Wednesday, December 24, 2014

Bear Radar

Style Underperformer:
  • Large-Cap Value +.03%
Sector Underperformers:
  • 1) Energy -1.22% 2) Oil Service -1.20% 3) Social Media -.90%
Stocks Falling on Unusual Volume:
  • CAMP, DLNG, CUBA, BIS, AFG, CAF, CALM, WMC, PKO, ARDX, OAS, PTY, SSL, VLP, AAVL, PDI, TGP, NOAH, BCPC, KOP, NE and CLR
Stocks With Unusual Put Option Activity:
  • 1) SHLD 2) NVDA 3) XLU 4) OIH 5) BBY
Stocks With Most Negative News Mentions:
  • 1) MON 2) CHK 3) JCP 4) NBL 5) CLR
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Growth +.61%
Sector Outperformers:
  • 1) Gold & Silver +2.27% 2) Biotech +2.17% 3) Utilities +1.44%
Stocks Rising on Unusual Volume:
  • ADMS, BRP, NVGS, ACHN, GPRO, ISIS, QIHU, VNDA and CELG
Stocks With Unusual Call Option Activity:
  • 1) OVTI 2) AEP 3) KKR 4) GPS 5) UPS
Stocks With Most Positive News Mentions:
  • 1) OVAS 2) BAC 3) AAPL 4) TOL 5) ABBV
Charts:

Tuesday, December 23, 2014

Wednesday Watch

Evening Headlines 
Bloomberg:
  • Russians Race to Secure Mortgages Before Costs Spiral. Russians are racing to take out mortgages on concern that borrowing costs will rise further after the ruble’s weakness prompted the central bank to increase interest rates. The number of people applying for mortgages at Bank VTB 24, a retail unit of state-controlled VTB Group (VTBR), almost tripled in the first two weeks of December compared with the November average, according to Andrey Osipov, head of the Moscow-based bank’s home-loan department. The bank is lending as much as 2.5 billion rubles ($46 million) each day, he said. 
  • UBS Raises Flag on China’s $1 Trillion Overseas Debt Pile. UBS Group AG is flagging risks from China’s $1 trillion worth of unhedged foreign debt as forecasters see bets against the greenback unwinding in 2015. The world’s second-largest economy is exposed to shifts in currency and interest rates as never before because of expanding international trade and easing foreign-exchange regulations, said Stephen Andrews, head of Asia banks research in Hong Kong at UBS. Daiwa Capital Markets has a $1 trillion estimate for carry-trade inflows since 2008, bets on the difference between yields in China and overseas. It sees a 5.7 percent drop in the yuan next year. 
  • China Brokers’ Profit Seen at Risk From Government Action. China’s surging stock market is raising the prospect of government action to prevent an equities bubble, a potential threat to brokerage earnings that are projected to hit a seven-year high this year. UBS Group AG says regulators could act to limit the use of credit in buying stocks. In 2007, authorities raised a trading tax following a sixfold increase in the Shanghai Composite Index over two years. The securities regulator this month cautioned investors on buying shares and started inspecting some brokerages’ margin finance businesses. 
  • China Stocks Fall on Bets Government Taking Steps on Bubble Risk. China’s stocks fell, extending the benchmark index’s biggest loss in two weeks, amid speculation the government is taking measures to cool the world’s best-performing major stock market over the past month. Citic Securities Co. and Haitong Securities Co., the nation’s biggest securities firms, slid more than 3 percent. Some brokerages raised the threshold for margin trading and short selling to control risks, the 21st Century Business Herald reported, while data showed new stock-trading accounts dropped 29 percent last week. China Life Insurance Co. and China Minsheng Banking Corp. slumped more than 3 percent to drag down a gauge of financial shares by the most among industry groups. The Shanghai Composite Index fell 0.4 percent to 3,020.84 at 9:47 a.m., after plunging 3 percent yesterday.
  • Asian Stocks Pace U.S. Gains on Economy While Oil Drops. Asian stocks climbed, as Japanese shares followed gains in U.S. equities after data showed the world’s biggest economy grew at the fastest pace since 2003 last quarter. Australian bonds fell as crude oil retreated. The MSCI Asia Pacific Index jumped 0.5 percent by 10 a.m. in Tokyo, with the Topix index rising 1 percent after a holiday in Japan yesterday.
  • Demonstrators Defy NYC Mayor's Call to Suspend Police Protests. Demonstrators tried to disrupt holiday shopping on New York’s Fifth Avenue today, defying Mayor Bill de Blasio’s request to suspend protests after two police officers were fatally shot over the weekend. Bearing signs calling for justice against police who have killed unarmed men, hundreds gathered near Central Park in a chilly light rain. “Stop Racist Police Terror,” read one banner displayed at Grand Army Plaza. “It’s preposterous and insulting to the people of color to say we should be silent,” said Noha Arata, 35, of Brooklyn. “Not showing up would have essentially had us agree with Mayor de Blasio." 
Wall Street Journal:
  • No Way Out for Iraqis Who Helped U.S. in War. Iraqi Colleagues of U.S. Troops Are Marked for Death by Islamic State. The first emails from Iraq landed in John Kael Weston ’s inbox while he was eating breakfast at a Utah ski resort. Islamic State fighters had just seized Fallujah, and the former State Department diplomat fired off a worried message to the Iraqi policeman who helped him over and over again during the war’s darkest days.
  • China’s Shadow-Banking Boom Is Over. Tighter Government Rules, Jump in Stock Market Curb Informal-Lending Sector. Following years of explosive growth, China’s shadow-banking industry is experiencing a sharp slowdown after Beijing tightened its grip on the sector, which has been a key source of funding for the economy but also has added to rising debt levels and other risks in the financial system.
MarketWatch.com:
  • The Fed is heading for another catastrophe. America’s Federal Reserve is headed down a familiar — and highly dangerous — path. Steeped in denial of its past mistakes, the Fed is pursuing the same incremental approach that helped set the stage for the financial crisis of 2008-2009. The consequences could be similarly catastrophic.
Zero Hedge:
Business Insider:
Yonhap News:
  • N. Korea can practically miniaturize nukes: Seoul. South Korea believes that North Korea has practically acquired the technology to miniaturize nuclear warheads that could be mounted on its long-range ballistic missiles, military sources said Tuesday.
  • Uber taxi founder indicted for illegal business in S. Korea. South Korean prosecutors said Wednesday they have indicted the founder of the U.S.-based taxi service Uber on charges of operating an illegal taxi service here. The Seoul Central District Prosecutors' Office said it prosecuted Travis Kalanick, the founder and CEO of the app-based taxi service, and the head of MK Korea, a local rental-car service operator, identified only as Lee, both without physical detention.
21st Century Business Herald:
  • Some China Brokers Raise Margin Trading Threshold. Some brokerages raised new account threshold for margin trading and short-selling businesses to control risks, without citing anyone.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.25% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 102.0 -1.0 basis point.
