Tuesday Watch

Evening Headlines

Bloomberg:

• Trump Says China’s Xi ‘Acted Responsibly’ in Hong Kong Protests

• Top Iran Diplomat to Meet Macron During Tanker Standoff With U.K. 

• Asia Stocks Edge Higher on Low Volumes; Oil Steady. Asian stocks opened modestly higher as investors brace for a busy week of U.S. corporate earnings and potential developments in trade negotiations. Oil stabilized after recent gains amid tensions in the Persian Gulf. Shares in Japan, Australia and South Korea edged higher. U.S. futures were little changed after gains in technology shares lifted stocks earlier. Trading has been thin across the region, with volumes below average. Treasury yields were little changed. The New Zealand dollar slipped after comments on monetary policy from the central bank. Japan’s Topix index was little changed as of 9:11 a.m. in Tokyo. Australia’s S&P/ASX 200 Index rose 0.2%. South Korea’s Kospi index added 0.2%. Hang Seng Index futures were little changed. S&P 500 Index futures were flat.  

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

• Oil Holds Gains Amid Concerns Over Tensions in Middle East.   

• Speculators Are at Odds With Asset Managers on Near-Term Fed Bets.

• Trump, Congress Clinch Debt-Limit Deal After Tense Negotiations. 

• There Are Green Lights All Over the Place for U.S. Stock Bulls.

Wall Street Journal:

• ‘No Niceties’ for Ship’s Crew From Iranian Commandos.

• In Puerto Rico, Thousands Demand Governor Resign.

• Europe Braces for Brexit With Boris Johnson.

• Hong Kong Protest Images Fan Chinese Public Anger.

• Facebook(FB) Settlement Expected to Mandate Privacy Committee.

• Boeing’s(BA) 737 MAX Grounding Spills Over Into Economy, Weighs on GDP.

Fox News:

• EXCLUSIVE: DOJ tells Mueller testimony 'must remain within the boundaries' of public report.

MarketWatch.com:

• Microsoft invests $1 billion in AI startup.

• Forget the Fed — stock-market investors brace for Dow’s busiest week of earnings.

CNBC:

• Elizabeth Warren’s recession scare appears long on fear, short on facts.

• Stocks making the biggest moves after hours: TD Ameritrade, Whirlpool and more.

• These are the 3 catalysts driving gold’s record rally.

Zero Hedge:   

• Wall Street Trading Desks Suffer Worst First Half In Over A Decade.

• Leaked Documents Expose Huawei's Role In Building North Korean Wireless Network.

• Illinois Lawmakers Push Property Tax Hikes To Fund Affordable Housing.

• Trump Announces Two-Year Budget Deal That Will Handle Debt Ceiling "With No Poison Pills".

• US Army Admits It's Conducting A Classified "Secret Operation" Near D.C.

• Iran Sentences "CIA Spy Ring" To Death; Publishes Video & Photos Of Americans.

• Semis Soar, Small Caps Sink, Silver Surges.

Business Insider: 

• Apple(AAPL) is reportedly in talks to buy Intel's(INTC) smartphone-modem chip business for $1 billion.

Telegraph:

• Money printing is dragging central banks into politics, Bank of England official says.

Night Trading 

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

• Asia Ex-Japan Investment Grade CDS Index 63.0 -1.0 basis point.

• China Sovereign CDS 42.0 -1.0 basis point.

• Bloomberg Emerging Markets Currency Index  67.72 -.04%.

• S&P 500 futures +.10%.

• NASDAQ 100 futures +.12%.

Morning Preview Links 

Earnings of Note 
Company/Estimate

Before the Open:

• (ATI)/.34

• (AN)/1.07

• (BIIB)/7.53

• (KO)/.62

• (FITB)/.66

• (HOG)/1.39

• (HAS)/.50

• (JBLU)/.57

• (KMB)/1.62

• (LMT)/4.75

• (MLM)/3.12

• (PCAR)/1.81

• (PII)/1.65

• (PHM)/.82

• (DGX)/1.68

• (SHW)/6.36

• (SWK)/2.55

• (TRV)/2.30

• (UTX)/2.05

After the Close:

• (CSL)/2.36

• (CMG)/3.76

• (CB)/2.56

• (EEFT)/1.70

• (IRBT)/.18

• (MANH)/.35

• (RHI)/.98

• (TER)/.62

• (TXN)/1.26

• (V)/1.32

Economic Releases
9:00 am EST

• The FHFA House Price Index MoM for May is estimated to rise +.4% versus a +.4% gain in April.
  

10:00 am EST

• The Richmond Fed Manufacturing Index for July is estimated to rise to 5.0 versus 3.0 in June. 

• Existing Home Sales MoM for June is estimated to fall -.3% versus a +2.5% gain in May.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone Consumer Confidence report, Japan Machine Orders report, US weekly retail sales reports and the $40B 2Y T-Note auction 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 100% net long heading into the day.

Stocks Rising into Final Hour on Earnings Optimism, Oil Gain, Technical Buying, Tech/Energy Sector Strength

 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) 13.72 -5.05%

• Euro/Yen Carry Return Index 125.63 +.08%

• Emerging Markets Currency Volatility(VXY) 6.92 -.14%

• S&P 500 Implied Correlation 35.8 -4.48%

• ISE Sentiment Index 105.0 +8.25%
  

• Total Put/Call .96 -4.0%

• NYSE Arms .96 -23.81%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.76 -1.97%
  

• America Energy Sector High-Yield CDS Index 642.0 +.05%

• European Financial Sector CDS Index 58.50 -4.09%

• Italian/German 10Y Yld Spread 200.0 +7.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 63.07 -.59%
  

• Emerging Market CDS Index 159.48 -.26%
  

• iBoxx Offshore RMB China Corporate High Yield Index 164.89 +.06%

• 2-Year Swap Spread 2.25 -.25 basis point

• TED Spread 19.0 -7.0 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -17.5 +2.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.75 -.09%
• 3-Month T-Bill Yield 2.07% +1.0 basis point

• Yield Curve 23.25 unch.

• China Iron Ore Spot 113.53 USD/Metric Tonne -.39%

• Citi US Economic Surprise Index -42.10 -.5 point

• Citi Eurozone Economic Surprise Index -8.20 +.6 point

• Citi Emerging Markets Economic Surprise Index -24.3 +4.7 points

• 10-Year TIPS Spread 1.79 -1.0 basis point
• 100.0% chance of Fed rate cut at Sept. 18th meeting, 100.0% chance of cut at October 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -16 open in Japan 
• China A50 Futures: Indicating -34 open in China

• DAX Futures: Indicating +8 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Value -.3%

Sector Underperformers:

• 1) Tobacco -1.8% 2) Papers -1.3% 3) Retail -1.0%

Stocks Falling on Unusual Volume: 

• CADE, PAYS, MBUU, HZO, IIPR, MCFT, TURN, LII, BPT, BC, HDB, FRGI, AMC and GEO

Stocks With Unusual Put Option Activity:

• 1) GEO 2) AET 3) HOG 4) SIG 5) MAT

Stocks With Most Negative News Mentions:

• 1) CADE 2) HZO 3) BC 4) MBUU 5) MNK

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth +.6%

Sector Outperformers:

• 1) Oil Service +2.2% 2) Semis +1.9% 3) Computer Hardware +1.3%

Stocks Rising on Unusual Volume:

• RPM, ARCT, GLPG, DVA, SBLK, MODN, DDS, JYNT, SLP, DIOD, PHG, USLV, AVRO, GNTX, HAL, COHU, SKX, MTN, LASR, SNY, SAP, AMAT, CQP, TDOC, UCTT and NEWM

Stocks With Unusual Call Option Activity:

• 1) PHM 2) KKR 3) DVA 4) KMB 5)WHR

Stocks With Most Positive News Mentions:

• 1) VYST 2) HAL 3) AMAT 4) DVA 5) LK

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -12.5% Below 100-Day Average
• 6 Sectors Rising, 5 Sectors Declining
• 53.3% of Issues Advancing, 41.8% Declining
• 56 New 52-Week Highs, 42 New Lows
• 60.8% of Issues Above 200-day Moving Average
• Average 14-Day RSI 47.7%
• Vix 14.2 -1.7%
• Total Put/Call .88 -12.0%
• TRIN/Arms .99 -21.4%

Monday Watch

Night Trading

• Asian indices are -1.0% to unch. on average.
• Asia Ex-Japan Investment Grade CDS Index 64.0 +.5 basis point.
• China Sovereign CDS 43.0 +.25 basis point.
• Bloomberg Emerging Markets Currency Index 67.76 -.08%.
• FTSE 100 futures -.01%.
• S&P 500 futures -.05%.
• NASDAQ 100 futures -.08%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (HAL)/.30
• (PETS)/.42
• (CALM)/-.26

After the Close:

• (BRO)/.28
• (CE)/2.35
• (CR)/1.56
• (LOGI)/.25
• (STLD)/.88
• (AMTD)/.97
• (WHR)/3.70
• (ZION)/1.10

Economic Releases

8:30 am EST

• The Chicago Fed National Activity Index for June is estimated to rise to .1 versus -.05 in May.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Japan Convenience Store Sales report could also impact trading today.

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

Weekly Outlook

• Wall St. Week Ahead by Reuters. 
• Global Economy Week by Bloomberg.
• Stocks to Watch Next Week by Seeking Alpha.
• Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on profit-taking, less dovish FOMC commentary, European/Emerging Markets/US High-Yield Debt Angst, earnings jitters, Iran tensions and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 75% net long heading into the week.