BETWEEN THE HEDGES

Thursday, July 28, 2016

Bear Radar

Posted by Gary .....at 1:47 PM

Style Underperformer:

Small-Cap Value -.4%

Sector Underperformers:

1) Oil Tankers -3.6% 2) Networking -2.4% 3) Alt Energy -1.9%

Stocks Falling on Unusual Volume:

IVTY, PRLB, CNMD, AXTA, TGI, BCOR, GNC, WIRE, MD, FI, RCII, THRM, F, DLB, KEX, LDOS, TER, SNN, COMM, SXCP, MMLP, ULTI, ALSN, FN, LOB, ECPG, SFM, LVLT, CAB, ASGN, STAY, SERV, ULTI, ASGN, INT, EXR, KS, SXCP, ALSN, NEWM, CIEN, HEES, LEA, MINI, MD, COMM, KRA, KEX, ADPT and WFM

Stocks With Unusual Put Option Activity:

1) CRUS 2) WFM 3) F 4) UPS 5) FB

Stocks With Most Negative News Mentions:

1) INFN 2) FCAU 3) GM 4) CNMD 5) WIRE

Charts:

Bull Radar

Posted by Gary .....at 1:20 PM

Style Outperformer:

Mid-Cap Value +.2%

Sector Outperformers:

1) Computer Hardware +1.6% 2) REITs +.7% 3) Road & Rail +.7%

Stocks Rising on Unusual Volume:

HWAY, N, GRUB, ALR, NVDQ, CRUS, TPX, LOGI, GTLS, ABCO, TAP, GPRO, AZN, CAKE, ARRS, MOH, NTRI, TREE, TILE, OSK, DBD, FEYE, CBT, SPB and RPM

Stocks With Unusual Call Option Activity:

1) GRPN 2) GNC 3) ARIA 4) TPX 5) KR

Stocks With Most Positive News Mentions:

1) GRMN 2) CRUS 3) HOLX 4) MRVL 5) KONA

Charts:

Morning Market Internals

Posted by Gary .....at 10:52 AM

NYSE Composite Index:

Volume Running +9.2% Above 100-Day Average
1 Sector Rising, 9 Sectors Declining
43.0% of Issues Advancing, 53.2% Declining
105 New 52-Week Highs, 8 New Lows
61.2% of Issues Above 200-day Moving Average
Average 14-Day RSI 44.0%
Vix 13.2 +2.7%
Total Put/Call .96 +5.5%
TRIN/Arms 1.18 -11.4%

Wednesday, July 27, 2016

Thursday Watch

Posted by Gary .....at 9:59 PM

Evening Headlines
Bloomberg:

China's Central Bank Ends Its War With Yuan Bears. For traders betting on a weaker yuan, the People’s Bank of China is turning from foe to friend. Six months after the monetary authority intervened to crush short sellers, Bank of America Merrill Lynch, Pacific Investment Management Co. and Societe Generale SA say the PBOC is more likely to guide the currency lower than to prop it up. Despite official pledges of exchange-rate stability last weekend, bears argue that China’s leaders are growing more comfortable with yuan weakness after a 3.3 percent slump since March failed to spark a repeat of January’s market turmoil.
Japan’s Helicopter-Money Ban Is Anchored in Occupation-Era Law. The law specifically prohibits the government from making the BOJ buy sovereign bonds or lend money to the state. A caveat allows for this to happen in special circumstances (without describing what these might be), and only up to an amount that must be approved by parliament. The central bank and government use the exception to directly sell debt to the BOJ to replace some bonds it holds that have matured. Under the "BOJ rollover" plan, the bankplans to buy 8 trillion yen ($76 billion) of bonds this fiscal year, according to the Ministry of Finance.
Leveraged Investors Lose Faith in Abenomics, BOJ Easing or Not. The biggest local cheerleaders for Japan Prime Minister Shinzo Abe are losing faith in his economic policies even as the stock market rallies on expectations of further stimulus. Japanese individuals trading using borrowed money cut their bets on a rising equity market to the lowest since March 2013, shortly before central bank Governor Haruhiko Kuroda unleashed unprecedented bond-buying that sent the Nikkei 225 Stock Average to its biggest annual gain in four decades. Even as most economists predict the Bank of Japan will add to monetary easing when its two-day policy meeting ends on Friday, leveraged investors are speculating this time won’t have the same effect.
Yen Rises as BOJ Easing Expectations Keep Traders on Tenterhooks. The yen strengthened against all except one of its 16 major peers as traders awaited Friday’s Bank of Japan decision on how much it will boost monetary easing to spur growth. Japan’s currency resumed gains after dropping on Wednesday when Prime Minister Shinzo Abe announced a 28 trillion yen ($267 billion) fiscal-stimulus package. A gauge of the greenback declined for a third day after the Federal Reserve said it expects to raise interest rates gradually. “The BOJ news tomorrow will trump the FOMC news last night,” said Imre Speizer, a market strategist at Westpac Banking Corp. in Auckland. “An above consensus amount of stimulus would surely push dollar-yen higher.” The yen advanced 0.5 percent to 104.87 per dollar as of 9:20 a.m. in Tokyo on Thursday, after sliding 0.7 percent on Wednesday. Japan’s currency rose 0.4 percent to 116.10 per euro.
Asian Stocks Rise Amid Central Bank Meetings; Japan Shares Slip. Asian stocks rose for a fourth day, with the regional benchmark index trading near a nine-month high, as investors digested policy decisions from the Federal Reserve and awaited results from a Bank of Japan meeting. Shares in Tokyo retreated as the yen strengthened. The MSCI Asia Pacific Index gained 0.2 percent to 135.10 as of 9:13 a.m. in Tokyo.
Deep Dive: Odds of Rate Hike, Copper Prices, CDS Spreads. (video)

