Bear Radar

Style Underperformer:

• Small-Cap Growth -1.8%

Sector Underperformers:

• 1) Biotech -2.9% 2) Drugs -2.5% 3) Steel -2.3%

Stocks Falling on Unusual Volume: 

• ITCI, DKT, DB, DTK, COTY, PG, FGP, DXB, SN, PRGS, SNY, SBH, SYNA, TEVA, VA, EXEL, LSI, DXCM, FIT, TPX, MYL, GOGO, CLSD, BUD, KLAC, CUZ, PKY, RHI, VLO, ITCI, FIT and MPC

Stocks With Unusual Put Option Activity:

• 1) EWG 2) VLO 3) XLE 4) XBI 5) COST

Stocks With Most Negative News Mentions:

• 1) FIT 2) SONS 3) ITCI 4) MOS 5) MS

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value -.8%

Sector Outperformers:

• 1) Oil Service +1.9% 2) Semis +.8% 3) Airlines -.4%

Stocks Rising on Unusual Volume:

• MIME,  AMTD, ECA, OAS, CAG, NXPI, MRC, CLR, DO, LL and SPN

Stocks With Unusual Call Option Activity:

• 1) MPC 2) SVU 3) VIAB 4) LL 5) PFE

Stocks With Most Positive News Mentions:

• 1) EMMS 2) KOS 3) SMRT 4) EXC 5) EGRX

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +11.3% Above 100-Day Average
• 4 Sectors Rising, 6 Sectors Declining
• 36.6% of Issues Advancing, 60.7% Declining
• 778 New 52-Week Highs, 11 New Lows
• 62.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 42.1%
• Vix 12.6 +2.0%
• Total Put/Call .85 -7.6%
• TRIN/Arms .70 +7.9%

Thursday Watch

Evening Headlines

Bloomberg:

