Weekly Outlook

Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week mixed as rising long-term rates, profit-taking and increasing emerging markets/European debt angst offsets seasonality, investor performance angst and short-covering. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.

Market Week in Review

S&P 500 1,818.32 +2.4%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,818.32 +2.4%

• DJIA 16,221.1 +3.0%

• NASDAQ 4,104.74 +2.6%

• Russell 2000 1,146.47 +3.6%

• S&P 500 High Beta 29.96 +3.6%

• Wilshire 5000 19,095.50 +2.5%

• Russell 1000 Growth 848.93 +2.5%

• Russell 1000 Value 912.96 +2.3%

• S&P 500 Consumer Staples 438.85 +1.4%

• Morgan Stanley Cyclical 1,442.09 +2.9%

• Morgan Stanley Technology 887.08 +3.5%

• Transports 7,282.26 +2.8%

• Utilities 488.34 +2.2%

• Bloomberg European Bank/Financial Services 104.47 +4.1%

• MSCI Emerging Markets 40.68 -1.1%

• HFRX Equity Hedge 1,153.54 +1.0%

• HFRX Equity Market Neutral 957.14 +.52%

Sentiment/Internals

• NYSE Cumulative A/D Line 193,204 +1.32%

• Bloomberg New Highs-Lows Index 46 +424

• Bloomberg Crude Oil % Bulls 18.75 -16.96%

• CFTC Oil Net Speculative Position 346,700 -.66%

• CFTC Oil Total Open Interest 1,629,694 -1.91%

• Total Put/Call .74 -12.94%

• OEX Put/Call 1.0 +9.9%

• ISE Sentiment 192.0 +47.7%

• NYSE Arms 1.32 +8.2%

• Volatility(VIX) 13.79 -12.5%

• S&P 500 Implied Correlation 51.42 -3.61%

• G7 Currency Volatility (VXY) 8.35 -3.6%

• Emerging Markets Currency Volatility (EM-VXY) 9.13 +.6%

• Smart Money Flow Index 12,012.21 +1.9%

• ICI Money Mkt Mutual Fund Assets $2.675 Trillion -1.27%

• ICI US Equity Weekly Net New Cash Flow -$5.682 Billion

• AAII % Bulls 47.5 +15.0%

• AAII % Bears 25.1 +.5%

Futures Spot Prices

• CRB Index 283.13 +1.23%

• Crude Oil 99.20 +2.82%

• Reformulated Gasoline 279.01 +6.3%

• Natural Gas 4.43 +.9%

• Heating Oil 307.78 +3.38%

• Gold 1,202.40 -2.92%

• Bloomberg Base Metals Index 192.61 +.82%

• Copper 330.45 -.01%

• US No. 1 Heavy Melt Scrap Steel 377.67 USD/Ton +4.71%

• China Iron Ore Spot 132.70 USD/Ton -2.43%

• Lumber 373.60 +2.47%

• UBS-Bloomberg Agriculture 1,377.55 +.81%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 2.1% -70 basis points

• Philly Fed ADS Real-Time Business Conditions Index .2053 -8.4%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 120.12 -.06%

• Citi US Economic Surprise Index 47.0 +14.9 points

• Citi Emerging Markets Economic Surprise Index -12.0 +3.0 points

• Fed Fund Futures imply 38.0% chance of no change, 62.0% chance of 25 basis point cut on 1/29

• US Dollar Index 80.55 +.43%

• Euro/Yen Carry Return Index 148.42 +.30%

• Yield Curve 251.0 -3 basis points

• 10-Year US Treasury Yield 2.89% +3 basis points

• Federal Reserve's Balance Sheet $3.965 Trillion +.36%
  

• U.S. Sovereign Debt Credit Default Swap 29.21 -3.56%

• Illinois Municipal Debt Credit Default Swap 163.0 -.61%

• Western Europe Sovereign Debt Credit Default Swap Index 60.33 +8.83%

• Asia Pacific Sovereign Debt Credit Default Swap Index 101.63 -.40%
  

• Emerging Markets Sovereign Debt CDS Index 223.17 -4.1%
  

• Israel Sovereign Debt Credit Default Swap 100.0 -.83%

• South Korea Sovereign Debt Credit Default Swap 61.46 +11.75%

• China Blended Corporate Spread Index 331.5 -4.25 basis points

• 10-Year TIPS Spread 2.16% unch.

