Stocks Reversing into Afternoon on China Trade Deal Hopes, Oil Gain, Technical Buying, Energy/Gaming Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Mixed
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 24.21 -4.8%

• Euro/Yen Carry Return Index 128.90 -1.5%

• Emerging Markets Currency Volatility(VXY) 9.85 +.51%

• S&P 500 Implied Correlation 49.69 +8.4%

• ISE Sentiment Index 65.0 -12.2%
  

• Total Put/Call 1.05 +7.2%

• NYSE Arms .88 -17.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 87.25 -.48%
  

• America Energy Sector High-Yield CDS Index 799.0 +.36%

• European Financial Sector CDS Index 112.18 +3.42%

• Italian/German 10Y Yld Spread 252.75 +2.75 basis points
  

• Asia Pacific Sovereign Debt CDS Index 11.75 unch.

• Emerging Market CDS Index 207.17 -.41%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.98 +.09%

• 2-Year Swap Spread 16.75 +.25 basis point

• TED Spread 36.25 -6.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap 1.25 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.90 -.31%
• 3-Month T-Bill Yield 2.41% +6.0 basis points

• Yield Curve 15.75 -4.0 basis points

• China Iron Ore Spot 69.78 USD/Metric Tonne +.53%

• Citi US Economic Surprise Index -22.5 +1.3 points

• Citi Eurozone Economic Surprise Index -71.6 +.2 point

• Citi Emerging Markets Economic Surprise Index -13.3 -2.7 points

• 10-Year TIPS Spread 1.71 unch.
• 2.0% chance of Fed rate hike at March 20th meeting, 4.0% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -94 open in Japan 
• China A50 Futures: Indicating +59 open in China

• DAX Futures: Indicating +47 open in Germany

Portfolio: 

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Value unch.

Sector Underperformers:

• 1) Medical Equipment -2.2% 2) REITs -2.0% 3) Utilities -1.5%

Stocks Falling on Unusual Volume: 

• MYOK, TNDM, BITA, TSLA, GMED, HOLX and NTGR

Stocks With Unusual Put Option Activity:

• 1) AET 2) XRX 3) MNK 4) LNG 5) CPB

Stocks With Most Negative News Mentions:

• 1) BITA 2) HOLX 3) GMED 4) LPX 5) RARE

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Value +.7%

Sector Outperformers:

• 1) Gaming +4.7% 2) Energy +2.3% 3) Retail +1.7%

Stocks Rising on Unusual Volume:

• ENTG, OPRX, NTGR, CARA, BEDU, EWZS, BOX, MITK, CBD, UTF, CONN, BEP, BPT, NGG, EBF, AGYS, SNP, TSU, VTWO, WRLD, KWR, BBBY, HQH, TGP and ENTG

Stocks With Unusual Call Option Activity:

• 1) THC 2) BOX 3) BK 4) COL 5) XOP

Stocks With Most Positive News Mentions:

• 1) TUSK 2) CBS 3) CARA 4) BHF 5) DFT

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +1.8% Above 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 62.5% of Issues Advancing, 36.0% Declining
• 5 New 52-Week Highs, 59 New Lows
• 12.9% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.1%
• Vix 25.1 -1.5%
• Total Put/Call 1.11 +14.4%
• TRIN/Arms .84 -21.5%

Wednesday Watch

Evening Headlines

Bloomberg:       

• China’s Xi Urges Self-Reliance Amid Change ‘Unseen in 100 Years’.    

• North Korea's Kim Warns Trump Talks at Risk Over Sanctions.

• The Biggest Asia Stock Winners and Losers of 2018.   

• South Korea Trade Slips in Another Bearish Sign for World Economy.   

• Sydney Housing Slump to Deepen as Prices Drop Most Since 1980s.

• Former Army Captain Takes Brazil's Reins in Surge of Nationalism.   

• Pompeo Says U.S. Still Committed to Israel Despite Syria Move.

