Weekly Outlook

• Week Ahead by Bloomberg.
• Wall St. Week Ahead by Reuters.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on yen strength, global growth worries, commodity weakness, technical selling, rising European/Emerging Markets/US High-Yield debt angst and Fed rate-hike fears. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg:

• Losses Piling Up for S&P 500 as Weekly Drop Is Worst Since June. What had been just a sleepy August is turning into an increasingly painful one for U.S. equity market bulls. Notwithstanding an hour-long burst of optimism that followed Federal Reserve Chair Janet Yellen’s policy speech Friday, the buoyancy that lifted stocks for the first half of the summer has now been missing for the better part of a month. The S&P 500 Index fell 0.7 percent to 2,169.04 this week, the biggest drop since June, to erase its August gains. Not since the presidential administration of Lyndon B. Johnson have stocks done so little for so long. Unable to break out of a 1.5 percent band for more than 30 days, the market is locked in its tightest trading range since the end of 1965 amid confusion about Federal Reserve policy and the outlook for earnings.
• BOJ’s Kuroda Says Ready to Ease as Jackson Hole Debates Options. Bank of Japan Governor Haruhiko Kuroda said he won’t hesitate to boost monetary stimulus if needed, reiterating a pledge during an annual policy retreat in Jackson Hole, Wyoming, at which central bankers stressed their need for backup from fiscal policy. “There is no doubt that there is ample space for additional easing in each of the three dimensions,” Kuroda said Saturday, referring to the BOJ’s package of asset buying, monetary-base guidance, and negative interest rates. “The bank will carefully consider how to make the best use of the policy scheme in order to achieve the price stability target,” he told the Federal Reserve Bank of Kansas City’s symposium.
• Germany Warns U.K. That Brexit Talks Will Be Very Difficult. German Deputy Foreign Minister Michael Roth warned that the U.K.’s negotiations to leave the European Union “will be very difficult” and that Britain won’t be allowed to “cherry pick” the best that the bloc has to offer. “If the British want full market access but want to limit the access of workers from Germany, France or Poland, they will find there is no a la carte cooperation in this direction,” Roth, the government minister responsible for European affairs, said at a Berlin event Saturday. “We’ve told the British they can’t expect to pick the best aspects of the EU and leave matters at that.”  
• Stronger Case for Fed Rate Rise Increases Volatility in Asia. Asian currencies look set for a bumpy ride over the next three months after Federal Reserve Chair Janet Yellen said Friday that the case for an interest-rate rise has strengthened, amid growing speculation the hike could come as early as next month. Yellen’s statement will create some volatility over the next three months, Raymond Yeung, chief economist at ANZ Banking Group in Hong Kong, said by phone. “The cost of the U.S. funding will increase, and Asian currencies will be under downward pressure.”
• September in Play for Bond Traders as Goldman Sees 40% Fed Odds. A September interest-rate increase by the Federal Reserve, an unthinkable move just two months ago, is now very much on the table, according to Goldman Sachs Group Inc. The bond market concurs.

Wall Street Journal: 

• Janet Yellen Lays Out Tools for Next Recession Fight. Unconventional programs like increasing bond purchases are on the table, but she doesn’t mention negative interest rates.
• Two Regional Fed Chiefs Doubt Central Bank Would Raise Rates Twice This Year. Dennis Lockhart, James Bullard distance themselves from Vice Chairman Stanley Fischer’s Friday remarks.
• Another Obama Parting Gift. His final fiscal year federal budget deficit will increase by 35%.

Barron's:

• Had bullish commentary on (VZ), (VIAB), (PYPL), (NFLX), (SYMC)  and (MET).
• Had bearish commentary on (DIS) and (MYL).

Fox News:

• Niners QB Kaepernick refuses to stand for anthem in protest. (video) ''I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color,'' Kaepernick said. ''To me, this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder.''

Zero Hedge:

• BleachBit Brags Of Wiping Hillary's Servers Clean With Claims It "Stifled FBI Investigation".
• “I’ve Never Seen Anything Like This Before" - The Housing Markets In The Hamptons, Aspen And Miami Are All Crashing.
• The EpiPen Scandal Is Worse Than You Think: What You’re Not Being Told.
• Joe Biden Humiliated In Turkish "Appeasement" As Erdogan Bombs US Allies In Syria.
• In "Victory For Eurosceptics" British PM Will Begin Brexit Negotiations Without Parliamentary Vote.
• American Electorate Loses As Partisan Media Coverage Of Candidate Health Turns Outright Bizarre.
• It Begins: Barney Frank Tells Yellen Not To Hike Before The Election, "It Risks Destabilizing Markets".
• Clinton's Pay-to-Play Is The Natural Consequence Of Big Government.
• How Obamacare Destroyed The Middle Class In One Chart.
• The Number One Factor Influencing Fed Monetary Policy.
• Illinois Governor Furious After Pension Fund Cuts Returns Forecast, Sticking Taxpayers With "Crippling" Tax Hike.
• Recession Odds Spike To 37%, JPM Calculates, Highest Yet For This Cycle.
• How The Hillary 'Victory Fund' Uses State Democratic Committees To Launder Money To The DNC.
• The Man Who Fabricates China's Econ Data Was Arrested For "Selling Power For Sex" And "Lacking Political Faith".
• Millennials Love Free Markets, But Don't Understand Them.
• Herbalife(HLF) Surges After Icahn Denies WSJ Selling Report, Says He Bought Another 2.3 Million Shares.
• The Reckoning Looms - Central Bankers Really Don't Know What They're Doing.
• Weekend Reading: The Coin Flip Market. (graph)
• J-Holed: Stocks Slide After "Good" Yellen, "Bad" Powell, & "Ugly" Fischer.

