Bear Radar

Style Underperformer:

• Small-Cap Value -1.02%

Sector Underperformers:

• 1) Homebuilders -2.50% 2) Gold & Silver -2.43% 3) Steel -2.03%
  

Stocks Faling on Unusual Volume:

• CEL, ACHN, PTNR, MCP, SNTA, BSBR, GDP, CLMT, IOC, IDCC, BBEP, UBNT, BAC, SEP, STMP, NMM, BRP, FFC, SAND, PFL, AWF, FCT, PHK, EMD, GNT, IAG, ARII, IVR, JRO, ERC, GGN, MED, GORO, BIDU, HPI, HTS, FUN, EVEP, DMND, VTA, AMTG, EDD, CMO, CYS, PHK, MAIN, WMC, NTI and TCAP

Stocks With Unusual Put Option Activity:

• 1) DHI 2) MOS 3) CBS 4) ANF 5) AKS
  

Stocks With Most Negative News Mentions:

• 1) ACI 2) PZZA 3) POT 4) GM 5) EXC
  

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Growth -.52%

Sector Outperformers:

• 1) Networking +.69% 2) Retail +.49% 3) Internet +.25%
  

Stocks Rising on Unusual Volume:

• CSCO, FFIV, ANF, FB, CLNE, ARO and CAVM

Stocks With Unusual Call Option Activity:

• 1) SQNM 2) ANF 3) IAG 4) ARO 5) CLWR
  

Stocks With Most Positive News Mentions:

• 1) SYY 2) ACM 3) ANF 4) GIS 5) CSCO

Charts:

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

Wednesday Watch

Evening Headlines 
Bloomberg: 

