Bear Radar

Style Underperformer:

• Mid-Cap Value -.2%

Sector Underperformers:

• 1) Hospitals -1.1% 2) Retail -.7% 3) Banks -.6%

Stocks Falling on Unusual Volume: 

• ACOR, BBY, VRX, EVH, CONN and NTLA

Stocks With Unusual Put Option Activity:

• 1) BBY 2) ALLY 3) KITE 4) AXL 5) USO

Stocks With Most Negative News Mentions:

• 1) FINL 2) ACOR 3) VRX 4) NKE 5) PSEC

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +.6%

Sector Outperformers:

• 1) Defense +1.3% 2) Steel +1.1% 3) Road & Rail +.8%

Stocks Rising on Unusual Volume:

• ABCO, ARCX, JUNO, MOV, CTLT, ADMS, HQY, ABEO, KTOS, STRL, COL, WVE, LJPC, FET, NWPX, CRY, DISH, TRHC, BLCM, AEM, CVTI, HIIQ, MLNX, SGMO, URI and FET

Stocks With Unusual Call Option Activity:

• 1) AKAM 2) UTX 3) TSCO 4) COL 5) URI

Stocks With Most Positive News Mentions:

• 1) JUNO 2) CTLT 3) IMGN 4) AGU 5) GILD

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -8.4% Below 100-Day Average
• 3 Sectors Rising, 7 Sectors Declining
• 29.0% of Issues Advancing, 67.2% Declining
• 37 New 52-Week Highs, 49 New Lows
• 38.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 33.9%
• Vix 12.9 +14.1%
• Total Put/Call .87 -4.4%
• TRIN/Arms .86 -38.2%

Tuesday Watch

Evening Headlines

Bloomberg:

• North Korea Fires Missile Over Japan in 'Unprecedented' Act. (video) North Korea fired a ballistic missile over Japan on Tuesday, reigniting tensions after a war of words earlier this month between Pyongyang and U.S. President Donald Trump. The missile landed about 1,200 kilometers (745 miles) off Hokkaido in the Pacific Ocean, Chief Cabinet Secretary Yoshihide Suga told reporters, adding there were no reports of damage. Japan’s government said it didn’t try to shoot it down.

• Korea Stock Bulls Shrug Off Nuclear Threat to Zero in on Profits. Not even the prospect of nuclear war in their backyard can dampen the enthusiasm of equity analysts in South Korea. They’re forecasting company earnings to almost double this year -- among the most optimistic in Asia.

• China's Central Bank Is Working Hard to Stand Still. While some of the biggest central banks are agonizing over changing direction, the People’s Bank of China is working hard to stay right where it is.That’s because, as the U.S. Federal Reserve or the European Central Bank are heading into phases of tighter policy, China’s monetary authority is engaged in an increasingly complex effort to preserve the status quo while the world changes around it. According to 60 percent of economists in a Bloomberg survey conducted this month, the PBOC’s broad policy stance will remain "roughly the same" through the end of 2017. It’s how they maintain the hold, though, that matters.

• Online Shopping Is Taking Off in Southeast Asia. Thailand has seen an explosion of internet shopping in recent years as consumers become more tech savvy. And if that’s anything to go by, e-commerce in Southeast Asia is taking off as well. Online retail sales in Thailand of everything from washing machines and televisions to fish sauce are growing more than 100 percent, far outpacing purchases made at traditional stores, where sales are rising about 10 percent.

• Stocks Drop, Yen Jumps After Korea Missile Launch. Equities fell in Tokyo, Seoul and Sydney, Japan’s currency gained versus all major developed peers, and the Swiss franc advanced while the Australian dollar dropped in a classic risk-off move. Several missiles were launched from Pyongyang and Japan said at least one landed off the eastern coast of Hokkaido. Gasoline added to a rally as traders counted the toll from the storm that inundated refineries along the Texas coast. The Topix index dropped 0.7 percent as of 9:18 a.m. in Tokyo, while South Korea’s Kospi index declined 0.9 percent and the S&P/ASX 200 Index in Sydney lost 0.8 percent.

• Five Things You Need to Know to Start Your Day.