• China Fund Exodus Accelerates as Further Yuan Weakness Expected. China’s capital outflow through cross-border sales of funds is accelerating amid expectations the yuan will weaken further. Mainland investors’ accumulative net buying of Hong Kong-registered public funds under the mutual recognition of fund program more than doubled to 7.8 billion yuan ($1.2 billion) as of Aug. 31 from a month earlier, according to data released by the State Administration of Foreign Exchange on Wednesday. That’s almost 96 times the sales of mainland funds in Hong Kong. 
• Experts Warn of China Property Bubble. (video)
• China’s Big Ball of Money Isn’t Going Anywhere Near Stock Market. This year is seen going down as the worst since 2011 for China’s stock investors as the memory of last summer’s rout lingers and speculative buying switches to the housing market. The Shanghai Composite Index will end the year at 3,075, according to the median forecast in a Bloomberg poll of 10 strategists and fund managers. That implies a 13 percent drop over the 12-month period, the steepest in five years, and a gain of 2.9 percent from Wednesday’s close. Fading prospects for monetary easing, a slowing economy and the risk of higher U.S. borrowing costs spurring yuan weakness were among factors weighing on the nation’s shares, the survey showed.
• Japan’s Retail Sales Decline for First Time in Three Months. Japan’s retail sales fell for the first time in three months, signaling that consumer spending is struggling to maintain traction.
• Turkey Risks Kurdish War on Two Fronts as Army Advances in Syria. Mustafa Denktas had twin sons. One of them, a Kurdish militant, was killed fighting the Turkish army in 2012. Denktas was still in mourning when news arrived three weeks later that the other son had met the same fate. Back then Turkey’s war with separatist Kurds, however bloody and protracted, was essentially a domestic issue. Now it’s an international conflict. When President Recep Tayyip Erdogan sent his army into Syria last month, he wasn’t just striking a blow against Islamic State: a second goal was to stop Kurds from creating a de facto state.
• ‘Hard Brexit’ Looms as 28 Red Lines Turn Deeper Shade of Scarlet. European Union governments are refusing to grant the U.K. any leeway on the link between immigration and trade as it prepares to leave the bloc, raising the likelihood of a “hard Brexit.” Almost 100 days since a referendum signaled the end of Britain’s four decades of EU membership, a Bloomberg News analysis has identified a hardening of positions with even the U.K.’s traditional allies such as Ireland insisting it cannot “cherry pick” in the looming divorce talks.
• Asia Stocks Rise With Ringgit as OPEC Deal Boosts Oil; Yen Falls. Asian stocks rose with Malaysia’s ringgit and oil climbed to a three-week high after OPEC agreed to a preliminary deal that will cut crude production for the first time in eight years. Energy shares led gains on the MSCI Asia Pacific Index as benchmarks advanced across regional markets open for trading. The MSCI Asia Pacific Index gained 0.5 percent as of 9:18 a.m. Tokyo time, extending its quarterly advance to about 10 percent. A gauge of energy shares surged 2 percent as Santos Ltd. and Inpex Corp. jumped more than 6 percent.
• U.S. Aluminum Producers Step Up Calls for China Policy Probe. The U.S. aluminum industry’s anti-China drumbeat is gaining volume in Washington this week. A group that represents aluminum companies is calling for a “meaningful dialogue” with Chinese authorities in a bid to end what they say are incentives and subsidies that are fueling a global glut and squeezing U.S. producers out of the market. The Aluminum Association is pressing for a deeper investigation by the U.S. International Trade Commission into Chinese policies to save what’s left of the domestic industry, the group’s chief executive officer Heidi Brock and chairman Garney Scott said in Washington on Wednesday. They are scheduled to give testimony Thursday at a Commission hearing.
• Traders Doubt Yellen’s December Resolve as Credibility Attacked. (video) Traders see barely more than coin-flip odds that the Federal Reserve will raise interest rates by December, even as Chair Janet Yellen reiterated Wednesday that most members of its policy-setting committee expect a hike this year. Treasury yields have fallen across maturities since the central bank left rates unchanged at its Sept. 21 meeting, while signaling that the case to hike had strengthened on brightening U.S. economic data. The bullish comments paired with no policy action left bond traders wondering how good conditions need to be for the Fed to move, particularly as officials pared projections for the future path of tightening.
• Intra-Cellular Therapies Plunges After Schizophrenia Study Fails. Intra-Cellular Therapies Inc. lost more than two-thirds of its value late Wednesday after its lead drug, an experimental pill for treating schizophrenia, failed to help patients in a key late-stage study. Shares plummeted 68 percent to $13.73 in late trading in New York.

Wall Street Journal:

• Trump Tees Up a Necessary Debate on the Fed. Sixty percent of stock gains since the 2008 panic have occurred on days when the Fed makes policy decisions.

MarketWatch:

• Doubts linger over OPEC’s preliminary deal on oil output.

CNBC:

• Oil bankruptcies: 100 down, maybe 100 more to go.

Zero Hedge:

• Madness Swirls At House Judiciary Committee As Comey Attempts To Justify Hillary Innocence.
• Peak Debt Complacency: Carmen "Different This Time" Reinhart Urges Debt Restructuring.
• "It’s A Lot More Negative Than People Think" - China Beige Book Issues Stark Warning About The Economy.
• No Need For Yield Curve Inversion (There Is Already Much Worse Indicated).
• The Bickering Begins: Iraq Disagrees With OPEC's Method Of Oil Production Estimates.
• Who Really Lost This Week's Presidential Debate? America Did!
• OPEC Agrees On First Oil Production Cut Since 2008, But Biggest Question Remains Unanswered.
• What's The Opposite Of "Nailed It"? (graph)
• General Collateral Rate Surges To Highest Level In 7 Years . (graph)
• OilPECalypse Sparks Stock-Buying Panic. (graph)

Business Insider:

• Teenage shooter in custody after 3 injured in shooting at South Carolina elementary school.
• One of China’s richest men is warning about the 'biggest bubble in history'.
• There's far too much complacency in the markets right now.
• FED'S MESTER: 'We could risk a recession' if interest rates don't go up now.

Telegraph:

• The era of robots: thousands of builders to lose jobs as machines take over, says construction boss.

Night Trading 

• Asian equity indices are +.5% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 112.50 -2.75 basis points. 
• Asia Pacific Sovereign CDS Index 31.25 -1.0 basis point.
• Bloomberg Emerging Markets Currency Index 73.12 +.04%. 
• S&P 500 futures +.10%. 
• NASDAQ 100 futures +.13%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• (ACN)/1.30
• (CMN)/.45
• (CAG)/.48
• (PEP)/1.32
• (COST)/1.73

Economic Releases
8:30 am EST

• Advance Goods Trade Deficit for August is estimated to widen to -$62.2B versus -$58.8B in July.
• Wholesale Inventories MoM for August are estimated unch. versus unch. in July.
• 2Q GDP is estimated to rise +1.3% versus a prior estimate of a +1.1% gain.
• 2Q Personal Consumption is estimated to rise +4.4% versus a prior estimate of a +4.4% gain.
• 2Q GDP Price Index is estimated to rise +2.3% versus a prior estimate of a +2.3% gain. 
• 2Q Core PCE is estimated to rise +1.8% versus a prior estimate of a +1.8% gain.
• Initial Jobless Claims are estimated to rise to 260K versus 252K the prior week.
• Continuing Claims are estimated to rise to 2129K versus 2113K prior.

10:00 am EST

• Pending Home Sales MoM for August are estimated unch. versus a +1.3% gain in July. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Fed's Yellen speaking, Fed's George speaking, Fed's Powell speaking, Fed's Lockhart speaking, Fed's Harker speaking, Germany Employment Change, Japan CPI report, weekly EIA natural gas inventory report, (PM) investor day and the (SLW) analyst day could also impact trading today.

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

Stocks Rising into Final Hour on Less US High-Yield Debt Angst, Oil Bounce, Yen Weakness, Energy/Metals & Mining Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.37 -5.57%

• Euro/Yen Carry Return Index 117.90 +.22%

• Emerging Markets Currency Volatility(VXY) 10.11 -.39%

• S&P 500 Implied Correlation 43.07 -6.17%

• ISE Sentiment Index 80.0 +19.4%
  

• Total Put/Call .87 -11.22%

• NYSE Arms .70 -36.23% 

Credit Investor Angst:

• North American Investment Grade CDS Index 75.50 -2.46%
  

• America Energy Sector High-Yield CDS Index 676.0 -1.66%

• European Financial Sector CDS Index 101.50 -.55%

• Western Europe Sovereign Debt CDS Index 24.65 +.43%

• Asia Pacific Sovereign Debt CDS Index 31.65 -1.85%

• Emerging Market CDS Index 234.81 +.04%
  

• iBoxx Offshore RMB China Corporate High Yield Index 132.15 +.05%

• 2-Year Swap Spread 24.0 -1.5 basis points

• TED Spread 59.5 -2.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -41.75 +.25 basis point
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 73.06 -.07%
• 3-Month T-Bill Yield .27% +2.0 basis points

• Yield Curve 81.0 unch.
  

• China Import Iron Ore Spot $56.48/Metric Tonne -.25%

• Citi US Economic Surprise Index -5.10 +.1 point

• Citi Eurozone Economic Surprise Index -10.40 +.3 point

• Citi Emerging Markets Economic Surprise Index -10.8 +.9 point

• 10-Year TIPS Spread 1.58% +4.0 basis points
• 54.3% chance of Fed rate hike at Dec. 14 meeting, 57.2% chance at Feb. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +90 open in Japan 
• China A50 Futures: Indicating +31 open in China

• DAX Futures: Indicating +53 open in Germany

Portfolio: 

• Slightly Lower: On losses in my biotech sector longs, index hedges and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long