• Spain Makes Progress on Repossessions Deal as Talks Continue. Spain’s government and the opposition plan to meet for a third time today, after they made progress toward a deal to stem home repossessions while Prime Minister Mariano Rajoy prepared to face a general strike. Talks between government and Socialist Party officials that began Nov. 12 will reconvene at 6:30 p.m. as the two sides work on “urgent measures” to limit evictions in cases of mortgage default, said a government spokesman, who asked not to be named in line with government policy. The government plans to pass a decree enforcing the measures at a cabinet meeting tomorrow, the spokesman said. Rajoy, who faces a general strike today amid mounting social disquiet at spending cuts and Spain’s economic crisis, pledged measures to stem evictions on Nov. 9 after a woman committed suicide as officials tried to seize her home. Rajoy is trying to respond to outrage over foreclosures amid a taxpayer- funded bank bailout without inflicting further losses on a financial system crippled by the collapse of a debt-fueled housing boom.
• China Vehicle Prices Fall for Sixth Straight Month, NDRC Says. China's vehicle prices fell for the sixth straight month in October, according to the National Development Reform Commission, as dealerships cut prices to clear inventories. Prices of locally produced vehicles fell 1.3% from a year earlier, with passenger-vehicle prices dropping 1.8%, the NDRC's price monitoring bureau said. "Market demand this year has been weak and dealers' inventories at both the local carmakers and foreign brands have been piling up," Cheng Xiaodong, head of vehilce-price monitoring at the NDRC, said in an interview. Average vehicle prices in the world's largest auto market may again come under pressure in the fourth quarter as dealerships slash prices further to meet year-end sales goals, the NDRC said. Vehicle sales growth may lag behind gdp expansion this year, the China Association for Automotive Manufacturers forecast Oct. 28.  
• Most Chinese Stocks Decline as Party Concludes Congress. Most Chinese stocks fell as the ruling party’s meeting to choose new leaders drew to a close. Consumer discretionary shares slid while aluminum stocks rose. China International Travel Service Corp. (601888), the largest tourism company by market value, tumbled by the 10 percent daily limit on a plan to sell new shares. Aluminum Corp. of China Ltd. jumped 5.5 percent after the China Securities Journal reported the government will start buying aluminum to add to reserves. Vice President Xi Jinping and Vice Premier Li Keqiang were re- appointed to the central committee today, while the members of the Politburo Standing Committee, the top decision-making body, will be elected tomorrow in Beijing. “The party congress hasn’t generated any exciting news for economic reforms and the market is a bit disappointed,” said Wang Weijun, a strategist at Zheshang Securities Co. in Shanghai.
• Gold to Advance to $2,000 on Money Printing, Deutsche Bank Says. Gold will probably rally to a record above $2,000 an ounce next year as central banks ramp up stimulus to sustain the recovery, according to Raymond Key, London-based global head of metals trading at Deutsche Bank AG. “We’ll take out $2,000, we’ll go higher,” Key said in an interview in Hong Kong, where he attended the London Bullion Market Association’s annual conference. “That’s on the view that they’ll continue to print money.” 
• Treasuries See U.S. Falling Over Cliff as Yields Converge. The biggest Treasury rally in five months is underlining market concern that President Barack Obama and House Republicans will fail to avert $607 billion in mandated spending cuts and tax increases starting Jan. 1. Yields on 10-year Treasuries dropped the most in one day since May to 1.62 percent after Obama’s re-election Nov. 6. A figure below 1.7 percent indicates that investors expect gross domestic product to shrink by 0.3 percent next year as the so- called fiscal cliff takes effect, according to JPMorgan Chase & Co.
• Palestinian Monetary Authority Readies for UN Bid Repercussions. Palestinian Monetary Authority Governor Jihad Al Wazir said he has readied the financial system to withstand the repercussions that may follow a planned statehood bid at the United Nations as soon as this month. Palestinian Authority President Mahmoud Abbas said Nov. 11 he’ll resist global pressure to drop the bid or wait until after Israeli elections on Jan. 22. That decision may spur Israel to halt the transfer of tax revenue to the Palestinian Authority, Israeli Finance Minister Yuval Steinitz said this week.
• Barak Says Israel to Hit Hamas Until Deterrence Restored. Israeli Defense Minister Ehud Barak, who directed Israel’s 2008 ground invasion of the Gaza Strip, is considering new measures to stop missile attacks from the Hamas- ruled territory. Between meetings with top generals and fellow cabinet ministers, Barak said that military operations will intensify if Palestinian rocket barrages continue, even as Egypt’s Muslim Brotherhood leadership seeks to broker a cease-fire.
• Debt-Fueled U.S. Car Sales May Need Income Help: Economy. A rebound in U.S. auto sales has been buoyed by the return of easy lending, even to borrowers with flawed credit histories. Some economists question whether the gains can be sustained without a boost in hiring. Auto loans were up 5.5 percent in the second quarter from the same time last year, with riskier buyers accounting for 43.9 percent of the total, up from 42 percent in 2008, according to Experian Plc. By contrast, hourly wages for non-managers climbed 1.1 percent on average over the past 12 months, the least since records began in 1965, Labor Department figures show.
• Commercial Property Faces Risk on Yields, Executives Say. Rising risks, including an eventual increase in interest rates, are leading commercial-property investors to borrow less and expect lower returns, said real estate executives including Rob Speyer and Richard J. Mack. AREA Property Partners LP isn’t building U.S. offices without signed tenants, even as commercial values increase, Mack, chief executive officer for North America, said at the Bloomberg Commercial Real Estate Conference today in New York. Tishman Speyer Properties LP has used “average leverage” of less than 50 percent in deals since 2010, said Speyer, the New York-based office developer’s co-chief executive officer.
• Re-Elected Obama Has No Reason to Block Keystone Pipeline. Environmentalists who are against building the Keystone XL oil pipeline from Alberta, Canada, to the U.S. Gulf Coast, have called a march on Washington this weekend to demand that President Barack Obama again reject it. This time, it is the opponents the president should turn down. He should move to get the 1,700-mile, $7 billion underground pipeline approved within the next couple of months.

Wall Street Journal: 

• Fiscal Cliff: Live Stream.
• Business Leaders Spooked by 'Fiscal Cliff'. Year-End Package of Tax Increases and Spending Cuts Surpasses Euro-Zone Woes as Many Chief Executives' Top Concern. 
• Geithner Says Higher Tax Rates Key to Deficit Plan. Treasury Secretary Timothy Geithner on Tuesday said higher tax rates on upper-income Americans were a central part of the White House's deficit-reduction proposal because there was no way to raise enough revenue by only limiting tax breaks.
• Scandal Entangles A Second General. The adultery scandal that led to the downfall of David Petraeus as CIA director widened Tuesday as President Barack Obama put on hold his nomination of Marine Gen. John Allen as commander of the North Atlantic Treaty Organization, one of the world's top military posts.
• Natural-Gas Cars to Get Home Fueling.
• Beijing Wields Big Stick Against Megaships. How China Closed Its Ports to Brazilian Miner Vale's Huge Iron-Ore Vessels.

MarketWatch.com: 

• Mosaic(MOS) cuts Q2 sales-volume view on slower demand. Mosaic Co. cut its fiscal second-quarter potash and phosphates sales volume guidance, pointing to weakened demand in the international crop nutrient market, although the fertilizer producer believes the demand is simply delayed. Shares slipped 5.1% to $48.15 after hours. Through the close, the stock has fallen 12% over the past three months. 
• China consensus is dead wrong, says Duncan. Bangkok-based economist and author Richard Duncan says a chorus of economists pointing to a rebound in China may well be proven wrong, as he believes the nation is headed into a serious crisis.

