Bear Radar

Style Underperformer:

• Small-Cap Value -.2%

Sector Underperformers:

• 1) Disk Drives -1.0% 2) Biotech -.6% 3) Gaming -.4%

Stocks Falling on Unusual Volume: 

• CARA, AOBC, CBI, VIPS, MGM, DDD and IMAX

Stocks With Unusual Put Option Activity:

• 1) MON 2) VFC 3) MGM 4) CARA 5) JNPR

Stocks With Most Negative News Mentions:

• 1) CARA 2) CRC 3) ESV 4) VIPS 5) DO

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.5%

Sector Outperformers:

• 1) Homebuilders +1.5% 2) Road & Rail +.8% 3) Defense +.8%

Stocks Rising on Unusual Volume:

• PKY, HAIN, NKE, AXGN, AVAV, NOAH, CRZO, TEO, TEP, OKE, OKS, SHLM, DCO, WOR, THS, MPLX, SHLX, STZ, MKC, SASP, HEP, TEGP and ASML

Stocks With Unusual Call Option Activity:

• 1) MON 2) AAOI 3) MU 4) HOG 5) HYG

Stocks With Most Positive News Mentions:

• 1) WMAR 2) NKE 3) MKC 4) MANT 5) STZ

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -9.3% Below 100-Day Average

• 9 Sectors Rising, 1 Sector Declining

• 54.8% of Issues Advancing, 40.9% Declining

• 34 New 52-Week Highs, 12 New Lows

• 47.1% of Issues Above 200-day Moving Average

• Average 14-Day RSI 36.3%

• Vix 11.2 -2.5%

• Total Put/Call .95 -4.0%

• TRIN/Arms 1.27 +105.8%

Friday Watch

Evening Headlines

Bloomberg:

• U.K. Won't Escape Shackles of EU Laws After Brexit, Bloc Says. (video) The U.K. must comply with hundreds of European Union regulations and European Court of Justice rulings even after its withdrawal from the bloc or face penalties, according to a series of negotiating documents under discussion by the EU’s 27 remaining member states. “All rulings given by the Court of Justice pursuant to the provisions of the withdrawal agreement are binding on the union and the United Kingdom, and are enforceable in the United Kingdom,” the European Commission’s Task Force in charge of preparing Brexit negotiations said in one of the so-called position papers circulated to national governments. The papers, posted on the commission’s website on Thursday, will be discussed among officials as soon as June 29.
• Happy Europeans May Bring Back Spark to Lagging Consumer Stocks. Europeans haven’t felt this good about spending in 16 years. That bodes well for companies focused on shoppers. The MSCI Europe Consumer Discretionary Index, which has typically tracked improvements in sentiment, has so far lagged gains in the broader regional measure this year. That may change, with the euro-area consumer confidence in June surging to its highest level since early 2001. 
• China Manufacturing Rose in June Amid Global Upturn. (video) China’s official factory gauge rose, adding to evidence that the world’s second-largest economy maintained its momentum in the second quarter.
• Asia Stocks Follow U.S. Drop as Dollar, Bonds Fall. Asian equity markets slid, paring a quarterly gain, after a slump in U.S. stocks triggered a surge in volatility. The dollar held on to losses and bonds fell as central banks worldwide shift toward a more hawkish tone. Stocks in Japan, Australia and South Korea declined after the S&P 500 Index lost the most in six weeks. The U.S. technology sector’s woes deepened as investors sold off the year’s biggest winners and rotated into banks. Australian 10-year yields jumped for a third day after the benchmark U.S. rate topped 2.29 percent for the first time in a month. Japan’s Topix dropped 0.8 percent as of 9:10 a.m. in Tokyo, trimming the quarter’s gain to 6.5 percent. Australia’s S&P/ASX 200 Index lost 1.4 percent. South Korea’s Kospi declined 0.6 percent, paring its quarterly advance to 10 percent. Futures on Hong Kong’s Hang Seng Index slid 0.5 percent.
• Apple’s(AAPL) Cook Reaped $145 Million Last Year, Most of S&P 500 CEOs.

Wall Street Journal:

• Trump Administration Tightens Limits on Getting Into the U.S., Targeting Six Nations and Refugee Program. New rules lay out more restrictive definition as to who constitutes close family, raising the ire of immigration advocates.
• GOP Operative Sought Clinton Emails From Hackers, Implied a Connection to Flynn. Peter W. Smith portrayed the former general as an ally in an effort, independent of the Trump campaign, to find personal emails deleted by Hillary Clinton.
• GE(GE), the Ultimate Global Player, Is Turning Local. Just look at its $200 million investment in India, which was crucial to winning giant locomotive deal.
• Trump Declares End to Obama-Era Energy Curbs. President pledges an era of ‘energy dominance’ by boosting nuclear and liquid natural gas and opening federal lands.