• Harvey Disrupts More Than One Third of U.S. Chemical Production. A third of U.S. chemical production has been disrupted by Tropical Storm Harvey, boosting prices and threatening shortages for basic industrial building blocks such as chlorine and ethylene. Producers such as Exxon Mobil Corp. and Occidental Chemical Corp. have shut plants and cut back operations in recent days along the flood-crippled Gulf Coast. Those disruptions have affected 37 percent of U.S. capacity for making chlorine and caustic soda, salt-derived chemicals used to make vinyl and PVC pipe, according to Bloomberg Intelligence.

Wall Street Journal:

• Texas Hit Hard by Tropical Storm Harvey: Live Coverage.

• Gilead(GILD) Bets $11 Billion on New Cancer Therapy. Drugmaker to buy Kite Pharma as it seeks to diversify portfolio.

• Our Political Central Bankers. Fed officials join the resistance against financial reform.

MarketWatch.com:

• Like Amazon(AMZN), these 7 stocks have dropped 10% or more in a month — and analysts say buy them too.

Fox News:

• North Korea fires missile over Japan, Pentagon confirms. (video)

• Harvey flood fears expand to Louisiana as Texas braces for more feet of rain. (video)

CNBC:

• Devastating storm may actually boost US GDP and push inflation higher.

• Trump promises 'very rapid action' on Harvey relief funding. (video)

Zero Hedge:

• North Korea Fires Ballistic Missile Over Japan; S.Korea Military Raising Alert. (video)

• Gold, VIX, Bitcoin Surge; Stocks, USDJPY Tumble After North Korean Missile Launch. (graph)

• Podesta Group Subpeonaed By Special Counsel Mueller In Russia Probe.

• Nomi Prins: Big Bank Concentration And Counterparty Risk Expands.

• Finish Line(FINL) Craters After Cutting Forecast In Half.

• "We Have A Problem" - Houston Hits Stocks, But Bonds & Bullion Bid. (video)

Night Trading 

• Asian equity indices are -.75% to -.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 79.0 +1.0 basis point. 

• Asia Pacific Sovereign CDS Index 18.25 -1.5 basis points.

• Bloomberg Emerging Markets Currency Index 74.42 -.11%.

• S&P 500 futures -.54%.

• NASDAQ 100 futures -.62%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (BBY)/.63

• (CBK)/-.22

• (HAIN)/.40

• (AVAV)/-.34

• (HRB)/-.62

Economic Releases 
9:00 am EST

• The S&P CoreLogic CS 20-City MoM for June is estimated to rise +.1% versus a +.1% gain in May.

10:00 am EST

• The Conference Board Consumer Confidence Index for August is estimated to fall to 120.6 versus 121.1 in July. 

Upcoming Splits

• None of note

Other Potential Market Movers

• The France GDP report, German GfK Consumer Confidence report, weekly US Retail Sales reports, $28B 7Y T-Note auction and the Jefferies Semi/Hardware/Communications Infra Conference could also impact trading today.

BOTTOM LINE:  Asian indices are mostly lower, weighed down by energy and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 75% net long heading into the day.

Stocks Slightly Higher into Final Hour on Tax Reform Hopes, Buyout Speculation, Short-Covering, Biotech/Healthcare Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 11.55 +2.38%

• Euro/Yen Carry Return Index 136.28 +.26%

• Emerging Markets Currency Volatility(VXY) 7.17 +.84%

• S&P 500 Implied Correlation 35.49 +.28%

• ISE Sentiment Index 132.0 +22.22%
  

• Total Put/Call .93 -4.12%

• NYSE Arms 1.30 +25.61%

Credit Investor Angst:

• North American Investment Grade CDS Index 59.46 -.99%
  

• America Energy Sector High-Yield CDS Index 477.0 +.31%

• European Financial Sector CDS Index 54.87 -.69%

• Western Europe Sovereign Debt CDS Index 5.88 -1.18%

• Asia Pacific Sovereign Debt CDS Index 18.21 -7.28%

• Emerging Market CDS Index 185.97 +.65%
  

• iBoxx Offshore RMB China Corporate High Yield Index 141.13 +.05%

• 2-Year Swap Spread 21.75 -1.5 basis points

• TED Spread 30.75 +.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -26.75 unch.

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 74.56 +.09%
• 3-Month T-Bill Yield 1.02% unch.
  

• Yield Curve 83.0 -1.0 basis point

• China Import Iron Ore Spot $77.15/Metric Tonne -1.57%

• Citi US Economic Surprise Index -30.90 +1.4 points

• Citi Eurozone Economic Surprise Index 25.90 +6.7 points

• Citi Emerging Markets Economic Surprise Index 19.70 +1.6 basis points

• 10-Year TIPS Spread 1.76 unch.
  