Wall Street Journal:

Attacks in Germany Amplify Fears of Refugees, Helpers. Some fear a backlash as violent acts increase, opposition to open-door policies mounts.
How a Chinese Highway Became a Boulevard of Broken Dreams. Problem-plagued project shows why infrastructure spending is increasingly ineffective in spurring China’s economy. A highway project here that is four years behind schedule and hundreds of millions of dollars over budget helps explain why Beijing’s effort to raise infrastructure spending is an increasingly ineffective way to boost thenation’s economy.
The Other Clinton ‘Change’. No one in Philadelphia wants to talk about the Clinton Foundation. Bill Clinton on Tuesday portrayed his wife as a “change maker” whose life has overflowed with good intentions and commitment to others. No one can spin a yarn like Bill, and for the believers it was a touching portrait. But if it’s true, why do the polls show that 68% of Americans don’t trust Hillary Clinton? That has to do with the rest of the story, which is how the Clintons have used politics to enrich themselves and retain power.
Trump’s Putin Illusions. Remember who mocked Mitt Romney for calling Russia a U.S. foe? Will someone—calling Ivanka—please tell Donald Trump that Vladimir Putin is no friend of America, or for that matter of Donald Trump? An intervention is needed after the Republican’s mouth-in-foot press conference Wednesday in which he invited Russia to turn over Hillary Clinton’s 33,000 missing emails from her private server.

Fox News:

Europe terror attacks spotlight security failings amid refugee crisis. (video) The European policy Germans call “Willkommenskultur” -- the enthusiastic embrace of refugees from Syria and other Muslim-majority countries -- has morphed into a summer of terror. Loose screening of refugees, lax counter-terrorism policies and lenient treatment of those with terrorist links or sympathies has led to a spate of attacks by terrorists already flagged by authorities. Tuesday’s attack in France, where a jihadist already under house arrest slit a priest’s throat, came just two days after a suicide bombing in Germany by a terrorist who a medical expert had predicted would “commit suicide in a spectacular fashion.” Critics say such cases are piling up.
DNC C onvention: Live Blog.

MarketWatch:

Facebook’s(FB) rapid growth is about to slow down.

Zero Hedge:

Business Insider:

The one note of caution in Facebook's(FB) insanely optimistic earnings.
The foundations of the stock market have crumbled. That this time it’s different also shows up in other assumptions and dynamics: business sales have been declining since mid-2014. Earnings have been declining for about that long. Even “adjusted” ex-bad items earnings of the S&P 500 companies have booked four quarters in a row of declines. The S&P 500 aggregate price-earnings ratio, based on GAAP, has soared to over 25, a dizzying number that sets off all kinds of alarm bells. And yet, the global flood of liquidity keeps pouring into this market, and fundamentals no longer matter, sales and earnings no longer matter, risks no longer matter, and money is free, or nearly free, for institutional investors. But the foundations have crumbled. And all bets are off. That’s what this divergence of margin debt and stock prices tells us. It’s a very precarious position to be in.
Whole Foods(WFM) shares fall after sales miss.
The world is following Japan's lead at the worst possible time.
Americans can't afford their houses, but the presidential candidates aren't talking about it.

