Bear Radar

Style Underperformer:

• Mid-Cap Value -1.0%

Sector Underperformers:

• 1) Hospitals -2.7% 2) Disk Drives -2.3% 3) Road & Rail -2.2%

Stocks Falling on Unusual Volume:

• TAP, AKAM, GMED, LLTC, CRI, SIX, NANO, UHS, TYPE, RHI, LVLT, TWTR, BJRI, EQR, ULTI, UFI, OC, CNXC, TSS, WYN, MTCH, ASH, CHRW, CTXS, KO, HUN, CVA, KO, NYCB, RRC, BCR. ROL, HES, ULTI, CHRW, ACHC, SLGN, R, TSS, LL and KN

Stocks With Unusual Put Option Activity:

• 1) LNKD 2) BWLD 3) MRO 4) USO 5) UPS

Stocks With Most Negative News Mentions:

• 1) TERP 2) MTCH 3) OAS 4) JWN 5) DO

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth -.1%

Sector Outperformers:

• 1) Biotech +1.4% 2) Gold & Silver +1.3% 3) Steel +.5%

Stocks Rising on Unusual Volume:

• EPIQ, LOGM, UIS, N, ENTG, GRMN, MHLD, BWLD, FRGI, CAVM, WIX, ILMN, EW, AAPL, X, STT and OLED

Stocks With Unusual Call Option Activity:

• 1) TAP 2) CLR 3) AKAM 4) EW 5) KO

Stocks With Most Positive News Mentions:

• 1) EW 2) AKS 3) MBLY 4) ZION 5) PNRA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +9.6% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 46.4% of Issues Advancing, 50.4% Declining
• 163 New 52-Week Highs, 5 New Lows
• 61.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 45.4%
• Vix 13.3 +2.0%
• Total Put/Call .79 -13.2%
• TRIN/Arms 1.09 +38.9%

Wednesday Watch

Evening Headlines
Bloomberg: 

• Turkey-Risk Model Shows Nation’s Markets Going From Bad to Worse. Turkey’s failed coup and President Recep Tayyip Erdogan’s crackdown could hardly have come at a worse time for investors worried about the riskiness of the country’s bonds. Now they may get even dicier. Even before rogue generals tried to seize control on July 15, the country had a relatively high default probability. It was greater than about 80 percent of nations, according to Bloomberg’s sovereign risk model, which uses debt, currency reserves and political instability metrics to calculate such odds. “There’s nothing in these factors that will not get worse,” said Salman Ahmed, the London-based chief strategist at Lombard Odier Asset Management, which uses similar gauges to assess government bonds and is staying underweight on Turkey’s debt. “Political risk is going to go up, growth will go down and external debt will go up as a percent of GDP.”
• Yen Traders Signal Risk Kuroda Falls Short as Volatility Jumps. (video) Bank of Japan Governor Haruhiko Kuroda has never been one to be swayed by market expectation. But this week, investors are leaving him very little room for maneuver. Four in five economists predict additional stimulus Friday -- the most since Kuroda presided over his first policy meeting in April 2013 -- with an increase in purchases of exchange-traded funds the most likely option, followed by a deeper cut in the negative deposit rate. After inaction at the previous two policy meetings sparked yen rallies, Citigroup Inc. warns the currency could surge about 5 percent toward the 2 1/2-year high of 99.02 per dollar it hit after the U.K. voted to leave the European Union.
• End of an Era as China’s Love Affair With U.S. Real Estate Fades. (video) For David Wong, the business of selling homes isn’t as good this year as it was in 2015, and he’s blaming that on a decline in customers from China. “The residential-property market here, especially for those priced between $2.5 million to $3 million, has been affected by China’s measures to control capital flight,” said the New York City-based Keller Williams Realty Landmark broker. “You need to cut the price, or it may take a real long time.” Wong is not the only one who has felt the cooling in the U.S. real estate market for foreign buyers. Total sales to Chinese buyers in the 12 months through March fell for the first time since 2011, to $27.3 billion from $28.6 billion a year earlier, according to an annual research report released by the National Association of Realtors. The number of properties purchased by Chinese also declined to 29,195 units from 34,327 units.
• Asia Stocks Rise Amid Japan Rebound as Yen Pulls Back; Oil Sinks. Shares in Tokyo snapped a three-day slide, driving gains in Asia as the yen retreated amid speculation over the outlook for Japanese stimulus. Gold fell ahead of the Federal Reserve’s interest-rate review, while crude oil extended its slump. The MSCI Asia Pacific Index added 0.2 percent as of 10:01 a.m. Tokyo time, headed for its highest close since Nov. 5 as the Topix gained 0.7 percent.
• Oil Majors Lost One Engine; Now the Second One Is Sputtering. If Big Oil was a two-engine airplane, you could say it’s been flying on a single engine since energy prices crashed in 2014. Now, the second motor is sputtering. The major integrated oil companies, including Exxon Mobil Corp., Total SA and BP Plc, have relied on their so-called downstream businesses, which include refining crude into gasoline, oil trading and gas stations, to cushion the losses on their upstream units, which pump crude and natural gas.