CNBC: 

• Is $250,000 a Year Rich? Let's Break It Down. It’s no surprise that working couples in big cities are struggling to raise children while paying off mortgages and student debt. What is surprising is that they’re lumped in with the so-called “wealthy” if they jointly earn $250,000 a year.
• US Heads for Fifth Straight Trillion-Dollar Deficit. The federal government started the 2013 budget year with a $120 billion deficit in October, an indication that the nation is on a path to its fifth straight $1 trillion-plus annual deficit.

Zero Hedge: 

• In Rare Loss, Seth Klarman Dumps Nearly Half Hewlett Packard Holdings.
• Greece Renegs On Troika Terms Hours After Getting Bailout Extension.
• Summing It All Up... Firstly, we have reached the limit in the credit backing of our financial, monetary and banking system.
• Obama To Demand $1.6 Trillion In Tax Hikes Over Ten Years, Double Previously Expected.

Business Insider: 

• These Are The Obama Tax Hikes That Will Really Hurt.
• The Republicans Will Fold If Obama Drives The Country Off The Fiscal Cliff.  No. Obama shouldn't gamble with the economy: The left is pushing Obama to "adopt a strategy of confrontation and conquest," but that would be the height of irresponsibility, says David Brooks at The New York Times. "It's reckless to think you can manufacture an economic crisis for political leverage and then control the cascading results." While it would help Obama ram through tax hikes on the wealthy, it would hurt his second-term agenda, sowing "such bitterness that it would be the last thing he'd pass for the rest of his term." Resolving the fiscal cliff will "take a dealmaker, not a warrior." 
• 28 Million Americans Could Be Hit By This Unintended Tax Hike, The IRS Warns. Some 28 million Americans including some in the middle class would face an unintended tax hike if a U.S. tax aimed at ensuring the wealthy pay a minimum isn't fixed before the end of the year, the U.S. tax commissioner said on Tuesday.
• Homebuilders Have Been Some Of The Hottest Stocks In The World — But One CEO Just Sent Out A Big Caution Warning.

24/7 Wall St.: 

• States With the Highest and Lowest Taxes.

The Blaze: 

• Did Obama Win in Landslide? Blue State Creep? 100 Years of Election Maps Will Give You Some True Perspective. (video)

Reuters: 

• Intel(INTC), Qualcomm(QCOM) may invest $378 mln in Sharp-sources. U.S.-based Intel Corp and Qualcomm Inc are in talks to jointly i nvest about 30 billion yen ($378 million) in debt-stricken Japanese consumer electronics maker Sharp Corp, two sources familiar with the matter said on Wednesday. Details of the talks were not known, but Sharp, whose displays are used in Apple Inc's iPads and iPhones, is looking to small displays to spark a revival in its fortunes and sees the new generation of high-end laptops as a fresh market.
• Fed no safety net if US goes over fiscal cliff -Fisher. The Federal Reserve cannot do much more to shelter the U.S. economy if the country goes over a year-end fiscal cliff of tax hikes and government spending cuts, a senior U.S. central bank official said on Tuesday. "It would be nice to have the fiscal authorities get their act together so we wouldn't be dependent on monetary policy. There is a limit to what we can do," Dallas Federal Reserve President Richard Fisher told CNBC television. "I do not see us as that safety net."
• Anti-austerity strikes sweep southern Europe. Spanish and Portuguese workers will stage the first coordinated general strike across the Iberian Peninsula on Wednesday, shutting transport, grounding flights and closing schools to protest against spending cuts and tax hikes. Unions in Greece and Italy also planned work stoppages and demonstrations on a "European Day of Action and Solidarity" against austerity policies, which labour leaders blame for prolonging and worsening the continent's economic crisis. The international coordination shows "we are looking at a historic moment in the European Union movement," said Fernando Toxo, head of Spain's biggest union, Comisiones Obreras.
• Cisco(CSCO) sees slower growth in second quarter. Cisco Systems Inc reported first quarter results that beat estimates but expects flat earnings and slower revenue growth for the current quarter.

Telegraph: 

• US Conference Board fears BRICS miracle over as world faces decade-long slump. The catch-up boom in China, India, Brazil is largely over and will be followed by a drastic slowdown over the next decade, according to a grim report by America’s top forecasting body.