• 17.5% chance of Fed rate hike at Nov. 1 meeting, 38.8% chance at Dec. 13 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -2 open in Japan 
• China A50 Futures: Indicating +46 open in China

• DAX Futures: Indicating +3 open in Germany

Portfolio: 

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:

• Wall Street Vets From Dalio to Gundlach Warn on Emerging Markets. (video) More investors are joining the cast of Wall Street veterans from Jeff Gundlach to Ray Dalio in warning that risky assets are overvalued. They point to rising global turmoil underscored by the recent terrorist attacks in Barcelona and the racially charged violence in Charlottesville, Virginia, as well as valuations that no longer compensate for potential flareups in North Korea and Venezuela. That’s not to mention the unpredictability in the U.S., where President Donald Trump is feuding with members of Congress before a critical vote to increase the country’s debt ceiling.
• Stocks Mixed as Traders Weigh Harvey; Gas Surges. (video) U.S. stocks were mixed, oil declined and gold rose as investors weighed the damage from Tropical Storm Harvey. The euro held steady after rising to its strongest level since January 2015 against the dollar. Gasoline surged to the highest in two years and crude oil fell as flooding from Harvey inundated refining centers along the Texas coast, shutting more than 10 percent of U.S. fuel-making capacity. Insurers were among the biggest decliners Monday in the S&P 500 Index, with Travelers Cos. dropping as much as 3.2 percent and Progressive Corp. down as much as 2.9 percent. The Stoxx Europe 600 Index fell 0.5 percent. The MSCI World Index of developed countries advanced 0.1 percent.

Wall Street Journal:

• Texas Hit Hard by Tropical Storm Harvey: Live Coverage.
• Harvey to Hit Houston Again. The tropical storm is headed back into the Gulf of Mexico, and is expected to make landfall closer to the flooded city.
• Freight Companies Scramble to Reroute Goods in Wake of Harvey. Trucking fleets, railroads and shipping lines look for alternative routes as Tropical Storm Harvey disrupts a major thoroughfare.
• Amazon(AMZN) Doesn’t Need to Make Money on Groceries, Putting Pressure on Wal-Mart, Kroger. By cutting prices on staples at Whole Foods, e-commerce giant looks to boost traffic at rivals’ expense.
• U.S. Navy Finds Remains of All Missing USS John McCain Sailors. The 10 are identified as junior-ranking servicemen mostly working as electronics and communications technicians.
• Investors Have Pulled $30 Billion from the Stock Market.

Fox News:

• Houston crippled by Harvey's deluge as millions face days of flooding. (video)

CNBC:

• Goldman: Pro investors are beating the market with these 11 stocks.
• Stocks of refiners and truckers jump on higher gasoline prices, need to rebuild after Harvey.
• Uber's new CEO pick has been an outspoken critic of Trump's policies.
• What to expect from Apple's iPhone 8 event in September.

Zero Hedge:

• Shocking Drone Footage Shows Harvey's "Unprecedented" Devastation, "No Parallel To Any Rainstorm In US History". (video)
• "You Couldn't Dream This Up": FEMA Expects Over 450,000 Harvey Victims, 30,000 To Seek Shelter. 
• Amazon(AMZN) Slashes Whole Foods Prices As Much As 43%, Channel Checks Reveal.
• Texas Activates All 12,000 National Guardsmen "In Response To Harvey Devastation".
• Bay Area TV Anchor: "I Experienced Hate First Hand Today In Berkeley" From Antifa. (pic)
• US Debt Ceiling, The Wall, Runaway Spending, & The Lack Of Evidence Of Concern... So Far. (graph)
• Spot Gold Spikes Above $1300 To Highest Since Election. (graph)
• Oil Tumbles Amid Speculation Up To 30% Of US Refining Capacity Could Be Shut. (graph)
• Chinese Shares Surge As Beijing "Plunge Protection Team" Boosts Stock Holdings. (graph)

Business Insider:

• GOLDMAN: Harvey's damage to America's oil industry could last several months.
• Gilead(GILD) just handed a revolutionary kind of cancer treatment a $12 billon endorsement.
• Robot caregivers for the elderly could be just 10 years away.
• Why evacuating major cities before a hurricane can be deadly.