Bear Radar

Style Underperformer:

• Large-Cap Value +.2%

Sector Underperformers:

• 1) Banks -.6% 2) Homebuilders -.6% 3) Tobacco -.4%

Stocks Falling on Unusual Volume: 

• JCAP, SCS, WB, ACN, BURL and SINA

Stocks With Unusual Put Option Activity:

• 1) FRED 2) PAA 3) CAG 4) URBN 5) HAIN

Stocks With Most Negative News Mentions:

• 1) SCS 2) FNCX 3) SKYS 4) SINA 5) CLS

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.7%

Sector Outperformers:

• 1) Hospitals +5.2% 2) Alt Energy +2.6% 3) Drugs +2.3%

Stocks Rising on Unusual Volume:

• ORCL, BIB, CSIQ, PAH, EQT, COOL, IBB, MEI, BLCM, SNY, GILD, VRX, NTLA, JKS, CRSP, NVS, KMX, TEP, HOME, LGND, CELG, MT, HOFT, VNTV, THC, NEP, ARNA, MDSO, JUNO and RXDX

Stocks With Unusual Call Option Activity:

• 1) DVAX 2) THC 3) ORCL 4) UTX 5) HUM

Stocks With Most Positive News Mentions:

• 1) ORCL 2) SPLS 3) ATU 4) GILD 5) AMD

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -3.1% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 51.8% of Issues Advancing, 43.5% Declining
• 51 New 52-Week Highs, 47 New Lows
• 44.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 35.2%
• Vix 10.8 +.6%
• Total Put/Call .81 -8.0%
• TRIN/Arms .80 -36.3%

Thursday Watch

Evening Headlines

Bloomberg:

• China Bad Debt Prices Surge 30% as New Gold Rush Gets Under Way. (video) Bad loans are rapidly becoming the latest hot commodity in China as more domestic and foreign investors rush into the market and bid up prices. Non-performing loan prices have risen more than 30 percent this year, according to distressed investor Belos Capital Asia Ltd. The average selling price of NPLs has climbed to around 50 cents on the dollar in the past two years, from 30 cents, said Victor Jong, a partner in the deals and business recovery services unit of PricewaterhouseCoopers LLP in Shanghai. Such a high level is “very rare” in international markets, Jong said. “There are just too many buyers grabbing a limited supply of NPLs,” said Hanson Wong, CEO of Belos Capital in Hong Kong. “At these prices, it’s pretty hard for these NPLs to be profitable.”

• May to Outline Post-Brexit Citizens' Rights Plan in Early Test. Prime Minister Theresa May’s first European Union summit since her disastrous election could mark the scene of the first big row of the Brexit negotiations as she outlines how the U.K. proposes to treat the bloc’s citizens after it leaves.

• Russia Cancels Talks With U.S. Over Latest Round of Sanctions. Russia canceled talks with a top U.S. official to protest the latest sanctions punishing Russian companies and individuals over the conflict in Ukraine, in a fresh setback for President Donald Trump’s bid to improve ties with President Vladimir Putin’s government.

• Asian Stocks Rise as Oil Halts Slide; Yen Climbs. Oil’s rout showed signs of easing, helping to feed a rebound in Asian equity markets. The yen strengthened while gold rose for a second day. West Texas Intermediate crude halted three days of declines that’s driven oil into a bear market amid concern over stockpiles in America. Australian shares bounced back after the biggest one-day drop since November, while Japanese equities climbed despite the yen’s strength. The kiwi rose after the nation’s central bank maintained its neutral policy stance. Japan’s Topix index rose 0.1 percent, after dropping 0.4 percent on Wednesday. South Korea’s Kospi index added 0.3 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent, after tumbling 1.6 percent on Wednesday to erase its gain for the year. Hong Kong’s Hang Seng was little changed, while the Shanghai Composite Index increased 0.3 percent. MSCI Inc. announced this week that it would include mainland Chinese shares in its benchmark global indexes.

• Your Evening Briefing. (video)

Wall Street Journal:

• Anthem(ANTH) Says It Will Stop Offering ACA Plans in Two States as Others Raise Their Bets. ​Amid ​health-law uncertainty, insurer announces 2018 pullback in Indiana and Wisconsin, while startup Oscar intends to expand offerings.

• The Georgia Special Election in 4 Charts. A key takeaway: The Democrat in the race underperformed Hillary Clinton.

• U.S. Regulators Set to Offer Bank Rule Changes to Congress. Fed governor Jerome Powell says it could be appropriate to ease annual ‘stress tests’ for big banks.

• Democrats Point Fingers, Debate Winning Formula After Georgia Loss. Defeat in special House race leaves party split heading into 2018.

Fox News:

• Flint Airport: Michigan officer stabbed at airport in attack eyed as terrorism. (video)

• ISIS urges attacks on Ramadan's Night of Power, Islam's holiest day. (video)

CNBC:

• Oracle(ORCL) shares jump as much as 9 percent after earnings top estimates.

