Stocks Surging into Final Hour on China Trade Deal Hopes, Diminished Global Growth Concerns, Short-Covering, Biotech/Tech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Above Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 14.9 -1.78%

• Euro/Yen Carry Return Index 123.18 -.10%

• Emerging Markets Currency Volatility(VXY) 8.25 -.24%

• S&P 500 Implied Correlation 36.8 +2.51%

• ISE Sentiment Index 109.0 +12.4%
  

• Total Put/Call .73 -12.0%

• NYSE Arms .95 +20.3%

Credit Investor Angst:

• North American Investment Grade CDS Index 51.12 -1.76%
  

• America Energy Sector High-Yield CDS Index 386.0 -4.22%

• European Financial Sector CDS Index 57.72 -.66%

• Italian/German 10Y Yld Spread 153.5 -3.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 57.60 -.63%
  

• Emerging Market CDS Index 200.35 -.56%
  

• iBoxx Offshore RMB China Corporate High Yield Index 165.29 -.03%

• 2-Year Swap Spread -1.25 +.25 basis point

• TED Spread 19.25 -.75 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -12.75 +2.5 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.69 -.11%
• 3-Month T-Bill Yield 1.95% +1.0 basis point

• Yield Curve .05 unch.

• China Iron Ore Spot 91.10 USD/Metric Tonne +5.46%

• Citi US Economic Surprise Index 7.0 unch.

• Citi Eurozone Economic Surprise Index -36.80 +.4 point

• Citi Emerging Markets Economic Surprise Index -11.1 +4.5 points

• 10-Year TIPS Spread 1.60 +1.0 basis point
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -112 open in Japan 
• China A50 Futures: Indicating +63 open in China

• DAX Futures: Indicating +16 open in Germany

Portfolio:

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

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

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth +.4%

Sector Underperformers:

• 1) Road & Rail -.7% 2) Computer Services -.4% 3) Restaurants unch.

Stocks Falling on Unusual Volume: 

• ZS, PLAY, FARM, GH, BHGE, MRNA, VCYT, DAN and SATS

Stocks With Unusual Put Option Activity:

• 1) ZNGA 2) STLD 3) ZS 4) MNK 5) LL

Stocks With Most Negative News Mentions:

• 1) GME 2) MNK 3) WKHS 4) BANC 5) ROK

Charts:

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

Bull Radar

Style Outperformer:

• Small-Cap Growth +1.8%

Sector Outperformers:

• 1) Networking +1.9% 2) Computer Hardware +1.8% 3) Alt Energy +1.7%

Stocks Rising on Unusual Volume:

• LOVE, FRAN, IGV, AIMT, CDLX, ADES, IHG, RH, RARE, QDEL, VIAV, CVGW, FNKO, IQ, INMD, STC, CLW, HLIO, ARA, ATKR, LYFT, FSLY, CHEF, SMAR, GNRC, FSLY, PD, MDP, IMMU, MINI, CCS, URGN, WSR and BA

Stocks With Unusual Call Option Activity:

• 1) VIAV 2) XME 3) RH 4) ZGNX 5) PLAY

Stocks With Most Positive News Mentions:

• 1) SCHW 2) LXRX 3) RH 4) MU 5) AA

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +25.3% Above 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 62.2% of Issues Advancing, 34.8% Declining
• 88 New 52-Week Highs, 10 New Lows
• 59.3% of Issues Above 200-day Moving Average
• Average 14-Day RSI 51.8%
• Vix 14.7 -3.5%
• Total Put/Call .70 -15.7%
• TRIN/Arms 1.02 +29.1%

Wednesday Watch

Night Trading 

• Asian equity indices are -.25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 58.0 unch.

• China Sovereign CDS 40.0 +.75 basis point.

• Bloomberg Emerging Markets Currency Index  65.76 -.01%.
• FTSE 100 futures +.13%.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.11%.

Morning Preview Links 

Earnings of Note 

Company/Estimate

Before the Open:

• None of note

After the Close:

• (OXM)/1.86
• (TLRD)/.79

Economic Releases

8:30 am EST

• PPI Final Demand MoM for August is estimated unch. versus a +.2% gain in July.
• PPI Ex Food and Energy MoM for August is estimated to rise +.2% versus a -.1% decline in July.

10:00 am EST

• Wholesale Trade Sales MoM for July is estimated to rise +.5% versus a -.3% decline in June.
  

10:30 am EST

• Bloomberg consensus estimates call for a weekly crude oil  inventory decline of -2,655,170 barrels versus a -4,771,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -857,090 barrels versus a -2,538,000 barrel decline the prior week. Distillate inventories are estimated to fall by -509,360 barrels versus a -2,538,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to fall by -.55% versus a -.4% decline prior.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The $24B 10Y T-Note auction, Japan Machine Orders report, weekly MBA Mortgage Applications report and the BofA Merrill Media/Communications/Entertainment Conference  could also impact trading today.

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

Stocks Lower into Final Hour on Sector Rotation, Emerging Markets Debt Angst, Oil Decline, REIT/Restaurant Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Heavy

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 15.9 +4.0%

• Euro/Yen Carry Return Index 123.22 +.20%

• Emerging Markets Currency Volatility(VXY) 8.27 +.61%

• S&P 500 Implied Correlation 37.65 +4.44%

• ISE Sentiment Index 99.0 +15.12%
  

• Total Put/Call .83 -14.4%

• NYSE Arms .83 +22.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.21 +1.07%
  

• America Energy Sector High-Yield CDS Index 402.0 -3.18%

• European Financial Sector CDS Index 58.11 +.68%

• Italian/German 10Y Yld Spread 156.75 +4.0 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 57.94 -.27%
  

• Emerging Market CDS Index 201.29 +1.14%
  

• iBoxx Offshore RMB China Corporate High Yield Index 165.34 +.03%

• 2-Year Swap Spread -1.5 -1.5 basis points

• TED Spread 20.0 +4.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -15.25 -.5 basis point

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 65.73 +.03%
• 3-Month T-Bill Yield 1.94% -1.0 basis point

• Yield Curve .05 +2.0 basis points

• China Iron Ore Spot 88.60 USD/Metric Tonne -.24%

• Citi US Economic Surprise Index 7.0 -.6 point

• Citi Eurozone Economic Surprise Index -37.20 -3.1 points

• Citi Emerging Markets Economic Surprise Index -15.6 +.6 point

• 10-Year TIPS Spread 1.59 +2.0 basis points
• 100.0% chance of Fed rate cut at Oct. 30th meeting, 100.0% chance of cut at Dec. 11th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -112 open in Japan 
• China A50 Futures: Indicating +18 open in China

• DAX Futures: Indicating +16 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 75% Net Long