• Asian Stocks to Usher in New Year on Cautious Note. Asian stocks look set to kick off 2019 on a muted note, with a holiday in Japan likely to dampen volumes, after global stocks finished their worst year since the financial crisis. In Australia, the benchmark index edged higher, while futures relative to fair value suggest slight declines in Hong Kong. S&P 500 Index futures advanced after signs U.S. President Donald Trump may be more willing to make a deal to end a government shut down. The cash gauge ended the worst year for U.S. stocks since 2008 with a narrow gain in thin pre-holiday trading Monday on optimism about a deal on trade between the U.S. and China. The advance trimmed the worst December rout for the S&P 500 since 1931 to 9.2 percent. That monthly rout capped a 6.2 percent slide in the year, the biggest of the record bull market. Treasuries won’t trade because of the Japan holiday. The S&P/ASX 200 Index rose less than 0.1 percent as of 10:48 a.m. in Sydney. Futures on Hong Kong’s Hang Seng Index relative to fair value point to an early drop of 0.1 percent. S&P 500 futures rose 0.4 percent.  

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

• Trump Calls Meeting With Lawmakers, Suggests He's Open to a Deal.

• Back to Normal Felt Anything But Average for Stock Bulls in 2018.

• This Is What Traders Will Be Watching in 2019.

• Year to Forget for S&P 500 Strategists Who Missed by 400 Points.   

• Industrials ETF Gets Cash Infusion as Recession Worries Subside. 

• Tech Rout Spurs Second-Biggest Quarterly ETF Outflow on Record.

Wall St. Journal:   

• The Fed’s Obama-Era Hangover.

• Investors Try Not to Panic Over Stock Volatility.

• North Korea’s Kim Extends Peace Overture to U.S.

• The Money Managers to Watch in 2019.

• U.S. Economy Fuels Boom in Consumer Debt.  

• To Woo Millennials, Atlanta Considers Covering Highways With Parks.

• Workers Brace for Mounting Bills as Shutdown Continues.

• The Money Managers to Watch in 2019.

• EU’s Trade Surplus With the U.S. Poses Risk to Tariff Truce.

• Netflix(NFLX) Hires Activision Blizzard(ATVI) CFO.

• Corporate Profit Crunch Looms.

• Great Retreat From Global Bank Lending Continues.

MarketWatch.com:

• Here’s how ugly 2018 was for stocks and other assets.

Fox News:

• President Trump opens 2019 with epic tweet to backers, haters and his favorite target.

• Mexican president’s immigration plan could be game-changer, say experts.

• Tensions continue to rise as authorities use tear gas to stop migrants at southern border.

CNBC:  

• Walmart(WMT) isn’t the only retailer already winning in 2019.

• Why 2019 could be very good for stocks, after worst year in a decade.

• Merck(MRK) surges more than 30% in 2018, taking the crown as biggest Dow winner.

• Here are the best and worst performing stocks of this tough and volatile year for the market.

Zero Hedge:   

• Chinese Admiral Wants To "Sink Two US Aircraft Carriers" Over South China Sea.  

• Hackers Threaten To Dump Secret 9/11 Attack Files If Bitcoin Ransom Not Met.

• Repo Rate Soars Most On Record As Yield Curve Goes Nuts In Year-End Liquidity Chaos.

• The IMF's Five Charts That "Explain The Global Economy In 2018".

• North Korea Threatens To Abandon US Talks If No Sanctions Relief Offered.

• U.S. Shale Challenges OPEC's Oil Dominance In Asia.

• Zuckerberg Funds Wireless Mind Control Using "Game-Changing" Brain Implant. 

• Your Tax Dollars At Work: Govt Officially Forgiving Student Debt.

• The Best And Worst Performing Markets Of 2018.

• 2018 Greatest Hits: The Most Popular Articles Of The Past Year And A Look Ahead.

• David Einhorn Closes 2018 Down 34%, His Worst Year On Record.

• Brazil's New President Vows To "Fight The Marxist Trash" in 2019.

• California Women's March Cancelled For Being "Overwhelmingly White".

• Soros 'Person Of The Year' Indeed - The Year Globalists Pushed People's Patience To The Edge.

Telegraph:

• Eurozone could break up this year if it doesn't reform, experts warn.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 95.25 -2.25 basis points. 

• Asia Pacific Sovereign CDS Index 11.75 unch.

• Bloomberg Emerging Markets Currency Index 67.03 -.1%.

• FTSE 100 futures +.33%.

• S&P 500 futures +.56%.

• NASDAQ 100 futures +.76%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• None of note

After the Close:

• None of note

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI report could also impact trading today.

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