Night Trading

Asian equity indices are -.5% to unch. on average.
Asia Ex-Japan Investment Grade CDS Index 120.0 -.75 basis point.
Asia Pacific Sovereign CDS Index 49.0 +.25 basis point.
Bloomberg Emerging Markets Currency Index 71.97 +.12%.
S&P 500 futures +.14%.
NASDAQ 100 futures +.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

(ALXN)/1.17
(AMT)/1.28
(APD)/1.90
(AB)/.44
(AZN)/.83
(ADP)/.67
(BZH)/.12
(BWA)/.82
(BSX)/.27
(BMY)/.66
(BG)/.41
(CAB)/.62
(CBG)/.52
(CELG)/1.39
(CLF)/.03
(CME)/1.11
(CL)/.69
(COP)/-.61
(CS)/-.02
(DOW)/.86
(FITB)/.38
(F)/.60
(HOG)/1.53
(HCA)/1.56
(HSY)/.78
(IGT)/.46
(IP)/.84
(LLL)/1.69
(LEA)/3.32
(MA)/.90
(OSK)/.99
(PTEN)/-.62
(POT)/.18
(SEE)/.64
(ZBH)/1.97
(AFL)/1.68
(GOOG)/8.04
(AMZN)/1.12
(BIDU)/1.20
(CBS)/.86
(DECK)/-2.07
(FE)/.54
(KLAC)/1.42
(WDC)/.71
(WYNN)/.96
(YRCW)/.54

Economic Releases
8:30 am EST

Advance Goods Trade Balance for June is estimated at -$61.0B versus -$60.6B in May.
Initial Jobless Claims for last week are estimated to rise to 261K versus 253K the prior week.
Continuing Claims are estimated to rise to 2136K versus 2128K prior.

11:00 am EST

Kansas City Fed Manufacturing Activity Index for July is estimated to rise to 4.0 versus 2.0 in June.

Upcoming Splits

(EBIX) 3-for-1

Other Potential Market Movers

The Eurozone Industrial Production report, the Japan Industrial report, weekly EIA natural gas inventory report and the Bloomberg weekly Consumer Comfort Index could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.

Stocks Slightly Higher into Final Hour on Falling Fed Rate Hike Odds, Yen Weakness, Earnings Optimism, Biotech/Metals & Mining Sector Strength

Posted by Gary .....at 3:42 PM

Broad Equity Market Tone:

Advance/Decline Line: Slightly Lower

Sector Performance: Most Sectors Declining

Volume: Around Average

Market Leading Stocks: Performing In Line

Equity Investor Angst:

Volatility(VIX) 12.8 -2.0%

Euro/Yen Carry Return Index 121.76 +1.39%

Emerging Markets Currency Volatility(VXY) 9.85 -2.18%

S&P 500 Implied Correlation 49.90 -.18%

ISE Sentiment Index 94.0 +4.44%

Total Put/Call .84 -7.69%

NYSE Arms 1.20 +51.99%

Credit Investor Angst:

North American Investment Grade CDS Index 73.53 -1.23%

America Energy Sector High-Yield CDS Index 763.0 +.51%

European Financial Sector CDS Index 94.76 -2.52%

Western Europe Sovereign Debt CDS Index 25.67 +.08%

Asia Pacific Sovereign Debt CDS Index 49.09 +.42%

Emerging Market CDS Index 259.76 -.20%

iBoxx Offshore RMB China Corporate High Yield Index 131.16 -.08%

2-Year Swap Spread 22.25 -.25 basis point

TED Spread 43.5 -.25 basis point

3-Month EUR/USD Cross-Currency Basis Swap -50.75 +2.75 basis points

Economic Gauges:

Bloomberg Emerging Markets Currency Index 71.89 +.16%
3-Month T-Bill Yield .28% -2.0 basis points

Yield Curve 79.0 -2.5 basis points

China Import Iron Ore Spot $58.63/Metric Tonne +.95%

Citi US Economic Surprise Index 37.20 -5.9 points

Citi Eurozone Economic Surprise Index 16.1 +5.3 points

Citi Emerging Markets Economic Surprise Index -7.60 +.9 point

10-Year TIPS Spread 1.50% unch.
26.4% chance of Fed rate hike at Sept. 21 meeting, 28.0% chance at Nov. 2 meeting

Overseas Futures:

Nikkei 225 Futures: Indicating +45 open in Japan
China A50 Futures: Indicating -43 open in China

DAX Futures: Indicating -10 open in Germany

Portfolio:

Higher: On gains in my biotech/tech sector longs

Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them

Market Exposure: 50% Net Long

Today's Headlines

Posted by Gary .....at 3:03 PM

Bloomberg:

FBI Chief Warns ‘Terrorist Diaspora’ Will Come to the West. Hundreds of terrorists will fan out to infiltrate western Europe and the U.S. to carry out attacks on a wider scale as Islamic State is defeated in Syria, FBI Director James Comey warned. “At some point there’s going to be a terrorist diaspora out of Syria like we’ve never seen before,” Comey said Wednesday in New York. “We saw the future of this threat in Brussels and Paris,” said the head of the Federal Bureau of Investigation, adding that future attacks will be on “an order of magnitude greater.” Comey’s blunt warnings echo those of Republican presidential nominee Donald Trump, who has scoffed at Obama administration efforts to defeat Islamic State extremists in Syria and Iraq. Nonetheless, the FBI chief’s comments reflect a consensus among U.S. intelligence officials that the group inevitably will strike out abroad as it continues to lose ground militarily under attack from a U.S.-led coalition.
Merkel Refugee Policies Face Renewed Criticism After Attacks. Chancellor Angela Merkel faced renewed criticism of her handling of the refugee crisis in the wake of four attacks in Germany in the span of a week that have unsettled the public. Lawmakers from her governing coalition, as well as politicians from parties on the political fringe, argued the assaults show her refugee policies aren’t working and have made the country less safe, breaking with the relative unity shown by the political and media establishment in the immediate aftermath. They pushed for speedy government action to step up security. "The refugee debate will take on a new dimension because of these recent attacks,” Mark Hauptmann, a lawmaker from Merkel’s Christian Democratic Union, said in an interview. “If you look at the suspects, you will see that most of them radicalized themselves over the past two years. Now just imagine what will happen with those 1.3 million refugees who entered Germany last year. This will not end well."
Syria Cuts Off Rebel-Run East Aleppo as 275,000 People Trapped. Syrian government forces seized control of the last rebel supply routes into eastern Aleppo city on Wednesday, in what a monitoring group said was their most significant advance in the province since 2013. The siege of eastern districts of Aleppo, Syria’s former commercial capital, has prompted the United Nations humanitarian chief to call for a weekly 48-hour humanitarian pause as an estimated 275,000 civilians remain trapped. Food supplies could be exhausted by mid-August, he said. The city has been divided between government and opposition forces since 2012, with clashes intensifying in recent weeks. The surge in fighting has cast a pall over efforts to revive a broader cease-fire and resume talks on a political solution to the five-year conflict. Officials from the U.S. and Russia, which support opposing sides in Syria’s war, met in Geneva on Tuesday.
China Stocks Tumble on Report of Wealth Management Product Curbs. (video) Chinese stocks slumped the most in six weeks as a report about possible curbs on wealth management products added to concern that regulatory efforts to reduce risks in the financial system will limit flows into equities. The ChiNext Index of small-company shares sank 5.5 percent, the most since June 13, while the Shanghai Composite Index fell 1.9 percent. The Shenzhen Composite Index lost 4.5 percent. China’s banking regulator is considering tightening curbs on the nation’s $3.6 trillion market for WMPs, the 21st Century Business Herald reported, citing people it didn’t identify. Authorities may set a limit on how much WMPs can invest in equities and “non-standard assets” such as loans, the report said. “There’s an obvious trend that the regulators want to strengthen market monitoring and lower the use of leverage in financial markets to control risks,” said Dai Ming, a fund manager at Hengsheng Asset Management Co. “Under such circumstances, ChiNext is especially vulnerable, given its high valuations and the recent gains.”
Morgan Stanley(MS) Says China Remains as Key Risk to India Investors. India has overtaken China as the world’s fastest-growing major economy, but its northeastern neighbor remains the biggest risk for investors in rupee assets, says Morgan Stanley Investment Management. A case in point: the local market’s reaction to Brexit. The rupee dropped more than 1 percent to 67.97 per dollar on June 24 when it was announced the U.K. had voted to quit the European Union. It has since rebounded to trade slightly stronger than where it was before the referendum, though it remains down almost 5 percent since China devalued the yuan on Aug. 11. “The risks to India are from the East and not from the West,’’ according to Ruchir Sharma, head of emerging markets and chief global strategist at the firm. “Look at what’s happening post the Brexit. The panic has subsided very quickly and markets are back to where they were before the Brexit. In contrast, see what happened to sentiment and the economy when China had problems in August last year and again in January and February this year.’’ China’s slowdown could impact India as Asia’s biggest economy has been the largest contributor to global growth this decade, said Sharma, who made the Bloomberg Markets 50 Most Influential list last year. Any further yuan depreciation risks exporting China’s deflation to developing-nation currencies, he said. The country is also India’s biggest trading partner.
