Wednesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 82.75 +1.25 basis points.

• China Sovereign CDS 46.25 +1.75 basis points.
  

• Bloomberg Emerging Markets Currency Index 57.93 -.02%. 
• Bloomberg Global Risk-On/Risk Off Index 3,336.0 +5.0 points.
• Volatility Index(VIX) futures 20.4 +.34%.
• FTSE 100 futures n/a.

• S&P 500 futures -.07%

• NASDAQ 100 futures -.09%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (AAWW)/4.32
• (BWA)/.74
• (EAT)/.78
• (CVS)/1.79
• (DISCA)/.41
• (EMR)/1.18
• (FDP)/.30
• (HUM)/4.67
• (JLL)/3.61
• (LL)/.32
• (MAR)/.99
• (PBI)/.07
• (SMG)/-.86
• (TUP)/.71
• (UTHR)/4.09
• (WING)/.35
  

After the Close:

• ((ALB)/.76
• (ALL)/1.75
• (BKNG)/33.03
• (CF)/.95
• (CAKE)/.70
• (EA)/1.15
• (FOXA)/1.03
• (HST)/.13
• (TWNK)/.20
• (HUBS)/.44
• (H)/-.35
• (IR)/.47
• (MRO)/.31
• (MET)/1.71
• (MGM)/-.02
• (PXD)/3.88
• (RGR)/2.18
• (SPWR)/.02
• (TTWO)/1.34
• (TRMB)/.59
• (TRUP)/-.01
  

Economic Releases

8:15 am EST:

• The ADP Employment Change for Oct. is estimated at 400K versus 568K in Sept.
  

10:00 am EST

• The ISM Services Index for Oct. is estimated to rise to 62.0 versus 61.9 in Sept.
• Factory Orders for Sept. is estimated to rise +.1% versus a +1.2% gain in Aug.
• Factory Orders Ex Transports for Sept. is estimated unch. versus a +.5% gain in Aug.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory gain of +1,696,400 barrels versus a +4,268,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,239,300 barrels versus a -1,993,000 barrel decline the prior week. Distillate inventories are estimated to fall by -870,000 barrels versus a -432,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.53% versus a .4% gain prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds Rate at  0.0-.25%.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed press conference, CDC decision on kids 5-11 vax, Eurozone Services PMI report, weekly MBA Mortgage Applications report and the (PGR) investor event could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Modestly Higher into Afternoon on Earnings Optimism, Stable Long-Term Rates, Short-Covering, Road & Rail/Pharma Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 16.1 -2.1%
• Bloomberg Global Risk On/Risk Off Index 3,329.0 -127.0 points

• Euro/Yen Carry Return Index 136.0 -.3%

• Emerging Markets Currency Volatility(VXY) 9.2 -.3%

• S&P 500 Implied Correlation 51.4 -.7%

• ISE Sentiment Index 142.0  +13.0 points
  

• Total Put/Call .68 -9.3%

• NYSE Arms 1.60 +128.5%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.10 -.8%
  

• US Energy High-Yield OAS 357.02 +.43%

• European Financial Sector CDS Index 57.97 -1.6%

• Italian/German 10Y Yld Spread 124.0 -8.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 82.25 +1.0%
  

• Emerging Market CDS Index 185.97 -.77%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 32.91 -.72%

• 2-Year Swap Spread 20.5 +.5 basis point
  

• TED Spread 8.75 +.25 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -18.75 +1.5 basis points
  
• MBS  5/10 Treasury Spread  64.5 +2.0 basis points
  
• IHS Markit CMBX BBB- 6 72.25 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 57.95 -.16%
• 3-Month T-Bill Yield .04% unch.
  

• Yield Curve 108.0 unch.
  

• China Iron Ore Spot 97.40 USD/Metric Tonne -.7%

• Citi US Economic Surprise Index -19.7 +.8 point

• Citi Eurozone Economic Surprise Index -51.7 -.2 point
  

• Citi Emerging Markets Economic Surprise Index -22.1 +.3 point

• 10-Year TIPS Spread 2.51 -2.0 basis points
• 100.0% chance of no change at Dec. 15th meeting, 95.1% chance of no change at Jan. 26th meeting

US Covid-19:

• 155 new infections/100K people(last 7 days total) +2/100K people
• 29% of Jan. 7th, 2021 peak(highest daily avg. new infections) unch.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating +5 open in Japan 
• China A50 Futures: Indicating -9 open in China

• DAX Futures: Indicating -9 open in Germany

Portfolio:

• Higher: On gains in my tech/industrial/medical sector longs and emerging market shorts
  

• Disclosed Trades:  None
  

• Market Exposure:  75% Net Long
  

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +2.3% Above 100-Day Average 
• 8 Sectors Rising, 3 Sectors Declining
• 40.1% of Issues Advancing, 55.7% Declining
• 136 New 52-Week Highs, 33 New Lows
• 61.2% of Issues Above 200-day Moving Average
• Average 14-Day RSI 53.%
  
• Bloomberg Global Risk-On/Risk-Off Index 3,316.0 -150.0 points
• Russell 1000: Growth/Value 18,047 +.16%
  
• Vix 15.9 -2.9%
• Total Put/Call .65 -13.3%
• TRIN/Arms 1.5 +120.0%

Tuesday Watch

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 81.5 unch.

• China Sovereign CDS 46.25 unch.
  

• Bloomberg Emerging Markets Currency Index 58.03 -.02%. 
• Bloomberg Global Risk-On/Risk Off Index 3,447.0 -20.0 points.
• Volatility Index(VIX) futures 20.8 +.24%.
• FTSE 100 futures -.11%.

• S&P 500 futures -.08%

• NASDAQ 100 futures -.15%. 

Morning Preview Links

Earnings of Note 
Company/Estimate 

 

Before the Open: 

• (BLMN)/.54
• (BP)/.16
• (COP)/1.52
• (CMI)/3.93
• (DD)/1.12
• (ETN)/1.73
• (EL)/1.70
• (GNRC)/2.40
•  (IDXX)/1.91
• (LEA)/.61
• (LPX)/3.42
• (MLM)/4.27
• (PFE)/1.09
• (RL)/2.00
• (ROK)/2.19
• (UAA)/.15
  

After the Close:

• (ATVI)/.70
• (AKAM)/1.39
• (AMGN)/4.21
• (CZR)/.14
• (HRB)/-1.02
• (LSCC)/.24
• (LYFT)/-.03
• (MTCH)/.58
• (MDLZ)/.70
• (PRU)/2.73
• (RRR)/.76
• (XPO)/.93
• (ZG)/.17
  

Economic Releases

Afternoon:

• Wards Total Vehicle Sales for Oct. is estimated to rise to 12.5M versus 12.18M in Sept.
  

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China Services PMI report and the US weekly retail sales reports could also impact global trading today.

US Equity Market Hours

• 9:30 am - 4:00 pm EST
  

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial 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.

Stocks Slightly Higher into Final Hour on Earnings Optimism, Dollar Weakness, Short-Covering, Commodity/Consumer Discretionary Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Most Sectors Rising
  

• Volume: Around Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 16.9 +3.8%
• Bloomberg Global Risk On/Risk Off Index 3,440.0 +117.0 points

• Euro/Yen Carry Return Index 136.3 +.3%

• Emerging Markets Currency Volatility(VXY) 9.2 +.3%

• S&P 500 Implied Correlation 51.8 +1.4%

• ISE Sentiment Index 128.0  +25.0 points
  

• Total Put/Call .74 -15.0%

• NYSE Arms .63 -61.6%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.42 +.51%
  

• US Energy High-Yield OAS 358.01 +1.11%

• European Financial Sector CDS Index 58.93 +1.3%

• Italian/German 10Y Yld Spread 132.0 +4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 81.37 +.45%
  

• Emerging Market CDS Index 187.63 +.77%
  

• China Corp. High-Yield Bond USD ETF(KHYB) 33.16 -.74%

• 2-Year Swap Spread 20.0 +.75 basis point
  

• TED Spread 8.5 -.5 basis point
  

• 3-Month EUR/USD Cross-Currency Basis Swap -20.25 +1.75 basis points
  
• MBS  5/10 Treasury Spread  62.5 -2.0 basis points
  
• IHS Markit CMBX BBB- 6 72.25 unch.
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 58.07 -.07%
• 3-Month T-Bill Yield .04% -1.0 basis point
  

• Yield Curve 108.0 -1.0 basis point
  

• China Iron Ore Spot 98.0 USD/Metric Tonne -3.3%

• Citi US Economic Surprise Index -20.5 -4.4 points

• Citi Eurozone Economic Surprise Index -51.5 +1.3 points
  

• Citi Emerging Markets Economic Surprise Index -22.4 -3.5 points

• 10-Year TIPS Spread 2.53 -3.0 basis points
• 100.0% chance of no change at Dec. 15th meeting, 95.1% chance of no change at Jan. 26th meeting

US Covid-19:

• 153 new infections/100K people(last 7 days total) -0/100K people
• 29% of Jan. 7th, 2021 peak(highest daily avg. new infections) unch.
  

Overseas Futures:

• Nikkei 225 Futures: Indicating -137 open in Japan 
• China A50 Futures: Indicating +37 open in China

• DAX Futures: Indicating -9 open in Germany

Portfolio:

• Slightly Lower: On losses in my tech sector longs and emerging market shorts
  

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

• Market Exposure:  Moved to 75% Net Long
  

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running +2.0% Above 100-Day Average 
• 6 Sectors Rising, 5 Sectors Declining
• 69.1% of Issues Advancing, 26.6% Declining
• 156 New 52-Week Highs, 15 New Lows
• 56.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.6%
  
• Bloomberg Global Risk-On/Risk-Off Index 3,450.0 +126.0 points
• Russell 1000: Growth/Value 17,992 -.66%
  
• Vix 16.5 +1.5%
• Total Put/Call .74 -14.9%
• TRIN/Arms .60 -63.4%