3) NVDA 4) QGEN 5) HD

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -33.8% Below 100-Day Average
• 7 Sectors Rising, 4 Sectors Declining
• 51.9% of Issues Advancing, 45.4% Declining
• 64 New 52-Week Highs, 5 New Lows
• 48.6% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.6%
• Vix 22.1 +.09%
• Total Put/Call .60 -21.1%
• TRIN/Arms 1.4 +81.8%

Monday Watch

Today's Headlines

Bloomberg:     

• China’s Banking Watchdog Warns Fed Easing Risks Financial Crisis.    
• Fraying U.S.-China Relations Tested by Trump Ahead of Election.  
• China’s Loss May Become India’s Gain in Shifting Supply Chains.
• Resilience Test Awaits Emerging Markets Basking in Recovery Mode.  
• Iran Warns UAE Ties Will Fundamentally Change Over Israel Pact.  
• Russia Offers Awkward Ally in Belarus Support as Protests Grow.
• Turkey in a Stir Over Old Biden Remarks Backing Erdogan’s Ouster.   
• Microsoft Weighs Buying TikTok’s U.K. Services Too, Fox Reports.
• Dollar Steady; Asia Stocks Point to Softer Start. The dollar began the trading week steady with U.S. equity futures ticking up after a planned review of the U.S.-China trade deal was postponed. Asian stocks were on course to open modestly lower. S&P 500 futures rose 0.2% in early trading, while the greenback was flat against most G-10 peers. Stock-index futures in Japan and Australia slipped, while Hong Kong contracts nudged higher. Gold traded flat after last week’s slide, while crude oil rose. The New Zealand dollar was little changed as the country’s election was delayed by four weeks until October. Futures on the S&P 500 Index added 0.2% as of 8:12 a.m. in Tokyo. Futures on Japan’s Nikkei 225 fell 0.6%. Hang Seng Index futures rose 0.3%. Futures on Australia’s S&P/ASX 200 Index declined 1%.  
• Oil Rises Ahead of OPEC Meeting to Discuss Production Curbs. 
• Texas Positive Tests Rise; California ICUs Fill Up: Virus Update.
• Six Key Takeaways From Pandemic Data on American Households.
• Absentee Ballot Versus Vote-by-Mail? A Guide to Election Terms.
• First Fires, Now Heat: Millions of Californians Back in the Dark.  
• Portland Police Declare Riot as Protesters Pushed From Building.

Wall Street Journal:

• Democrats Move Left, but the Center Holds.
• Gold Is Soaring, but Getting Harder to Mine.
• Traders Brace for Haywire Markets Around Presidential Election.
• Sixth Street Partners Amasses One of the Largest Private-Capital Funds.
• As College Football Games Vanish, So Do Its Millions.
• More Americans Go Hungry Amid Pandemic, Census Shows.
• Saudi Wealth Fund Moves Billions From Blue Chips to ETFs.
• Utilities Cash In on Green Energy Subsidy for Bigger Wind Farms.
• The Postal Service’s Good Election Advice.
• We’ll Protect America’s Suburbs.
• Home Depot Braced for Covid Pain—Then Americans Remodeled.
• Casinos, Investors Bet on Gamblers Playing From Home.
• Violence Erupts at Protests in Chicago, Portland.

Fox News:

• President Trump shares heartfelt statement after death of brother Robert Trump in New York.
• Dem convention’s goal: Unify the party, keep ‘restive’ Bernie supporters from blowing it.

CNBC:

• A flood of job losses looms as airline industry struggles in pandemic.

Zero Hedge:

• The Manufactured Hysteria Over Mail Delivery.
• California Set To Pass The Nation's First Wealth Tax Targeting The Ultra Rich.
• Morgan Stanley: The Market Stakes Are Now Even Higher For Congress To Reach A Stimulus Deal.
• New COVID-19 Cases Hit 5-Month High In South Korea, France Smashes Post-Lockdown Record: Live Updates.
• Disney "Makes History" By Introducing Its First Bisexual Cartoon Character.
• Zillow Exposes Dramatic Exodus Out Of San Francisco Real Estate.
• Got Wood? Lumber Prices Explode To Record Highs Amid "Supply Chain Screw Ups".
• De Blasio's New York: Bulletproof Vest Sales Are Skyrocketing In Parts Of The Cityl;'
• This Is What Hedge Funds Bought And Sold In The Second Quarter.
• Turkey Hit By Bank Runs, Currency Panic As Locals Sell Their Cars And Houses`][\ To Buy Gold While Lira Implodes.
• Bank Of America Trading Platform Sees 180% Q2 Boost As Day-Trading Millennials Flood Markets.
• Pompeo Signs Pact To Redeploy Troops To Poland From Germany, Boosting "NATO Deterrence".
• Inside The Center For Cancel Culture And Digital Hypocrisy, Part 2.
• "The Concept Of A Bar Is Completely Changing" - How Automation Is Crushing Servers' Labor Market Hopes.
• China To Begin Major Expansion Of Digital Currency Testing.
• COVID Has Transformed America Into The 'Drive-In' Nation.

Business Insider:

• Barack Obama has privately voiced concerns that Joe Biden could 'f--- things up,' according to a report.

Night Trading

• Asian indices are -.75% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 65.5 +.25 basis point.
• China Sovereign CDS 40.0 unch.
• Bloomberg Emerging Markets Currency Index 60.36 +.01%.
• FTSE 100 futures n/a.
• S&P 500 futures +.21%.
• NASDAQ 100 futures +.20%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (ATHM)/1.03
• (JD)/2.63
• (JKS)/.75
• (SINA)/.50
• (WB)/.46
  

After the Close:

• (FN)/.87

Economic Releases
8:30 am EST

• Empire Manufacturing for August is estimated to fall to 14.5 versus 17.2 in July.
  

10:00 am EST

• The NAHB Housing Market Index for August is estimated to rise to 74.0 versus 72.0 in July.

4:00 pm EST

• Net Long-Term TIC Flows for June.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The RBA Minutes and the Needham Med Tech Conference could also impact trading today.

Market Hours
Normal:

• 9:30 am - 4:00 pm EST

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and consumer shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 50% net long heading into the week.

Weekly Outlook

• Wall St. Week Ahead by Reuters.
• 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 lower on global recession fears, coronavirus second wave worries, US election concerns, technical selling, rising China tensions and profit-taking. My intermediate-term trading indicators are giving bearish signals and the Portfolio is thee week 50% net long heading into the week.