Fox News:

• House passes Kate’s Law, as part of illegal immigrant crackdown. (video)

MarketWatch:

• Low-income families spend 40% of their money on luxuries.
• It’s been an ugly first half for commodities in 2017. (graph)

CNBC: 

• Nike(NKE) tops Wall Street expectations; confirms deal with Amazon(AMZN).
• Senate GOP mulling not repealing Obamacare tax increase. (video)
• Alibaba(BABA) is working on an Amazon Echo rival that speaks Chinese, report says.
• Micron(MU) earnings: $1.62 a share, vs. estimated EPS of $1.51. (video)
• Japan May industrial output falls 3.3 percent on-month, marking fastest pace of decline since 2011.

Zero Hedge:

• Comey Friend Unveils "Smoking Gun" Story.
• Susan Rice Agrees To Testify Before House Intel Panel In Closed Session: Report.
• Global Debt Hits A New Record High Of $217 Trillion; 327% Of GDP. (graph)
• The "Diplomatic Quagmire" In Qatar Deepens 3 Days Before The Saudi Ultimatum Expires.
• Bob Woodward Blasts MSM: "Fair-Mindedness Is Essential If You Want People To Trust You". (video)
• In "Unprecedented Step" US Sanctions Chinese Entities With Ties To North Korea.
• "This Is Getting Out Of Hand" - Another Vol Event Strikes As FANGs Face Worst Week In 5 Months. (graph)

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.
• Asia Ex-Japan Investment Grade CDS Index 86.25 +.75 basis point. 
• Asia Pacific Sovereign CDS Index 19.75 +.25 basis point.
• Bloomberg Emerging Markets Currency Index 72.95 +.02%.
• S&P 500 futures +.03%.
• NASDAQ 100 futures -.27%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases 
8:30 am EST

• Personal Income for May is estimated to rise +.3% versus a +.4% gain in April. 
• Personal Spending for May is estimated to rise +.1% versus a +.4% gain in April.
• The PCE Core MoM for May is estimated to rise +.1% versus a +.2% gain in April.

9:45 am EST

• The Chicago Purchasing Manager Index for June is estimated to fall to 58.0 versus 59.4 in May.
  

10:00 am EST

• Final Univ. of Mich. Consumer Sentiment for June is estimated at 94.5 versus a prior estimate of 94.5.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Manufacturing PMI report, Eurozone CPI report and the (DAL) annual meeting could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by technology 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 50% net long heading into the day.

Stocks Falling into Final Hour on Profit-Taking, Tax/Healthcare Reform Worries, Hawish Central Bank Commentary, Gaming/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.14 +31.0%

• Euro/Yen Carry Return Index 133.67 +.25%

• Emerging Markets Currency Volatility(VXY) 7.63 +.66%

• S&P 500 Implied Correlation 36.75 +11.5%

• ISE Sentiment Index 88.0 +4.8%
  

• Total Put/Call .96 +2.13%

• NYSE Arms .48 -33.96%

Credit Investor Angst:

• North American Investment Grade CDS Index 61.75 +2.08%
  

• America Energy Sector High-Yield CDS Index 462.0 -2.55%

• European Financial Sector CDS Index 52.54 -.43%

• Western Europe Sovereign Debt CDS Index 6.09 -4.62%

• Asia Pacific Sovereign Debt CDS Index 19.69 +.82%

• Emerging Market CDS Index 202.43 +2.02%
  

• iBoxx Offshore RMB China Corporate High Yield Index 139.54 -.02%

• 2-Year Swap Spread 21.75 unch.

• TED Spread 28.5 -1.0 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -27.75 +1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.89 -.22%
• 3-Month T-Bill Yield 1.02% +2.0 basis points
  

• Yield Curve 90.0 +3.0 basis points

• China Import Iron Ore Spot $64.71/Metric Tonne +3.82%

• Citi US Economic Surprise Index -76.40 +1.1 points

• Citi Eurozone Economic Surprise Index 73.60 +13.8 points

• Citi Emerging Markets Economic Surprise Index 10.10 -.3 point

• 10-Year TIPS Spread 1.74 -1.0 basis point
  
• 27.8% chance of Fed rate hike at Sept. 20 meeting, 29.3% chance at Nov. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -210 open in Japan 
• China A50 Futures: Indicating -145 open in China

• DAX Futures: Indicating -28 open in Germany

Portfolio: 

• Lower: On losses in my tech/medical/biotech sector longs 

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

• Market Exposure: Moved to 75% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.7%

Sector Underperformers:

• 1) Semis -3.2% 2) Gaming -2.6% 3) Networking -2.6%

Stocks Falling on Unusual Volume: 

• GOV, DOC, GMS, ALDR, FUL, BLCM, EMKR, GOOS, ASML and AKBA

Stocks With Unusual Put Option Activity:

• 1) RAD 2) STZ 3) CTL 4) SIG 5) ABT

Stocks With Most Negative News Mentions:

• 1) EMKR 2) PIR 3) FRED 4) EDIT 5) SBUX

Charts:

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