Business Insider:

• The Bank of Japan is worried about a stock market crash.
• This trade has gotten completely out of hand. (graph)
• The government wants to force trucks and buses to drive slower.
• Dwyane Wade's cousin was the latest victim of Chicago's horrific gun violence.
• Huge hedge fund redemptions are horrible news for the industry.

Financial Times:

• The rally in emerging markets masks frailties. Investors should be wary of Chinese debt lurking in a jumble of assets.

FAZ:

• Germany's Schaeuble Says Low ECB Rates Are Damaging. Low or negative interest rates are harmful, in areas including retirement planning, German Finance Minister Wolfgang Schaeuble says in an interview.

Spiegel:

• Germany Says ECB Bond Purchases Are Distorting Rates. German Finance Ministry concerned that European Central Bank's buying of government bonds is distorting interest rates, citing internal Finance Ministry documents.

Market Week in Review

• S&P 500 2,166.45 -.80%*

The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 2,166.45 -.80%

• DJIA 18,409.30 -.90%

• NASDAQ 5,215.32 -.61%

• Russell 2000 1,233.68 -.03%

• S&P 500 High Beta 32.20 -.40%

• Goldman 50 Most Shorted 118.24 -1.42% 

• Wilshire 5000 22,417.45 -.67%

• Russell 1000 Growth 1,044.91 -.84%

• Russell 1000 Value 1,037.0 -.67%

• S&P 500 Consumer Staples 555.91 -1.08%

• Solactive US Cyclical 140.54 -.11%

• Morgan Stanley Technology 1,179.83 -.07%

• Transports 7,818.24 -1.17%

• Utilities 668.18 -1.44%

• Bloomberg European Bank/Financial Services 75.16 +5.02%

• MSCI Emerging Markets 36.85 -1.20%

• HFRX Equity Hedge 1,134.40 -.14%

• HFRX Equity Market Neutral 999.01 -.02%

Sentiment/Internals

• NYSE Cumulative A/D Line 269,112 -.12%

• Bloomberg New Highs-Lows Index 99 -184

• Bloomberg Crude Oil % Bulls 9.38 -67.69%

• CFTC Oil Net Speculative Position 307,500 +19.07%

• CFTC Oil Total Open Interest 1,852,402 +1.23%

• Total Put/Call 1.06 +21.69%

• OEX Put/Call .87 -21.43%

• ISE Sentiment 85.0 -4.04%

• NYSE Arms 1.29 unch.

• Volatility(VIX) 14.57 +24.42%

• S&P 500 Implied Correlation 48.81 +9.77%

• G7 Currency Volatility (VXY) 10.05 -.69%

• Emerging Markets Currency Volatility (EM-VXY) 10.01 +.91%

• Smart Money Flow Index 19,613.59 -.26%

• ICI Money Mkt Mutual Fund Assets $2.735 Trillion +.91%

• ICI US Equity Weekly Net New Cash Flow -$6.308 Billion

• AAII % Bulls 29.4 -17.3%

• AAII % Bears 29.6 +12.4%

Futures Spot Prices

• CRB Index 186.11 -1.59%

• Crude Oil 47.42 -2.41%

• Reformulated Gasoline 150.75 -.06%

• Natural Gas 2.87 +12.52%

• Heating Oil 149.47 -1.68%

• Gold 1,320.70 -1.33%

• Bloomberg Base Metals Index 149.29 -1.56%

• Copper 207.60 -4.29%

• US No. 1 Heavy Melt Scrap Steel 209.33 USD/Ton unch.

• China Iron Ore Spot 59.13 USD/Ton -2.99%

• Lumber 316.80 -1.03%

• UBS-Bloomberg Agriculture 1,130.35 -2.16%

Economy

• Atlanta Fed GDPNow Forecast +3.4% -20.0 basis points
• ECRI Weekly Leading Economic Index Growth Rate +8.1% -30.0 basis points

• Philly Fed ADS Real-Time Business Conditions Index .3485 -5.43%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 127.33 +.29%

• Citi US Economic Surprise Index 11.1 +6.5 points

• Citi Eurozone Economic Surprise Index 21.2 -6.4 points

• Citi Emerging Markets Economic Surprise Index -3.60 -1.8 points

• Fed Fund Futures imply 62.0% chance of no change, 38.0% chance of 25 basis point hike on 9/21

• US Dollar Index 95.45 +.79%
• MSCI Emerging Markets Currency Index 1,540.21 -.54%

• Euro/Yen Carry Return Index 119.19 +.27%

• Yield Curve 79.0 -5.0 basis points

• 10-Year US Treasury Yield 1.63% +4.0 basis points

• Federal Reserve's Balance Sheet $4.433 Trillion +.16%

• U.S. Sovereign Debt Credit Default Swap 26.55 -.19%

• Illinois Municipal Debt Credit Default Swap 356.0 -.05%

• Western Europe Sovereign Debt Credit Default Swap Index 24.64 -.24%

• Asia Pacific Sovereign Debt Credit Default Swap Index 40.27 -6.57%
  

• Emerging Markets Sovereign Debt CDS Index 109.47 -4.66%
  

• Israel Sovereign Debt Credit Default Swap 72.50 +3.57%

• Iraq Sovereign Debt Credit Default Swap 856.87 unch.