• The big bet on a big move for Chinese stocks. (video)

• McDonald's(MCD) McCafe is posing a major threat to Dunkin Donuts.

• Biotech stocks just had their best session of the year, and the best could still be ahead. (video)

• Martha Stewart loves Alibaba(BABA), and here's why. (video)

• The charts are pointing to a further rally for one surging semi stock: Trader. (video)

• Take a look at what the GOP Senate health bill might look like, for now.

Zero Hedge:

• Ethereum Flash Crashes By 96% After Status ICO Clogs Network.

• Emerging Market 'Risk' Has Never Been Lower, But...

• Automation's Destruction Of Jobs: You Ain't Seen Nothing Yet... (graph)

• Gundlach Warns Flatter Curve Is "A Concern For US Economic Growth".

• Jon Ossoff Spent 7.6x More Than Handel Per Vote...For Nothing.

• ECB Reveals That 15% Of Its Bond Purchases Directly Funded Companies.

• Traders Panic Into 'Safe Haven' Biotechs As Crude, Credit, & Yield Curve Carnage Continues. (graph)

Telegraph:

• 'Simmering discontent' across Europe at EU, new poll finds.

Night Trading 

• Asian equity indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 87.0 +2.5 basis points. 

• Asia Pacific Sovereign CDS Index 18.50 +.5 basis point.

• Bloomberg Emerging Markets Currency Index 72.37 +.03%.

• S&P 500 futures -.12%.

• NASDAQ 100 futures -.09%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (ACN)/1.52

• (APOG)/.60

• (BKS)/-.23

• (CCL)/.47

• (CMC)/.26

• (BBBY)/.66

• (SONC)/.41

Economic Releases 
8:30 am EST

• Initial Jobless Claims for last week are estimated to rise to 240K versus 237K the prior week.

• Continuing Claims are estimated to fall to 1930K versus 1935K prior.

9:00 am EST

• The FHFA House Price Index MoM for April is estimated to rise +.5% versus a +.6% gain in March.
  

10:00 am EST

• The Leading Index for May is estimated to rise +.3% versus a +.3% gain in April.

11:00 am EST

• The Kansas City Fed Manufacturing Activity Index for June is estimated to rise to 9.0 versus 8.0 in May.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Dodd Frank Stress Test Results, Eurozone Consumer Confidence report, Bloomberg Economic Expectations Index for June, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, JMP Securities Financial Services/Real Estate Conference, (V) investor day and the (KR) general meeting could also impact trading today.

BOTTOM LINE:  Asian indices are modestly higher, boosted by financial and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.

Stocks Slightly Lower into Afternoon on Emerging Markets/US High-Yield Debt Angst, Oil Decline, Technical Selling, Energy/Retail Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Modestly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Outperforming
  

Equity Investor Angst:

• Volatility(VIX) 10.69 -1.6%

• Euro/Yen Carry Return Index 129.64 +.10%

• Emerging Markets Currency Volatility(VXY) 7.75 +.39%

• S&P 500 Implied Correlation 36.33 +.39%

• ISE Sentiment Index 75.0 +70.5%
  

• Total Put/Call .91 +7.06%

• NYSE Arms 1.26 -27.43%

Credit Investor Angst:

• North American Investment Grade CDS Index 62.26 +1.93%
  

• America Energy Sector High-Yield CDS Index 461.0 +5.37%

• European Financial Sector CDS Index 59.68 -2.62%

• Western Europe Sovereign Debt CDS Index 6.42 -2.43%

• Asia Pacific Sovereign Debt CDS Index 18.30 +2.21%

• Emerging Market CDS Index 201.22 -.15%
  

• iBoxx Offshore RMB China Corporate High Yield Index 139.40 +.02%

• 2-Year Swap Spread 19.75 -.5 basis point

• TED Spread 27.5 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -30.0 +2.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 72.30 -.19%
• 3-Month T-Bill Yield 1.0% -1.0 basis point
  

• Yield Curve 81.0 unch.

• China Import Iron Ore Spot $56.82/Metric Tonne +.66%

• Citi US Economic Surprise Index -76.50 +.7 point

• Citi Eurozone Economic Surprise Index 18.20 -4.6 points

• Citi Emerging Markets Economic Surprise Index 9.6 +.2point

• 10-Year TIPS Spread 1.67 unch.
  
• 24.3% chance of Fed rate hike at Sept. 20 meeting, 27.5% chance at Nov. 1 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -6 open in Japan 
• China A50 Futures: Indicating -13 open in China

• DAX Futures: Indicating -19 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Value -.2%

Sector Underperformers:

• 1) Oil Service -3.3% 2) Retail -.9% 3) Energy -.9%

Stocks Falling on Unusual Volume: 

• BMA, PAM, TEO, GGAL, FL, BFR, TGS, YPF, CBI, MRC and DKS

Stocks With Unusual Put Option Activity:

• 1) SPN 2) DNOW 3) SHLD 4) NBR 5) HP

Stocks With Most Negative News Mentions:

• 1) AIOM 2) OCN 3) OKE 4) PHH 5) CSOD

Charts:

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