Air France Braced for Slump as Terror Spree Weighs on Travel. (video) Air France-KLM Group warned that political and economic uncertainties are weighing on travel demand, with the carrier especially worried about France’s standing as a tourist hotspot after a succession of terrorist attacks that have spanned Paris to the Riviera. Europe’s largest airline said Wednesday there is “special concern about France as a destination” amid the Islamic State-inspired killings, with inbound flows on long-haul routes set to fall at least 10 percent this summer. Fuel savings that helped lift operating profit 77 percent in the second quarter are also about to be eaten up by a fare decline as passenger numbers slide. “If the question is do we see a deteriorating environment, the answer is yes,” Chief Financial Officer Pierre-Francois Riolacci said in a phone briefing. “As the months have gone by we’ve seen a significant drop in demand for inbound travel to Europe, especially France. This pressure is happening in the context of capacity growth that is very high for the summer season.”
Canada Housing Agency Sees Strong Vancouver Risks for First Time. Vancouver’s market is showing “strong” signs of problematic conditions, Canada’s housing agency said Wednesday, weighing in after curbs on the market imposed by the British Columbia and federal governments to avoid a crash. Canada Mortgage & Housing Corp. raised Vancouver’s risk rating to its highest level, from “moderate” in April and “weak” in January. The west coast city is at risk from overvaluation, price acceleration and demand that’s outstripping supply, the Ottawa-based agency said. Rapidly rising prices in Canada’s largest cities may soon drag the entire national market into the strongly problematic category, the housing officials said.
Europe Stocks Hit One-Month High After LVMH, Santander Earnings. European stocks broke out of their torpor after ending little changed for four straight days. Earnings announcements from companies including LVMH Moet Hennessy Louis Vuitton SE, Telecom Italia SpA and and Banco Santander SA helped push the Stoxx Europe 600 Index up as much as 0.8 percent before it pared its gain to 0.4 percent amid a slide in oil.
Fed Says Risks Have Diminished as It Leaves Main Rate Unchanged. The Federal Reserve left interest rates unchanged while saying risks to the U.S. economy have subsided and the labor market is getting tighter, suggesting conditions are getting more favorable for an increase in borrowing costs. “Near-term risks to the economic outlook have diminished,” the Federal Open Market Committee said in its statement Wednesday after a two-day meeting in Washington, before repeating language from June that the panel “continues to closely monitor” inflation and global developments. Job gains were “strong” in June and indicators “point to some increase in labor utilization in recent months,” the Fed said.
Democrats Ignored Cybersecurity Warnings Before Theft. The Democratic National Committee was warned last fall that its computer network was susceptible to attacks but didn’t follow the security advice it was given, according to three people familiar with the matter. The missed opportunity is another blow to party officials already embarrassed by the theft and public disclosure of e-mails that have disrupted their presidential nominating convention in Philadelphia and led their chairwoman to resign. Computer security consultants hired by the DNC made dozens of recommendations after a two-month review, the people said. Following the advice, which would typically include having specialists hunt for intruders on the network, might have alerted party officials that hackers had been lurking in their network for weeks -- hackers who would stay for nearly a year. Instead, officials didn’t discover the breach until April. The theft ultimately led to the release of almost 20,000 internal e-mails through WikiLeaks last week on the eve of the convention.
Apple’s(AAPL) Earnings Point to Technology Lag Behind Rivals: Chart.
C. H. Robinson(CHRW) Tumbles Most in 18 Months as Trucking Rates Sag. C.H. Robinson Worldwide Inc. fell the most in 18 months after the arranger of freight shipments said a decline in revenue that weighed on second-quarter results continued into July. Sales dropped 6.9 percent to $3.3 billion in the quarter, compared with analysts’ average estimate of $3.44 billion. Intermodal revenue plunged 22 percent as volumes decreased 13 percent, the company said Wednesday on a conference call.