• Russia Sovereign Debt Credit Default Swap 225.54 -1.93%

• iBoxx Offshore RMB China Corporate High Yield Index 131.69 +.22%

• 10-Year TIPS Spread 1.49% unch.
  

• TED Spread 51.0 -.75 basis point

• 2-Year Swap Spread 22.25 -3.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -39.75 -2.75 basis points

• N. America Investment Grade Credit Default Swap Index 71.90 +.64%

• America Energy Sector High-Yield Credit Default Swap Index 685.0 +.68%

• European Financial Sector Credit Default Swap Index 89.25 -3.89%
  

• Emerging Markets Credit Default Swap Index 242.67 +.49%
  

• CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 137.50 -10.0 basis points
  

• M1 Money Supply $3.328 Trillion +1.53%

• Commercial Paper Outstanding 1,003.90 -.80%

• 4-Week Moving Average of Jobless Claims 264,000 -1,250

• Continuing Claims Unemployment Rate 1.6% unch.

• Average 30-Year Mortgage Rate 3.43% unch.

• Weekly Mortgage Applications 530.10 -2.11%

• Bloomberg Consumer Comfort 45.3 +1.7 points

• Weekly Retail Sales +.3% -10.0 basis points

• Nationwide Gas $2.21/gallon +.07/gallon

• Baltic Dry Index 718.0 +5.12%

• China (Export) Containerized Freight Index 705.21 -.85%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 25.0 -9.09%

• Rail Freight Carloads 261,020 -2.22%

Best Performing Style

• Small-Cap Value +.1%

Worst Performing Style

• Large-Cap Growth -.8%

Leading Sectors

• Restaurants +1.3%

• Homebuilders +1.2%

• Agriculture +.9%

• I-Banks +.9%

• Banks +.7%

Lagging Sectors

• HMOs -3.4% 

• Oil Service -3.5%

• Gaming -4.1%

• Oil Tankers -6.6%

• Gold & Silver -10.3%

Weekly High-Volume Stock Gainers (25)

• AEPI, BREW, CLVS, CRMT, ISIL, MDVN, BBY, GES, GEO, PMC, HZN, AMWD, VNDA, LCI, DE, NDSN, SCVL, TOL, RPD, MENT, DV, AMAT, WNC, SJW and WSM

Weekly High-Volume Stock Losers (11)

• MOV, STJ, SJM, LZB, SIG, DLTR, PSTG, MYL, DG, ZOES and EXPR

Weekly Charts

ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Reversing Lower into Afternoon on Fed Rate-Hike Fears, Global Growth Worries, Technical Selling, Homebuilding/Healthcare Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Lower
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 13.92 +2.13%

• Euro/Yen Carry Return Index 118.89 +.33%

• Emerging Markets Currency Volatility(VXY) 10.03 unch.

• S&P 500 Implied Correlation 46.74 +2.52%

• ISE Sentiment Index 93.0 +4.49%
  

• Total Put/Call 1.02 -10.53%

• NYSE Arms .67 -27.81% 

Credit Investor Angst:

• North American Investment Grade CDS Index 71.18 -.33%
  

• America Energy Sector High-Yield CDS Index 689 -.42%

• European Financial Sector CDS Index 89.25 -1.92%

• Western Europe Sovereign Debt CDS Index 24.69 +.24%

• Asia Pacific Sovereign Debt CDS Index 40.27 -.70%

• Emerging Market CDS Index 241.88 -.89%
  

• iBoxx Offshore RMB China Corporate High Yield Index 131.69 +.04%

• 2-Year Swap Spread 22.25 -.25 basis point
  

• TED Spread 51.0 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -39.25 -.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.79 -.20%
• 3-Month T-Bill Yield .32% +1.0 basis point

• Yield Curve 77.0 -2.0 basis points
  

• China Import Iron Ore Spot $59.13/Metric Tonne -3.76%

• Citi US Economic Surprise Index 11.1 -1.1 points

• Citi Eurozone Economic Surprise Index 21.2 unch.

• Citi Emerging Markets Economic Surprise Index -3.6 -1.0 point

• 10-Year TIPS Spread 1.51% +1.0 basis point
• 43.3% chance of Fed rate hike at Nov. 2 meeting, 62.3% chance at Dec. 14 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +154 open in Japan 
• China A50 Futures: Indicating +3 open in China

• DAX Futures: Indicating -77 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 25% Net Long