• TED Spread 19.25 +1.0 basis point

• 2-Year Swap Spread 8.0 -2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 -3.0 basis points

• N. America Investment Grade Credit Default Swap Index 65.24 -6.5%
  

• European Financial Sector Credit Default Swap Index 87.32 -10.1%
  

• Emerging Markets Credit Default Swap Index 267.61 -3.5%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 113.0 unch.

• M1 Money Supply $2.640 Trillion +.14%

• Commercial Paper Outstanding 1,085.30 +.40%

• 4-Week Moving Average of Jobless Claims 343,500 +14,700

• Continuing Claims Unemployment Rate 2.2% +10 basis points

• Average 30-Year Mortgage Rate 4.47% +5 basis points

• Weekly Mortgage Applications 374.60 -5.45%

• Bloomberg Consumer Comfort -29.40 +1.5 points

• Weekly Retail Sales +2.80% +20 basis points

• Nationwide Gas $3.22/gallon -.03/gallon

• Baltic Dry Index 2,134 -8.7%

• China (Export) Containerized Freight Index 1,046.78 unch.

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 37.50 unch.

• Rail Freight Carloads 268,161 +2.1%

Best Performing Style

• Small-Cap Growth +3.9%

Worst Performing Style

• Small-Cap Growth +2.3%

Leading Sectors

• Computer Hardware +5.2%

• Homebuilders +5.2%

• Alt Energy +4.2%

• Defense +3.9%

• Internet +3.9%

Lagging Sectors

• Airlines +1.1% 

• Coal +.8%

• Steel +.7%

• Hospitals -.8%

• Gold & Silver -2.1%

Weekly High-Volume Stock Gainers (19)

• LSI, OMER, VCI, KODK, IACI, IRBT, PTCT, TXI, LPX, WOR, SUNE, MTRN, CW, SCS, TROX, DOOR, ESRT, BNFT and IRG

Weekly High-Volume Stock Losers (13)

• APC, FCN, HPTX, CTB, F, INTL, AVD, WGO, SMTC, AFSI, JBL, ADUS and RMTI

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Rising into Final Hour on Lower Long-Term Rates, Seasonality, Investor Performance Angst, 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: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.55 -4.24%

• Euro/Yen Carry Return Index 148.34 -.12%

• Emerging Markets Currency Volatility(VXY) 9.13 +.77%

• S&P 500 Implied Correlation 51.79 -1.31%

• ISE Sentiment Index 205.0 +48.55%

• Total Put/Call .68 -8.11%

• NYSE Arms 1.16 +28.16% 

Credit Investor Angst:

• North American Investment Grade CDS Index 64.47 -2.29%

• European Financial Sector CDS Index 87.32 -.99%

• Western Europe Sovereign Debt CDS Index 60.33 -1.65%

• Emerging Market CDS Index 267.50 -.49%

• 2-Year Swap Spread 8.0 -.25 basis point

• TED Spread 19.75 +1.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -2.25 +1.5 basis points

Economic Gauges:

• 3-Month T-Bill Yield .05% -1 basis point

• Yield Curve 251.0 -6.0 basis points

• China Import Iron Ore Spot $132.70/Metric Tonne unch.
  

• Citi US Economic Surprise Index 47.0 +7.9 points

• Citi Emerging Markets Economic Surprise Index -12.0 +1.4 points

• 10-Year TIPS Spread 2.16 +1 basis point

Overseas Futures:

• Nikkei Futures: Indicating +115 open in Japan

• DAX Futures: Indicating +16 open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/retail/medical sector longs and emerging markets shorts

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• EU Loses AAA Rating at S&P as States’ Creditworthiness Falls. The European Union lost its top credit rating from Standard & Poor’s, which cited the deteriorating creditworthiness of the bloc’s 28 member nations. S&P cut its long-term rating on the EU to AA+, with a stable outlook, from AAA and maintained its short-term rating at A-1+. The downgrade came after S&P last month lowered its AAA rating on the Netherlands. 