  • Asia Pacific Sovereign CDS Index 64.5 -.75 basis point.
  • S&P 500 futures +.09%.
  • NASDAQ 100 futures  +.08%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • None of note
Economic Releases
8:30 am EST
  • Initial Jobless Claims are estimated to rise to 290K versus 289K the prior week.
  • Continuing Claims are estimated to rise to 2375K versus 2373K prior.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,811,110 barrels versus a -847,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +733,330 barrels versus a +5,250,000 barrel gain the prior week. Distillate supplies are estimated to fall by -822,220 barrels versus a -207,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.19% versus a -1.9% decline the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The $29B 7Y T-Note auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report and weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Mostly Higher into Final Hour on US Economic Data, Seasonal Strength, Yen Weakness, Gaming/Financial Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 14.50 -4.92%
  • Euro/Yen Carry Return Index 153.46 +.09%
  • Emerging Markets Currency Volatility(VXY) 10.82 -2.08%
  • S&P 500 Implied Correlation 64.49 +1.24%
  • ISE Sentiment Index 69.0 -29.59%
  • Total Put/Call .85 +11.84%
  • NYSE Arms .87 -19.95% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 64.30 -1.05% 
  • America Energy Sector High-Yield CDS Index 629.0 +3.62%
  • European Financial Sector CDS Index 62.38 -1.39%
  • Western Europe Sovereign Debt CDS Index 27.74 +3.80%
  • Asia Pacific Sovereign Debt CDS Index 64.55 -1.01%
  • Emerging Market CDS Index 324.22 +1.74%
  • China Blended Corporate Spread Index 343.30 -.36%
  • 2-Year Swap Spread 18.5 -4.75 basis points
  • TED Spread 21.75 -1.0 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .02% unch.
  • Yield Curve 152.0 +2.0 basis points
  • China Import Iron Ore Spot $66.84/Metric Tonne -1.56%
  • Citi US Economic Surprise Index 36.90 4.2 points
  • Citi Eurozone Economic Surprise Index 2.10 +.2 point
  • Citi Emerging Markets Economic Surprise Index -14.0 -1.2 points
  • 10-Year TIPS Spread 1.71 +4.0 basis points
Overseas Futures:
  • Nikkei Futures: Indicating +320 open in Japan
  • DAX Futures: Indicating +6 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my biotech/medical sector longs
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:
  • Russia May Be Cut to Junk as S&P Says It’s Considering Downgrade. Russia may lose its investment grade for the first time in a decade after Standard & Poor’s signaled it’s considering cutting the country’s rating. “We are reviewing our assessment of Russia’s monetary flexibility and the impact of the weakening economy on its financial system,” S&P said in a statement. The move implies at least a one-in-two likelihood of a “negative rating action” within 90 days, the statement said. S&P said it expects to conclude its review by mid-January. 
  • Ukraine Lawmakers Annul Non-Aligned Status in NATO Move. Ukraine’s parliament backed a proposal to cancel the country’s non-aligned status, a decision that Russia denounced as a dangerous step toward seeking membership of NATO. The legislation put forward by President Petro Poroshenko was supported today by 303 of 357 lawmakers in the chamber, hours after the announcement of fresh talks to try to end the conflict with pro-Russian rebels in eastern Ukraine. The bill will help Ukraine as it seeks to achieve “all criteria of membership” for the North Atlantic Treaty Organization, Foreign Minister Pavlo Klimkin told parliament.
  • Russia Moves to Stave Off Panic Among Depositors After Rescuing Bank. After arresting a decline in the ruble, Russia is now trying to avert a banking crisis. Lawmakers rushed legislation through the lower house of parliament today allowing the Deposit Insurance Agency to buy stakes in banks before they face bankruptcy proceedings to keep the system stable. While the ruble strengthened for a third day as the government told state-run exporters to sell foreign currency, it’s still down 30 percent in three months.
  • Greece Moves Closer to Polls as Samaras Loses Vote. Prime Minister Antonis Samaras failed to win enough backing today for his nominee for president, bringing Greece a step closer to early elections. In the second of three attempts, 168 lawmakers in Greece’s 300-seat chamber voted for Samaras’s nominee, Stavros Dimas, short of the required 200 ballots. Although up from 160 in the first round on Dec. 17, it showed Samaras’s calls for consensus during the weekend didn’t lure enough opposition lawmakers to add to his coalition’s 155 votes. 
  • Iron Ore Extends Decline to Lowest Since 2009 as Surplus Builds. Iron ore extended losses to the lowest level in more than five years amid concern that slowing steel demand in China may hurt consumption in the world’s biggest user just as rising supplies deepen a glut. Ore with 62 percent content delivered to Qingdao, China, dropped 1.6 percent to $66.84 a dry metric ton, according to data compiled by Metal Bulletin Ltd. That’s the lowest since June 2, 2009. 
CNBC:
ZeroHedge:
Business Insider:
Telegraph: 
RIA Novosti:
  • Medvedev Says Russia Faces Risk of Deep Recession. Russia needs to move to hands-on management like in 2008 crisis, citing Prime Minister Dmitry Medvedev.
Interfax:
  • Russia Calls Ukraine Vote on Non-Aligned Status Unfriendly. Decision to drop non-aligned status is unfriendly, political step that will only add tension in ties w/Russia, citing Russia's representative to OSCE Andrey Kelin.

Bear Radar

Style Underperformer:
  • Small-Cap Growth -.32%
Sector Underperformers:
  • 1) Biotech -5.30% 2) Drugs -2.62% 3) Medical Equipment -1.03%
Stocks Falling on Unusual Volume:
  • WNRL, CLDN, RDUS, GDOT, BIB, ACHN, GILD, CELG, ASPS, VRTX, IBB, AGIO, HQL, HQH, REGN, ISIS, SERV, NSM, MGNX, KITE, BTI, OVAS, ENTA, ZU, ALXN, BLUE, ASPX, PCYC and OCN
Stocks With Unusual Put Option Activity:
  • 1) CWB 2) EA 3) XLK 4) CELG 5) NVDA
Stocks With Most Negative News Mentions:
  • 1) HAL 2) ACHN 3) GMCR 4) CELG 5) AET
Charts: