Bear Radar

Style Underperformer:

• Small-Cap Growth -1.3%

Sector Underperformers:

• 1) Computer Hardware -4.1% 2) Hospitals -3.3% 3) Semis -2.7%

Stocks Falling on Unusual Volume:

• MDCA, EPAY, MOH, TBPH, SRCL, GLNG, WRE, SYNA, STJ, TMUSP, PRLB, TYPE, CPHD, ALR, STX, ATHN, DGLD, WDC, GVA, BRX, ABT, UN, MCO, ELLI, NPTN, ALGN, ATR, EFII, COHR, EMN, WCIC, THRM, GVA, AMC, CUZ, BSFT, NSR, CAVM, SEE, MCO, ATHN, ECHO, SMCI, USCR, MSCC, USCR, CSH, SWKS, IPHI, ATRC, ELLI, GILD, TBI and HRC

Stocks With Unusual Put Option Activity:

• 1) SMH 2) XLV 3) XME 4) GILD 5) EWJ

Stocks With Most Negative News Mentions:

• 1) SRCL 2) SYNA 3) WDC 4) MOH 5) EPAY

Charts:

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

Bull Radar

Style Outperformer: 

• Mid-Cap Value -.8%

Sector Outperformers:

• 1) Gold & Silver +5.2% 2) Internet +2.0% 3) Steel +1.5% 

Stocks Rising on Unusual Volume: 

• EHTH, PKY, BGS, CIMO, SKYW, HMSY, SCSS, LOGM, MNST, EXPE, AMZN, NLNK, BIDU, NWL, CBM, FET, NOV and P

Stocks With Unusual Call Option Activity: 

• 1) GNW 2) SYNA 3) SPXS 4) OCN 5) S

Stocks With Most Positive News Mentions: 

• 1) BIDU 2) BGS 3) AMZN 4) EXPE 5) MNST

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +15.0% Above 100-Day Average
• 0 Sectors Rising, 10 Sectors Declining
• 33.6% of Issues Advancing, 63.4% Declining
• 60 New 52-Week Highs, 9 New Lows
• 57.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.4%
• Vix 16.2 +6.2%
• Total Put/Call 1.28 +29.3%
• TRIN/Arms .81 -25.9%

Friday Watch

Evening Headlines
Bloomberg: 

• ICBC Breach of Bad-Loan Buffer Shows China Banking Stresses. Industrial & Commercial Bank of China Ltd.’s breach of a regulatory requirement for bad-loan provision coverage added to signs of growing stress in the nation’s banking industry. ICBC avoided reporting a quarterly drop in profit on Thursday by letting provisions fall to 141 percent of existing nonperforming credit, below the 150 percent level required by the China Banking Regulatory Commission. The move let it eke out a 0.6 percent gain in net income for the first three months from a year earlier.
• Chinese Commodity Speculators Drop Out After $261 Billion Binge. The speculators that traded $261 billion in Chinese commodities in a single day last week are retreating as regulators prepare to step up control of the market. The value of futures traded across China’s three biggest commodity exchanges has shrunk 42 percent since investors spent 1.7 trillion yuan last Thursday on everything from steel bars to eggs. The amount that changed hands was on a par with the entire U.S. equities market on the same day. Markets in the world’s biggest consumer of raw materials have been gripped by a trading frenzy that’s drawn comparisons with the credit-driven stock market rally last year that preceded a $5 trillion rout. Exchanges have responded by raising margins and transaction fees to curb speculation while the securities regulator is said to have prepared measures to limit price fluctuations.
• Taiwan Economy Shrank in First Quarter as Weak Exports Drag. Taiwan’s economy contracted on a yearly basis for a third straight quarter as an export slump showed no signs of abating, adding urgency to President-elect Tsai Ing-wen’s pledge to revive growth when her term begins next month. Gross domestic product fell 0.84 percent in the three months through March from a year earlier, according to preliminary data released by the statistics bureau Friday. That compares with a 0.65 percent drop projected by the median estimate in a Bloomberg survey of economists and the 0.52 percent decrease in the third quarter.
• China's Stocks Head for Monthly Decline on Earnings Concern. China’s stocks headed for their steepest monthly decline since the start of the year as energy and financial companies slumped after PetroChina Co. reported its first quarterly loss since listing and the nation’s biggest bank barely eked out a profit. The Shanghai Composite Index has dropped 1.84 percent in April and was little changed on Friday as turnover slumped. PetroChina, the most heavily weighted stock, slid to its lowest level in two months. Industrial & Commercial Bank of China Ltd. lost the most in a week after it posted a 0.6 percent gain in net income by breaching a regulatory requirement for bad-loan provision coverage. The Hang Seng China Enterprises Index retreated for the first time in four days.
• Asian Stocks Extend Weekly Decline as Investors Weigh Earnings. Asian stocks fell, extending their weekly decline, after the Bank of Japan quashed expectations for further stimulus and investors scrutinized earnings from PetroChina Co. to China Petroleum & Chemical Corp. The MSCI Asia Pacific Excluding Japan Index retreated 0.3 percent to 416.93 as of 9:34 a.m. in Hong Kong, heading for a weekly loss of 1.5 percent and a 0.1 percent monthly decline. Stocks retreated this week as Japan’s central bank refrained from boosting monetary stimulus and earnings at companies from Canon Inc. to Oversea-Chinese Banking Corp. disappointed investors. Focus now turns to profit reports due from Citic Securities Co., China’s biggest brokerage, and Chinese manufacturing data due at the weekend. Japan’s market is closed Friday for a holiday. “Central banks look like they have run out of bullets to a degree,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone. “We’re getting to that point where there are limits to the results they can get from anything more they do. This points to a fragile outlook with still a lot of risks out there.”
• Iron Ore Bear Holds Fast Even After `the Market Got It So Wrong'. Iron ore’s surprise rally may be a thing of the past in just three months. Rising supply will top demand once more and the sudden jump in speculative trading in China that’s helped support gains is set to fizzle out, according to Brazil’s Itau Unibanco Holding SA. The commodity will probably soon be back below $50 a metric ton, and may end the year at about $42, Artur Manoel Passos, an economist in Sao Paulo at Latin America’s largest bank by market value, said in an interview. Last week, iron ore traded as high as $70.46.

Wall Street Journal:

• Caterpillar(CAT) to Close Five Plants, Shed 820 Jobs. Cutbacks part of strategy announced in September to scale back production and workforce in response to falling demand.
• U.S. Corporate Profits on Pace for Third Straight Decline. Slow global growth, energy slump weigh on earnings of S&P 500 companies.
• The Agony of a Trump Delegate. Rules may say they’re bound to The Donald, but many are thinking through their options.

Zero Hedge:

• Obama Admits Couldn't "Convince Americans Of Recovery", Bashes 'The Big Short'.
• Why The US Output Gap Means The 10 Year Is Going Below 1%. (graph)
• Junk Economics: Michael Hudson Rages "Wall Street Has Taken Over The Economy.. & Is Draining It".
• China Bond-Sale Cancellations Soar As BofA Warns "Default Risk Is Mispriced". (graph)
• "Why Our Children Should Hate Us" - Read The Lance Simmens Article Banned By The Huffington Post. (video)
• "Peak Oil Demand" - The Collapse Of The Old Oil Order.
• Why 'Good' Jobs Matter (In 1 Recovery-Crushing Chart). (graph)
• The Future Of America? – More Than Half Of All Adults Under-30 Now Reject Capitalism.
• Why Is JPM's "Quant Guru" Suddenly Worried About The "Endgame".
• Automating Ourselves To Unemployment.
• Earnings "Beats" & The Warning In Today's GDP Data. (graph)
• SEC Begins Crack Down On Non-GAAP Accounting Gimmicks. (graph)
• Amazon(AMZN) Soars After Smashing Expectations On Surge In Cloud Profits.
• Kamikaze-Kuroda & Carl Icahn Crush Facebook-Driven Stock-Feeding Frenzy. (graph)

Business Insider:

• Amazon(AMZN) plans to 'significantly' increase investment in video as it goes to war with Netflix.
• Valeant(VRX) might throw the entire pharmaceutical industry under the bus.
• China and Russia are boosting their military cooperation to try to contain the US.
• Goldman Sachs(GS) thinks dividend cuts are coming from big oil.

Financial News:

• China Should Enhance Risk Control for Financial Innovation. Financial innovation without proper risk prevention measures may create systemic risks and even disturb market order, according to a commentary. Regulation should cover all new forms of financial products and activities, the commentary says.

Macao Daily:

• Macau March Tour Group Visitors Fall 36.2% y/y. March tour group traveler arrivals fall to 564,000, lowest since March 2011, citing govt data.

Night Trading 

• Asian equity indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 141.25 +2.5 basis points. 
• Asia Pacific Sovereign CDS Index 56.75 -1.0 basis point. 
• Bloomberg Emerging Markets Currency Index 73.35 +.03%. 
• S&P 500 futures +.01%. 
• NASDAQ 100 futures +.05%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (AMT)/1.26
• (COG)/-.14
• (CBOE)/.62
• (CVX)/-.16
• (CTB)/.97
• (ETN)/.85
• (XOM)/.32
• (IDXX)/.47
• (LM)/.70
• (MNST)/.74
• (LPNT)/.88
• (MCO)/1.07
• (ZEUS)/-.15
• (PSX)/.87
• (RCL)/.32
• (TYC)/.45
• (VFC)/.58  

Economic Releases 
8:30 am EST

• The 1Q Employment Cost Index is estimated to rise +.6% versus a +.6% gain in 4Q.
• Personal Income for March is estimated to rise +.3% versus a +.2% gain in February.
• Personal Spending for March is estimated to rise +.2% versus a +.1% gain in February.
• Real Personal Spending for March is estimated to rise +.1% versus a +.2% gain in February.
• The PCE Core (MoM) for March is estimated to rise +.1% versus a +.1% gain in February.    

9:00 am EST

• ISM Milwaukee for April.

9:45 am EST

• Chicago Purchasing Manager for April is estimated to fall to 52.8 versus 53.6 in March.

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for April is estimated to rise to 90.0 versus 89.7 in March.
  

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Kaplan speaking could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Reversing Substantially Lower into Final Hour on Global Growth Fears, Earnings Outlook Concerns, Yen Strength, Tech/Financial Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Slightly Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 14.1 +2.34%

• Euro/Yen Carry Return Index 128.24 -2.84%

• Emerging Markets Currency Volatility(VXY) 10.41 -10.33%

• S&P 500 Implied Correlation 55.15 +1.53%

• ISE Sentiment Index 129.0 +12.2%

• Total Put/Call .92 -8.91%

• NYSE Arms .87 +22.41% 

Credit Investor Angst:

• North American Investment Grade CDS Index 75.83 +2.8%
  

• America Energy Sector High-Yield CDS Index 1,020.0 -7.4%

• European Financial Sector CDS Index 85.62 -1.9%

• Western Europe Sovereign Debt CDS Index 26.19 +1.0%

• Asia Pacific Sovereign Debt CDS Index 56.0 -1.4%

• Emerging Market CDS Index 275.32 +.72%
  

• iBoxx Offshore RMB China Corporate High Yield Index 127.30 +.05%

• 2-Year Swap Spread 13.25 +1.5 basis points

• TED Spread 39.50 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -22.50 -.5 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.35 +.56%
• 3-Month T-Bill Yield .22% -2.0 basis points
  

• Yield Curve 105.0 +2.0 basis points
  

• China Import Iron Ore Spot $62.90/Metric Tonne +2.96%

• Citi US Economic Surprise Index -29.80 -2.0 points

• Citi Eurozone Economic Surprise Index -9.30 +4.5 points

• Citi Emerging Markets Economic Surprise Index 16.80 +.3 point

• 10-Year TIPS Spread 1.73% +5.0 basis points
  
• 26.1% chance of Fed rate hike at July 27 meeting, 42.3% chance at September 21 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -376 open in Japan 
• China A50 Futures: Indicating -10 open in China

• DAX Futures: Indicating -29 open in Germany

Portfolio: 

• Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
  

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

• Market Exposure: Moved to 25% Net Long