• Spain Markets Splinter as Europe Builds Bank Union: Euro Credit. Spanish Prime Minister Mariano Rajoy is faced with a splintering of domestic financial markets, just as European governments move closer to a banking union. In the coming months, the country’s 17 semi-autonomous regions will be allowed to create a levy on bank deposits, Budget Minister Cristobal Montoro said on Dec. 18 after a meeting with local budget chiefs. The government decided to comply with a ruling by the Constitutional Court saying that the tax is within the regions’ powers, he said. “Banks will suffer from the tax more than the regions will benefit from it,” said Santiago Carbo-Valverde, an economist at Spain’s saving banks’ association Funcas, who also teaches banking and finance at Bangor University in the U.K. “The tax isn’t justified from an economic point of view and will penalize banking liquidity when it’s most needed.” 

• Turkey’s Lira Weakens to Record as Erdogan Fights Graft Probe. Turkey’s lira tumbled to a record against the dollar and euro while bonds fell as Prime Minister Recep Tayyip Erdogan’s government purged police leadership in a fight back against a probe into official corruption. 

• Prada Says 2014 Sales May Miss Estimates on China, Italy. Prada SpA (1913) said it may fall short of analysts’ predictions for fiscal-year revenue after unfavorable currency moves and slowing demand for luxury goods in Europe and Asia weighed on third-quarter profit. “Consensus at the moment is challenging,” Chief Financial Officer Donatello Galli said, without specifying a figure, during a conference call after Milan-based Prada reported quarterly profit today. Before the announcement, analysts were predicting that sales in the year through January would rise to 3.71 billion euros ($5.1 billion) from 3.3 billion euros, according to the average of 32 estimates compiled by Bloomberg. Prada, whose products include $2,950 leather handbags, joins European luxury-goods makers including LVMH Moet Hennessy Louis Vuitton SA (MC) and Gucci owner Kering SA (KER) in reporting slowing revenue growth as Chinese demand wanes and the euro strengthens against currencies including the Japanese yen. Fewer Chinese consumers are shopping in Europe, preferring instead to go to the U.S., while domestic consumption remains under pressure in Italy and Spain, Chief Executive Officer Patrizio Bertelli said on the call. “Unfavorable exchange rates and softening consumption patterns in some regions could weigh on results, and thus will require increasing attention by the management in order to ensure profitability and continue the retail expansion,” Prada said in a statement. 

• European Stocks Post Biggest Weekly Advance Since April. European stocks posted their biggest weekly rally since April as the Federal Reserve’s decision to reduce its monthly bond purchases increased investors’ confidence in the strength of the U.S. economic recovery. Cable & Wireless Communications Plc (CWC) surged 16 percent after U.K. newspapers named it as a potential acquisition target. Carnival Plc jumped 10 percent after the world’s largest cruise-ship operator posted quarterly sales (CCL) that beat estimates. CGG SA slumped 15 percent after the world’s biggest seismic surveyor of oilfields cut its earnings forecast for 2013. The Stoxx Europe 600 Index rose 3.7 percent to 321.14 this week, trimming its decline from the beginning of the month to 1.2 percent.

• China’s Stocks Extend Slump in Longest Streak Since 1994. China’s stocks fell, with the benchmark index posting longest losing streak in almost two decades, as targeted fund injections by the central bank failed to alleviate the worst cash crunch since June. China Construction Bank Corp. sank 6.2 percent after touching its lowest level in almost five years. China Everbright Bank Co. slid 4 percent in its debut in Hong Kong. Ping An Insurance (Group) Co. dropped 4.7 percent. The People’s Bank of China conducted short-term liquidity operations recently, it said on its microblog yesterday, without giving details of the recipients, amount or rate charged. The Shanghai Composite Index (SHCOMP) dropped 2 percent to 2,084.79 at the close in a ninth straight day of losses and capping a 5.1 percent weekly decline. The seven-day repurchase rate, a gauge of liquidity in the financial system, increased 100 basis points to 7.60 percent, according to a daily fixing by the National Interbank Funding Center. It jumped 328 basis points this week, the most since January 2011. 

• WTI Oil Rises to 2-Month High. WTI for February delivery increased 20 cents to $99.24 a barrel at 1:32 p.m. on the New York Mercantile Exchange. Futures touched $99.40, the highest intraday level for a contract closest to expiration since Oct. 22. The volume of all futures traded was 32 percent below the 100-day average.