The National:  

• Warning from OPEC Over US Oil Production. The head of Opec warned yesterday that if predictions that the United States will surpass Saudi Arabia as the world's biggest oil producer continue, the result will be a reduction in investment by his members that will hit oil consumers. "If this message keeps coming, there will be no investment" from Opec members, said Abdalla El Badri, Opec's secretary general, adding that "consumers will lose". Mr El Badri's rebuke came less than 24 hours after a prediction by the International Energy Agency (IEA), the industrialised nations' adviser on energy policy, that US oil production will exceed that of Saudi Arabia within five years.

Evening Recommendations 

• None of note

Night Trading

• Asian equity indices are -.50% to +.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 126.50 +2.5 basis points.
• Asia Pacific Sovereign CDS Index 91.25 +2.0 basis points.
• FTSE-100 futures -.32%.
• S&P 500 futures +.31%.
• NASDAQ 100 futures +.61%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (PETM)/.63
• (SPLS)/.45
• (ANF)/.60
• (NTAP)/.48
• (WSM)/.45

Economic Releases
8:30 am EST

• The Producer Prices Index for October is estimated to rise +.2% versus a +1.1% gain in September.
• The PPI Ex Food & Energy for October is estimated to rise +.1% versus unch. in September.
• Advance Retail Sales for October are estimated to fall -.2% versus a +1.1% gain in September.
• Retail Sales Less Autos for October are estimated to rise +.2% versus a +1.1% gain in September.
• Retail Sales Ex Auto & Gas for October are estimated to rise +.4% versus a +.9% gain in September.  

10:00 am EST

• Business Inventories for September are estimated to rise +.6% versus a +.6% gain in August.

2:00 pm EST

•  Minutes of FOMC Meeting.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The Fed's Williams speaking, Eurozone Industrial Production/Portugal GDP/UK unemployment reports, US Mortgage Delinquencies report, weekly MBA Mortgage Applications Index, Morgan Stanley TMT Conference, Jefferies Healthcare Conference, Morgan Stanley Chemicals Conference, UBS Tech/Services Conference, JPMorgan Services Conference, UBS Growth Conference, (FB) lockup expiration and the (GWW) analyst meeting could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Lower into Final Hour on Rising Fiscal Cliff Fears, Rising Eurozone Debt Angst, More Global Growth Worries, Tech/Financial Sector Weakness

 Broad Market Tone:

• Advance/Decline Line: Modestly Lower
  
• Sector Performance: Mixed
• Volume:Below Average
• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• VIX 16.35 -1.98%
• ISE Sentiment Index 98.0 +5.4%
• Total Put/Call .74 -24.29%
• NYSE Arms .62 -46.92%

Credit Investor Angst:

• North American Investment Grade CDS Index 105.32 bps -1.33%
• European Financial Sector CDS Index 180.37 bps -1.20%
• Western Europe Sovereign Debt CDS Index 120.59 bps +2.65%
• Emerging Market CDS Index 237.56 bps -.64%
• 2-Year Swap Spread 12.0 +.25 basis point
• TED Spread 22.25 +.5 basis point
• 3-Month EUR/USD Cross-Currency Basis Swap -28.0 -1.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .09% unch.
• Yield Curve 134.0 -1 basis point
• China Import Iron Ore Spot $122.30/Metric Tonne +.16%
• Citi US Economic Surprise Index 60.70 -.1 point
• 10-Year TIPS Spread 2.42 -1 basis point
  

Overseas Futures:

• Nikkei Futures: Indicating +35 open in Japan
• DAX Futures: Indicating -11 open in Germany

Portfolio:

• Slightly Higher: On gains in my Retail sector longs, index hedges and emerging markets shorts
• Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short
• Market Exposure: Moved to 25% Net Long

BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 was unable to build on a morning reversal higher at its 200-day moving average on rising global growth fears, rising eurozone debt angst, earnings worries and increasing US "fiscal cliff" fears. On the positive side, Retail shares are especially strong, rising more than +1.0%. Oil is falling -.38%, gold is down -.11%, copper is gaining +.29% and the UBS-Bloomberg Ag Spot Index is down -.17%. Major European indices were higher, led by a +1.7% gain in Spain. The Bloomberg European Bank/Financial Services Index is rising +1.5%. Brazil is rising +.75%. The Germany sovereign cds is falling -1.3% to 32.38 bps and the Italy sovereign cds is falling -2.0% to 311.24 bps. The Italian/German 10Y Yld Spread is falling -1.5% to 362.57 bps and the Spain 10Y Yld is falling -.67% to 5.85%. On the negative side, Alt Energy, Software, Networking and I-Banking shares are under pressure, falling more than -1.25%. Financial and Tech shares have traded poorly throughout the day. Lumber is falling -.9%. The 10Y Yld is -2 bps to 1.59%. The Spain sovereign cds is gaining +1.0% to 356.94 bps, the Portugal sovereign cds is rising +1.7% to 621.01 bps, the China sovereign cds is rising +2.2% to 69.16 bps and the Japan sovereign cds is gaining +1.5% to 69.35 bps. The benchmark China Iron/Ore Spot Index is down -32.4% since 9/7/11. As well, copper and oil continue to trade poorly given equity investor perceptions that the Eurozone has successfully kicked-the-can, US housing has hit a major bottom, China's economy is rebounding and global central bank stimuli will boost economic growth in the near future. US weekly retail sales have decelerated to a very sluggish rate at +1.2%. Moreover, the weekly MBA Home Purchase Applications Index has been around the same level since May 2010 despite investor perceptions of a big improvement in the nationwide housing market. The Baltic Dry Index has plunged around -55.0% from its Oct. 14th high and is now down around -45.0% ytd. Shanghai Copper Inventories have risen +461.0% ytd. Oil tanker rates have plunged, with the benchmark Middle East-to-US voyage down to 25.0 industry-standard worldscale points, which is near the lowest since May, 2009. US Rail Traffic is starting to weaken too much. The 10Y T-Note continues to trade too well. There still appears to be a fairly high level of complacency among US investors regarding the deteriorating macro backdrop. It remains unclear to me whether or not Germany will destroy its own balance sheet or allow the ECB to monetize debt in a major way in an attempt to "save" the euro even as investors continue to price this outcome into stocks. Massive tax hikes and spending cuts have still yet to hit in several key eurozone countries that are already in recession. A lack of economic competitiveness and growth incentives remain unaddressed problems. The European debt crisis is also really affecting emerging market economies, which will further pressure exports from the region and further raise the odds of more sovereign/bank downgrades over the coming months. I continue to believe that China's problems are much larger than commonly perceived and cannot be solved with another massive stimulus package given their real estate bubble, rising food prices/labor costs, massive overcapacity in certain key parts of the economy and growing bad loans problem. The most likely outcome for the US fiscal cliff crisis is our own can-kicking, which would leave much investor uncertainty over the intermediate-term. Moreover, any of the likely "solutions" being bandied about would hurt economic growth, which would more than offset the benefits to investors from less uncertainty going forward. As well, little being done by global central bankers will actually boost global economic growth to an extent that overcomes the growing macro headwinds over the intermediate-term, in my opinion. Over the intermediate-term, the Fed's recklessness greatly increases the chances of hard-landings in key emerging markets and of a serious global stock swoon, in my opinion. Moreover, uncertainty surrounding the effects on business of Obamacare will likely become more and more of a focus for US investors next year. The Mid-east continues to unravel at an alarming rate, as well. Overall broad market health remains poor as breadth, volume, leadership, lack of big volume/gainers and copper relative weakness all continue to be concerns. The fact that the S&P 500 is just hovering at its 200-day moving average without being able to sustain a meaningful bounce is a bad sign. For this year's equity advance to regain traction, I would expect to see further European credit gauge improvement, a subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower food/energy prices, a US "fiscal cliff" solution/can-kicking, a calming in Mid-east and China/Japan tensions and higher-quality stock market leadership. I expect US stocks to trade modestly lower into the close from current levels on more eurozone debt angst, rising global growth fears, US fiscal cliff fears, more shorting and tech/financial sector weakness.

Bear Radar

Style Underperformer:

• Small-Cap Value -.09%

Sector Underperformers:

• 1) Software -1.45% 2) Networking -1.31% 3) Alt Energy -1.23%
  

Stocks Faling on Unusual Volume:

• WPZ, NLY, TWO, CYS, MSFT, IVR, EVER, EVEP, SXL, MTGE, CRAY, LPLA, SLCA, CQP, PMT, BIG, MWE, WMC, AMTG and ACM

Stocks With Unusual Put Option Activity:

• 1) JNK 2) AKS 3) WFT 4) KORS 5) DKS
  

Stocks With Most Negative News Mentions:

• 1) LL 2) TSL 3) BIG 4) AKS 5) TEX
  

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Growth +.54%

Sector Outperformers:

• 1) Retail +1.22% 2) Airlines +.97% 3) Utilities +.89%
  

Stocks Rising on Unusual Volume:

• HK, EGY, DTSI, GBX, CSOD, DMND, CLNE, NTI, DKS, HD, NS, INFI, GBX, ALNY and STRA

Stocks With Unusual Call Option Activity:

• 1) EWY 2) NSC 3) M 4) KORS 5) MON
  

Stocks With Most Positive News Mentions:

• 1) FFIV 2) MNST 3) ADP 4) HD 5) BK

Charts:

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