Wall Street Journal: 

• At Democratic Convention, Economic Messages Reveal Tensions. As Hillary Clinton trumpets gains and policy proposals, progressives emphasize shortcomings.
• Akamai(AKAM) Stumbles as Silicon Valley Giants Wean Themselves Off Network. Company still counts on traditional media outlets to shore up its video business.
• Treasury Yield Curve Near Flattest Since 2007. Traders and investors await the Fed’s message following this week’s policy meeting. The yield premium investors charged to hold the benchmark 10-year Treasury note relative to the two-year note fell to near a nine-year low ahead of the latest interest-rate decision by the Federal Reserve.
• Apple’s(AAPL) Earnings in Five Charts. (graph)
• Europe’s Terror Storm. François Hollande declares war on Islamic State. Does he mean it? Two terrorists entered a village church in Normandy at morning Mass on Tuesday, slit the throat of an elderly priest and critically wounded another person before police shot the pair dead. Islamic State claimed credit, adding to a list of recent atrocities that includes a suicide bombing and knife attack in Germany and the Bastille Day murder of 84 people in Nice. President François Hollande says France is at “war” with Islamic State, and we’d like to believe he means it.

Fox News:

• DNC Convention: Live Blog.

MarketWatch: 

• The villain of both conventions: Goldman Sachs(GS).

CNBC:

• This chart spells trouble for stocks: Technical analyst. (video)
• Oil market disaster: This is a glut without end in sight, expert says. (video) The oil industry is still "a disaster," with an oversupply issue that doesn't appear to be balancing out anytime soon, John Kidluff, partner at Again Capital, said Tuesday. Kilduff, who has been bearish on crude, pointed out that refiners are soon going to go into their seasonal maintenance.

Zero Hedge:

• Why Hillary Is Nervous: "More Leaks May Be Coming".
• Dead 'Market' Walking: Chinese Stock Volatility Crashes Near Record Lows. (graph)
• What The Sudden Spike In The TED-Spread Really Means. (graph)
• "An Extraordinary Development": Record Swiss Gold Flow Into The United States.
• "I'm (Not) With Her" - Clinton's Image Lowest In 24 Years. (graph)
• Twitter(TWTR) Plummets After Slashing Q3 Outlook.
• Apple(AAPL) Surges After Beating Expectations, Despite Forecasting Third Straight Revenue Decline.
• Peak Hubris.
• Global Central Banks Are All-In: QE Running At Record $180 Billion Per Month (And Rising). (graph)
• Oil Extends Losses After Surprisingly Large Cushing Build. (graph)
• Manic Day Leaves S&P, Bonds, Gold, Crude, Dollar Unchanged. (graph)

Business Insider:

• The worst might be yet to come with the DNC email hack.
• The mayor of New York City is reportedly under federal investigation.
• It's time to take a serious look at Tim Cook's leadership of Apple(AAPL).
• Donald Trump says he wants to raise the federal minimum wage to $10 an hour.
• Trump is doubling down on taxing companies that manufacture overseas.

Financial Times:

• Apple(AAPL) passes ‘low point’ on iPhone sales. Sales for device fall 15% in second quarter as Chinese revenues hit hard. Apple assured investors that demand for the iPhone was getting stronger and the worst of the decline in sales of its flagship device was behind it, as it reported third-quarter results just ahead of Wall Street expectations.

Night Trading 

• Asian equity indices are unch. to +.50% on average.
• Asia Ex-Japan Investment Grade CDS Index 120.75 +.75 basis point.
• Asia Pacific Sovereign CDS Index 48.75 unch.
• Bloomberg Emerging Markets Currency Index 71.80 +.03%. 
• S&P 500 futures +.12%. 
• NASDAQ 100 futures +.62%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (MO)/.80
• (ANTM)/3.23
• (ARMH)/.08
• (BA)/2.27
• (KO)/.58
• (CMCSA)/.81
• (GLW)/.32
• (FCAU)/.47
• (GD)/2.31
• (GT)/1.02
• (HES)/-1.24
• (HLT)/.26
• (IR)/1.30
• (MDLZ)/.40
• (NDAQ)/.88
• (NSC)/1.35
• (NOC)/2.53
• (OC)/.85
• (R)/1.53
• (STRA)/1.06
• (WYN)/1.37
• (AMGN)/2.74
• (ABX)/.15
• (CAKE)/.71
• (ESV)/.51
• (FB)/.82
• (GPRO)/-.58
• (iac)/.51
• (LRCX)/1.64
• (MAR)/.98
• (MCK)/3.34
• (MUR)/-.39
• (ORLY)/2.67
• (OI)/.63
• (WFM)/.37
• (XLNX)/.56 
  

Economic Releases 
8:30 am EST

• Preliminary Durable Goods Orders for June are estimated to fall -1.4% versus a -2.3% decline in May.
• Preliminary Durables Ex Transports for June are estimated to rise +.3% versus a -.3% decline in May.
• Preliminary Cap Goods Orders Non-Defense Ex Air for June are estimated to rise +.2% versus a -.4% decline in May. 

10:00 am EST

• Pending Home Sales MoM for June are estimated to rise +1.2% versus a -3.7% decline in May.

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,077,780 barrels versus a -2,342,000 barrel decline the prior week. Gasoline supplies are estimated to rise by +5,560 barrels versus a +911,000 barrel gain the prior week. Distillate supplies are estimated to rise by +677,780 barrels versus a -214,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.23% versus a +.9% gain prior.
  

2:00 pm EST

• The FOMC is expected to leave the benchmark Fed Funds rate at .25%-.5%.

Upcoming Splits 

• (EBIX) 3-for-1

Other Potential Market Movers

• The German GFK Consumer Confidence report, $28B 7Y T-Note auction and the weekly MBA mortgage applications report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and industrial 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 Slightly Lower into Final Hour on Rising European/Emerging Markets/US High-Yield Debt Angst, Yen Strength, Earnings Outlook Worries, Restaurant/Biotech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 13.08 +1.63%

• Euro/Yen Carry Return Index 120.07 -1.19%

• Emerging Markets Currency Volatility(VXY) 10.06 +.5%

• S&P 500 Implied Correlation 49.93 -1.27%

• ISE Sentiment Index 81.0 +8.0%
  

• Total Put/Call .94 +3.30%

• NYSE Arms .75 -34.56% 

Credit Investor Angst:

• North American Investment Grade CDS Index 74.46 +1.48%
  

• America Energy Sector High-Yield CDS Index 753.0 +2.36%

• European Financial Sector CDS Index 96.35 +3.70%

• Western Europe Sovereign Debt CDS Index 25.65 -.89%

• Asia Pacific Sovereign Debt CDS Index 49.0 +.71%

• Emerging Market CDS Index 260.53 +1.74%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.26 +.11%

• 2-Year Swap Spread 21.5 -3.75 basis points
  

• TED Spread 43.75 +3.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -53.5 -3.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.79 -.15%
• 3-Month T-Bill Yield .30% unch.

• Yield Curve 80.50 -3.5 basis points

• China Import Iron Ore Spot $58.08/Metric Tonne +2.15%

• Citi US Economic Surprise Index 43.10 +4.5 points

• Citi Eurozone Economic Surprise Index 10.4 -.4 point

• Citi Emerging Markets Economic Surprise Index -8.50 +1.6 points

• 10-Year TIPS Spread 1.50% unch.
• 28.0% chance of Fed rate hike at Sept. 21 meeting, 29.5% chance at Nov. 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +67 open in Japan 
• China A50 Futures: Indicating +10 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

• Slightly Higher: On gains in my retail/tech/medical sector longs
  

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• Islamic State Claims Attack After Priest Murder in French Church. French police killed two attackers who seized hostages and murdered a priest during a siege at a church in Normandy in the latest attack claimed by Islamic State amid a wave of terror attacks across Europe. The police said they killed the assailants as they ended the standoff in north-western France on Tuesday morning. Le Figaro reported that the attackers cut the priest’s throat, citing police sources. The Paris prosecutor’s anti-terrorism unit has been tasked with looking into the assault.
• Putin, Erdogan Mend Ties as Post-Coup Turkey Turns to Russia. Turkey and Russia will seek to speed up the repair of frayed relations when Recep Tayyip Erdogan meets Vladimir Putin for talks in St. Petersburg next month in the wake of the failed military coup against the Turkish president. Russia “isn’t just our close and friendly neighbor, but also a strategic partner,” Turkish Deputy Prime Minister Mehmet Simsek, who announced the Aug. 9 visit, said at talks in Moscow with his Russian counterpart Arkady Dvorkovich on Tuesday. “Today, we are here to normalize the situation and our relations as soon as possible and at an accelerated pace since they were disrupted on November 24,” he said, referring to the downing of a Russian warplane by Turkish fighter jets near the Syrian border.
• China Steel Oversupply Still ‘Big Worry’ for Industry, JSW Says. Steel supply from China, the world’s biggest producer, remains a “big worry” for the global industry, which continues to be under pressure despite an improvement in prices, JSW Steel Ltd. Chairman Sajjan Jindal said. There is “‘huge overcapacity” in China and the industry is worried about how the Asian nation will address the issue, Jindal, who runs India’s second-biggest steelmaker, said in an interview after the company’s annual general meeting in Mumbai. “Our biggest concern is how China plays out and what they do as most of their businesses are run because of the highly subsidized policies of the government.”
• Europe Stocks Little Changed Amid Faurecia, Commerzbank Results. (video) Automobile-parts maker Faurecia SA added 4.3 percent after raising its 2016 targets. AMS AG rallied 12 percent after the semiconductor company posted better-than-estimated profit and forecast an increase in sales. Commerzbank AG lost 4.5 percent after saying a key measure of its capital strength fell in the second quarter, leading lenders lower before Friday’s bank stress-test results. BP Plc fell 1.3 percent after its profit plunged. The Stoxx Europe 600 Index added 0.1 percent at the close, after rising as much as 0.4 percent and sliding 0.6 percent.
• No-Win Oil Market Saps Profits for Refiners and Producers: Chart. (video)
• El-Erian Says Fed Risks ‘Collateral Damage’ by Keeping Rates Low. (video) Allianz SE’s Mohamed El-Erian said Federal Reserve policymakers must be aware of the diminishing returns of keeping interest rates so low and need to be aware of the possibility of “unintended consequences” from their approach. “If the Fed continues with interest rates being too low, it risks causing collateral damage,” El-Erian, Allianz’s chief economic adviser, said Tuesday in a Bloomberg Television interview. “The more the structural headwinds, the less effective central banks’ stimulus is. It’s ironic, but this is a recognition that is now spreading within the Fed.”
• Analyst Warns of a Restaurant Downturn and Sees Harbinger of U.S. Recession. And it doesn't bode well for the U.S. economy. According to one analyst, not even the Pokemon Go craze can save the restaurant industry. During much of the recovery from the financial crisis, restaurant spending has been a retail highlight as other areas, like department stores, have struggled. According to Stifel Financial Corp. analyst Paul Westra, however, recent surveys point to the start of a serious decline. 
• Analog Devices(ADI) Said in Advanced Talks to Buy Linear Technology(LLTC). Analog Devices Inc. is in advanced talks to acquire Linear Technology Corp., according to people familiar with the matter. A deal for Linear, which has a market valuation of about $12 billion, could be announced as soon as today, the people said, asking not to be identified as the matter is private. No final agreement has been reached and the deal may still fall apart, they said.

Wall Street Journal:

• Crude Slump, Pipeline Expansion Mark End of U.S. Oil-Train Boom. As more pipelines reach shale regions, producers have a cheaper way to move their oil to market.
• Driverless Cars Threaten to Crash Insurers’ Earnings. The technology may be decades away, but firms are already scrambling to figure out how to deal with an expected decline in premium revenue as autos become safer.
• Guns, China, Abortion: How the Democratic Platform Has Changed.

Fox News:

• Wasserman Schultz left to defend House seat, $$ pours in for primary foe. (video) Just two days after an email scandal forced her resignation as head of the Democratic Party, Florida Rep. Debbie Wasserman Schultz could be on her own in a suddenly tough re-election battle, as fellow House Democrats turn their back — and withhold their money — while contributions pour in for her primary opponent.
• DNC Convention: Live Blog.

CNBC:

• Chinese tech giant LeEco to acquire Vizio for $2 billion. A famed Chinese tech giant plans to acquire Vizio for $2 billion — a move that will give it "great influence" in the global TV industry, the CEO said.
• Big bull Tom Lee admits: ‘August scares us’ and here's why. (video)

Zero Hedge:

• 2 Islamic State Hostage Takers Killed After Slitting Priest's Throat In Assault On French Church.
• Why Swap Spreads Are Suddenly Blowing Out And Why This Is Good For Treasuries. (graph)
• David Einhorn Is Back In The Doldrums With Q2 Loss As Amazon Short Stings: Full Letter.
• Pokemon Go Is Spooking Middle East Governments.
• One Analyst's Surprising Indicator Why Recession Is Coming In Early 2017.
• Hollande Vows "All Out War" Against ISIS After Priest Killing. (video)
• "Hope" Fades As Consumer Confidence Ignores Stock Market Exuberance. (graph)
• New Home Sales Rebound To Highest Since 2008 As Median Home Price Rises Back Over $300,000. (graph)
• Tuesday Humor: Richmond Fed Survey Beats Expectations By 7 Standard Deviations. (graph)
• US Services Economy 'Bounce' Dies - PMI Tumbles To 5-Month Lows. (graph)
• RBS Warns Clients May Face Negative Interest Rates.
• Case-Shiller Home Prices Drop Most In 2 Years. (graph)
• Crude Carnage Continues: WTI Hits $42 Handle On Inventories, Dollar. (graph)
• Caterpiller Cuts Guidance On "Subdued Global Growth", Blames Brexit And "Turkey Turmoil". (graph)

Business Insider:

• If Apple(AAPL) misses this key number, it means Tim Cook is misjudging his business.
• Nun: French church attackers forced the priest to kneel before killing him and filmed the encounter.
• 'Bernie or bust' supporters take to the streets again, unmoved by pleas to support Clinton.
• Turkey is widening crackdown after the attempted coup amid international alarm.

NY Times:

• As ISIS Loosens Grip, U.S. and Iraq Prepare for Grinding Insurgency.