Wall Street Journal:  

• Live Blog: Obama’s End-of-Year Press Conference. 

• Fed to Scrutinize Banks' Risky Asset Transfers to Affiliates. Fed Responds to Concerns from Banks and Investors. The Federal Reserve said Friday it would closely scrutinize the transfer of banks' risky assets to affiliates, responding to concerns from banks and investors about the transactions.

• China Money Market Interest Rates Jump. Interbank Rates Hit Highest Since the Summer Despite Central Bank's Cash Injection.  A cash squeeze is rippling through the Chinese financial system despite three days of liquidity injections by the country's central bank, as borrowers scramble to secure funds before the end of the year. The situation worsened Friday as the interest rate banks charge each other for short-term loans jumped to 8.2%, the highest level since a crippling liquidity shortage in the summer. The stress in the banking system is starting to spread: Stocks in Shanghai fell for a ninth consecutive day to the weakest level in four months, while government bonds dropped, pushing the 10-yield near to its highest level in eight years.

MarketWatch:

• All-cash home sales reach new high. Why the Fed tapering may help drive more all-cash buyers. More Americans are buying homes in all-cash deals, according to a new report. But real-estate experts say this increase may not be a good sign for the health of the housing market, which may also be impacted by the Federal Reserve’s decision to pull back on its bond-buying program.

CNBC:

• What to watch for in DC in 2014.

ZeroHedge: 

• China Bails Out Money Markets For Second Day In A Row, Following Repo Rate Blow Out. (graph)

• Main Reasons For "Upward Revised" Q3 Personal Spending: Healthcare And Gasoline. (graph)

• BofAML Closes USDJPY, Warns "Bulls Beware". (graph)

• Goldman Vs Gazpromia: Russian Sovereign Risk Downgraded By Goldman Sachs(GS).

• Citi Warns Of "Deja Vu All Over Again" For Treasury Bond Bears. (graph)

• Israeli Generals Preparing For "Short, Sharp" War Against Hezbollah.

• The Twist-er Tantrum: Bernanke Unleashes 5-Sigma Curve Flattening. (graph)

ValueWalk:

• Hedge Funds Have Record High Client Satisfaction Despite Rough Year.

Business Insider: 

• Obama Ends The Year With Another All-Time Low Approval Rating.

• CHART OF THE DAY: North Carolina Has Demonstrated What Happens When We End Extended Unemployment Benefits.

• 10 American Industries That Will Be Destroyed In The Next Decade.

Washington Post:

• Obamacare's Radicalism Exposed. The lie of the year, according to Politifact, is “If you like your health care plan, you can keep it.” But the story of the year is a nation waking up to just how radical Obamacare is — which is why it required such outright deception to get it passed in the first place.

@Fmirw:

• EMU: public debt vs. private debt, selected countries - Crédit Agricole. (graph)

Reuters:  

• Dollar falls from five-year high vs yen.

Financial Times: 

• Short-focused fund to launch in Canada. Investors in Canada are to get the chance to bet against their own real estate market as one of the first short-focused funds is set to launch in the country, where concerns have grown that there is a housing bubble ready to burst.

TheGuardian:

• GCHQ and NSA targeted charities, Germans, Israeli PM and EU chief. British and American intelligence agencies had a comprehensive list of surveillance targets that included the EU's competition commissioner, German government buildings in Berlin and overseas, and the heads of institutions that provide humanitarian and financial help to Africa, top secret documents reveal.

Bear Radar

Style Underperformer:

• Large-Cap Value +.26%

Sector Underperformers:

• 1) Coal -2.73% 2) Steel -2.03% 3) Gaming -.42%

Stocks Falling on Unusual Volume:

• LUX, TIBX, KMX, AVD, FAST, WGO, AIR, IDCC, DGLD, SWFT, NAV, SAIC, ESS, BNNY, IOC, GWW, NKE, WOR, PRAA, GOGO, HLS, IACI, BRE, LL, FOSL and MD

Stocks With Unusual Put Option Activity:

• 1) GLW 2) RHT 3) JNY 4) AKS 5) CT B
  

Stocks With Most Negative News Mentions:

• 1) BTU 2) KMX 3) OMC 4) BAC 5) MR
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume