Bull Radar

Style Outperformer:

• Mid-Cap Value +.47%

Sector Outperformers:

• 1) Gold & Silver +1.32% 2) Airlines +.86% 3) I-Banks +.85%
  

Stocks Rising on Unusual Volume:

• ICLD, HTZ, NQ, ONVO, MRVL and TWTR

Stocks With Unusual Call Option Activity:

• 1) HTZ 2) DG 3) AET 4) ONVO 5) UNXL

Stocks With Most Positive News Mentions:

• 1) STT 2) NFLX 3) HPQ 4) AAPL 5) WAG
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Tuesday Watch

Evening Headlines 
Bloomberg: 

• China Approves Listing of Five Companies as IPOs Set to Resume. China's securities regulator gave approvals for five companies to sell shares publicly in Shanghai and Shenzhen, paving the way for the resumption of initial offerings after a more than one-year freeze. About 50 companies are expected to complete the IPO approval preparations and list or be ready to do so by the end of January, the China Securities Regulatory Commission said in a statement last month. There are more than 760 companies in the queue for approval and it will take about a year to complete an audit of all the applications, the regulator said. Another several companies will likely receive approvals in the next few days, the China Securities Journal reported today, citing unidentified people at the companies.

• Hong Kong's New Pollution Index Shows Very High Health Risk. A new Hong Kong air quality index introduced yesterday as part of the city's efforts to combat pollution registered “very high” a day after the gauge reached its highest level.

• Asia Stocks Outside Japan Rise Third Day as Consumer Shares Gain. Asian stocks outside Japan rose, with a regional gauge extending gains into a third day as consumer and utilities companies advanced. HanKore Environment Tech Group Ltd. (BIOT) soared 35 percent in Singapore after a filing showed China Everbright International Ltd. plans to transfer water-industry investments to the company. Sinopec Kantons Holdings Ltd. gained 4.6 percent in Hong Kong after the oil trader said its controlling shareholder China Petroleum & Chemical Corp. is considering a asset injection of natural gas pipelines. Perseus Mining Ltd., a gold producer, sank 3.9 percent in Sydney as the precious metal headed for its biggest annual decline since 1981. The MSCI Asia Pacific excluding Japan Index climbed 0.2 percent to 467.69 as of 12:06 p.m. in Hong Kong.

• Rebar Set for Monthly Loss Amid Concern on Local Government Debt. Steel reinforcement-bar futures swung between gains and losses, heading for a monthly decline, amid speculation that rising local government debt may prompt China to rein in spending. Rebar for May delivery on the Shanghai Futures Exchange lost as much as 0.3 percent and gained as much as 0.2 percent before trading little changed at 3,574 yuan ($590) a metric ton at 10:56 a.m. Beijing time. The most-active contract fell 2.7 percent this month, bringing losses this year to 10 percent.

• Corn Set for Worst Drop Since ’60 as Crop Prices Slump on Output. Corn is heading for the worst year since at least 1960 and wheat is poised for the biggest annual loss in five years as global production climbs to a record. Futures for corn plunged 39 percent this year to $4.23 a bushel by 11:35 a.m. in Singapore today as wheat dropped 23 percent to $6.005 a bushel. Soybeans fell 7.1 percent to $13.10.

• Yen Set for Biggest Decline Since 1979 on Outlook for BOJ Policy. The yen is set for its biggest annual drop against the dollar since 1979 amid speculation the Bank of Japan will maintain unprecedented stimulus to support Prime Minister Shinzo Abe’s economic strategy. The yen has fallen 16 percent in 2013 against a basket of nine other developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes, the biggest slide within the gauge. Hedge funds and other large speculators increased bets on a drop in the yen against the dollar to the most since July 2007.

• Ringgit Posts Worst Annual Drop Since 1997 Crisis as Fed Tapers. Malaysia’s ringgit posted its worst annual loss since the 1997 Asian financial crisis on concern capital inflows will slow as the Federal Reserve trims its record monetary stimulus. The Fed announced on Dec. 18 that it will start cutting monthly bond purchases by $10 billion to $75 billion in January and pledged to keep interest rates near zero until inflation and unemployment improve. Malaysia’s government bonds returned 0.9 percent in 2013, the smallest increase in four years, according to an index compiled by HSBC Holdings Plc.

• Aussie Poised for Monthly, 2013 Loss With 85 U.S. Cents in View. Australia’s dollar was poised for a second monthly drop and its biggest annual slide since 2008 as policy makers emphasized a weaker currency to kick-start growth. The Aussie has dropped against 14 of its 16 major peers this year, recording the biggest declines against the Danish krone, euro and Swiss franc. Private sector credit expanded at a slower pace than forecast last month, according to Reserve Bank data released today. Central bank Governor Glenn Stevens has indicated the currency needs to decline a further 5 percent given the economic outlook. A report tomorrow is forecast to show slower manufacturing growth in China, Australia’s largest trading partner.

• Russia Bombings Raise Prospect of Olympics as Target. Two bomb attacks in southern Russia before the country hosts the Winter Olympics are raising concerns that the location, the nations represented and the international platform may make the games a major target for terrorists. Four U.S. and European counterterrorism experts said the main threat is attacks by the Muslim separatist groups in the north Caucasus that are at war with the Russian government. They are the leading suspects in the suicide bombings at the train station in Volgograd two days ago and on a trolleybus in the city yesterday that killed more than 30 people. 

• Apple’s(AAPL) Cook, Gore Should Face E-Book Queries, U.S. Says. Apple Inc. faces opposition from the U.S. in its bid to block an antitrust monitor appointed in a electronic books price-fixing case from interviewing top executives and directors, including chief executive officer Tim Cook and board member Al Gore. The government said the monitor, former Justice Department inspector general Michael Bromwich, should be allowed to interview the company’s leaders, as such activities are “standard procedure in monitorships,” according to a filing today in Manhattan federal court. Bromwich was appointed in October by U.S. District Judge Denise Cote to evaluate Apple’s antitrust compliance policies.

Wall Street Journal: 

• China Says Terrorist Group Behind Police Station Attack. Authorities Identify Eight People Shot Dead and a Ninth Arrested on Monday in Xinjiang. Police have identified the eight people shot dead by authorities on Monday and a ninth arrested outside a police station in China's far western region of Xinjiang as members of a terrorist group carrying out a premeditated attack, state media reported. A report on the Xinjiang government's news portal late Monday said the assailants hurled explosives at the Yarkand county police station. After the clash, it said, police recovered 25 other explosive devices and nine machetes at the scene. Investigators said the group formed in August and began gathering funds and materials for the "organized, premeditated, violent terrorist attack," according to the report on Tianshan.net.

• U.S. Population Growth Slows to Snail’s Pace. America's population grew by just 0.72%, or 2,255,154 people, between July 2012 and July 2013, to 316,128,839.

• FAA Authorizes Commercial-Drone Testing. Six Operators Selected to Conduct Research, Setting Stage for Eventual Widespread Use. Aviation officials on Monday selected a handful of universities and state agencies to operate sites for drone testing, in a step toward eventually integrating commercial unmanned aircraft into the U.S. aviation system. Under the six operators chosen by the Federal Aviation Administration, research will be conducted by industry experts and academics on the safe operation of drones, or unmanned aerial vehicles, across a broad array of geographical areas, climates and types of airspace. 

• Tom Coburn: The Year Washington Fled Reality. 'Message discipline' can win elections but is not a healthy way to run a country. The past year may go down not only as the least productive ever in Washington but as one of the worst for the republic. In both the executive branch and Congress, Americans witnessed an unwinding of the country's founding principles and of their government's most basic responsibilities. The rule of law gave way to the rule of rulers. And the rule of reality—in which politicians are entitled to their own opinions but not their own facts, as Sen. Daniel Patrick Moynihan liked to say—gave way to some politicians' belief that they were entitled to both their own opinions and their own facts. It's no wonder the institutions of government barely function.

CNBC:

• China’s debt sentence, the biggest 'known, unknown' in 2014? (video)

Zero Hedge: 

• "What The Bubble..." Chart Of The Day: Half Of Loans Issued In 2013 Were "Covenant Lite". (graph)

• Correcting Some Misconceptions About A New Secular Bull Market. (graph)

• The Bifurcated Housing Bubble; From "Why Didn't I Buy?" To "This Is Crazy".

• Consensus Now Believes Abenomics "Recovery" Will Fail.

• 4 Asia-Pacific Flashpoints To Watch In 2014.

• Spot The Non-PBOC Intervention Days. (graph)

Business Insider: 

• 2014 Could Start Off With A Massive Snow Storm. 

• Putin’s Methods Won’t Work On The Suicide Bombers, And That Should Worry Everyone.

• HP Announces Another 5,000 Layoffs, For A Total Of 34,000.

• This Irate Cookbook Author Represents A Swelling Threat To Facebook's(FB) $6 Billion Ad Business.

The Blaze:

• Allen West: 6 ‘Disturbing Unanswered Questions’ That Still Remain About Benghazi.

Reuters: 

• ACLU sues for details of U.S. surveillance under executive order. The American Civil Liberties Union filed a lawsuit on Monday, seeking to force the U.S. government to disclose details of its foreign electronic surveillance program and what protections it provides to Americans whose communications are swept up. 

• Fed's Fisher says his FOMC vote will reflect concerns on bond buying. Dallas Federal Reserve Bank President Richard Fisher said his votes on the central bank's policy panel in 2014 will reflect his concern that the Fed's bond-buying risks stoking inflation and exposing the institution politically. In an interview conducted on Dec. 2 but posted to the Internet as a podcast on Monday, Fisher called the excess reserves piling up in the U.S. banking system potential "tinder" for inflation, and he said the central bank's plans to eventually unwind its extraordinary policies relied on an untested "theoretical exit strategy." "I expect that my own voting behavior will reflect this concern I've just stated," Fisher said in the interview hosted by the private educational foundation Liberty Fund. "I worry about the fact that we've already painted ourselves into a corner that's going to be very hard to get out of."

• NYC sues FedEx(FDX) for illegally shipping cigarettes to homes. New York City has sued FedEx Corp, accusing it of illegally delivering millions of contraband cigarettes to people's homes and seeking $52 million in fines and unpaid taxes. 

• Reduced Fed support reflected in January bond-buying plan. The Federal Reserve plans to purchase about $40 billion in longer-dated federal government debt in 18 operations next month, the New York Fed said on Monday, reflecting the U.S. central bank's decision to trim its support for the economy. In what came as a surprise to some investors, earlier this month the Fed decided to cut its bond-buying program, known as quantitative easing, by $10 billion to $75 billion per month. It reduced purchases of both Treasuries and mortgage bonds by $5 billion each. 

• South Korea, China alarmed over yen slide. China and South Korea’s anxiety over the rapidly falling yen came to the fore on Monday as senior officials said their exporters could be hurt by Japan’s attempts to pull its moribund economy out of a two-decade slump.

Telegraph:

• A world economy on the brink of fracture. What will happen in 2014? The Chinese economy will slow; the price of oil will sink; Germany will slide into recession; the EU will remain intact and the internet will begin to Balkanise.

Caixin:

• China to Ban Trust Sales By Wealth-Management Agents. China Banking Regulatory Commission plans to ban wealth management agents from signing agreements with trust companies to sell products.

Evening Recommendations

• None of note

Night Trading

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

• Asia Ex-Japan Investment Grade CDS Index 128.0 +.5 basis point.

• Asia Pacific Sovereign CDS Index 104.75 +1.5 basis points. 

• FTSE-100 futures -.03%.

• S&P 500 futures +.01%.

• NASDAQ 100 futures +.01%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
 9:00 am EST

• The S&P/CS 20 City MoM SA for October is estimated to rise +.95% versus a +1.03% gain in September.

9:45 am EST

• The Chicago Purchasing Manager report for December is estimated to fall to 60.8 versus 63.0 in November.

10:00 am EST

• Consumer Confidence for December is estimated to rise to 76.2 versus 70.4 in November.

Upcoming Splits

• None of note

Other Potential Market Movers

• The China Govt Manufacturing PMI, German Retail Sales report and weekly US retail sales reports could also impact trading today.

BOTTOM LINE: Asian indices are slightly higher, boosted by financial 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 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Emerging Markets Debt Angst, Technical Selling, Profit-Taking, Financial/Commodity Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: About Even
  

• Sector Performance: Mixed
  

• Volume: Light

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 13.45 +7.95%

• Euro/Yen Carry Return Index 151.33 +.36%

• Emerging Markets Currency Volatility(VXY) 9.25 -.11%

• S&P 500 Implied Correlation 50.53 +2.62%

• ISE Sentiment Index 91.0 -1.09%

• Total Put/Call .72 unch.

• NYSE Arms 1.13 +73.53% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.73 +.75%

• European Financial Sector CDS Index 87.73 +2.57%

• Western Europe Sovereign Debt CDS Index 59.85 -1.0%

• Emerging Market CDS Index 273.87 +.14%

• 2-Year Swap Spread 9.5 unch.

• TED Spread 18.50 unch.

• 3-Month EUR/USD Cross-Currency Basis Swap -3.75 -2.25 basis points

Economic Gauges:

• 3-Month T-Bill Yield .06% unch.

• Yield Curve 259.0 -2.0 basis points

• China Import Iron Ore Spot $134.20/Metric Tonne +.15%
  

• Citi US Economic Surprise Index 50.20 +.8 point

• Citi Emerging Markets Economic Surprise Index -6.70 +2.3 points

• 10-Year TIPS Spread 2.21 +1.0 basis point

Overseas Futures:

• Nikkei Futures: Indicating +54 open in Japan

• DAX Futures: Indicating +49 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech sector longs and emerging markets shorts

• Disclosed Trades: None

• Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:

• China’s Swelling Local Debt Adds Urgency to Xi Fiscal Repair Job. China’s local-government debt swelled to 17.9 trillion yuan ($2.95 trillion), underscoring risks to the financial system as President Xi Jinping rolls out economic reforms. Debt including contingent liabilities rose about 13 percent in the six months through June, based on figures in a report by the National Audit Office, posted on its website yesterday. That followed a 48 percent increase over the previous two years. China’s borrowing spree in recent years has evoked comparisons to debt surges that tipped Asian nations into crisis in the late 1990s and preceded Japan’s lost decades. The audit result adds pressure for Xi, yesterday named head of a Communist Party leading group for reform, to repair a fiscal system that starves local governments of tax revenue.  

• China’s Xi Amassing Most Power Since Deng Raises Risk for Reform. Xi Jinping today completes his first year as China’s leader with the greatest individual sway over his nation since Deng Xiaoping, a feat that raises the stakes on delivering on pledges for economic and social change.

• China Says Abe Closed Door to Meetings After Visiting Shrine. China ruled out talking to Japanese Prime Minister Shinzo Abe, saying he “closed the door” to any meetings with Chinese leaders after visiting a site that memorializes fallen Japanese soldiers including war criminals. “Chinese people don’t welcome him,” Foreign Ministry spokesman Qin Gang said at a briefing in Beijing today. “What Abe needs to do now is confess his mistakes to the Chinese government and the Chinese people.”   

• Europe Stocks Decline. Swatch Group AG, the world’s largest watchmaker, lost 0.8 percent after a fire caused damage at one of its workshops. International Personal Finance Plc (IPF) rallied 10 percent after Numis Securities Ltd. recommended buying the stock following a 26 percent drop in the past two days. Vedanta Resources Plc increased 4 percent after its Sesa Sterlite Ltd. won approval to restart its iron-ore mines in Karnataka, India. The Stoxx 600 slipped 0.2 percent to 327.13 at the close of trading in London. 

• Natural Gas Advances on Forecasts for Cold Start to New Year. Natural gas advanced in New York on speculation that an unusually cold start to the new year will stoke demand for the heating fuel. Gas gained as much as 2.4 percent as Commodity Weather Group LLC predicted a push of below-normal temperatures into the Northeast, Midwest and South through Jan. 8. The high in New York City on Jan. 3 will be 18 degrees Fahrenheit (minus 8 Celsius), 21 below normal, according to AccuWeather Inc. The low in Chicago on Jan. 2 will drop to 6 degrees, 13 below normal, and Dallas will be 31 degrees, 6 lower than average, according to AccuWeather in State College, Pennsylvania.

• Chart: A Nation of Part-Timers... But Not by Choice. (video)

Wall Street Journal:

• Second Blast in Russia Stokes Olympic Security Fears. Suicide Bombing Is Volgograd's Second Within 24 Hours. A suicide bomber struck in the southwest Russian city of Volgograd on Monday morning, killing at least 14 people aboard a crowded trolley bus in the city's second terrorist attack in less than 24 hours, stoking security fears in the country ahead of the Winter Olympics. Russian President Vladimir Putin ordered security to be tightened around the country after the second attack, which comes less than six weeks before the games are set to start in the Black Sea resort of Sochi. The repeated attacks, and risk of additional violence, threaten to tarnish an event on which Mr. Putin has staked his personal pride and spent $50 billion to stage.

• Chinese Funds Look to Hedge Their Bets. Chinese funds focused on the nation's domestic stocks are increasingly looking to hedge their bets. While short selling, or betting that a stock's price will fall, remains uncommon in China because of the high cost of borrowing stocks, hedge funds are using CSI-300 index futures and other methods to limit their risk. And fund managers say they expect regulators to roll out more products that will allow them to better hedge in the future. "More and more [local] funds are using hedging strategies" to protect themselves during market declines, said Martin Bao, assistant portfolio manager at Shanghai-based Broadvision Investment Management.

Fox News: 

• 'Stuck in our own experiment': Leader of trapped team insists polar ice is melting. The leader of a scientific expedition whose ship remains stranded in Antarctic ice says the team, which set out to prove climate change, is "stuck in our own experiment." But Chris Turney, a professor of climate change at Australia’s University of New South Wales, said it was “silly” to suggest he and 73 others aboard the MV Akademic Shokalskiy were trapped in ice they’d sought to prove had melted. He remained adamant that sea ice is melting, even as the boat remained trapped in frozen seas.

• Drones, placentas and transgender students: New laws in 2014 cover much ground. You may have heard that Colorado residents will be able to legally buy pot next year. But did you know that in Oregon, mothers will be able to take their placentas home after giving birth? And in Illinois, it will be illegal for police to use a surveillance drone in most cases without a warrant. These are just a few of the thousands of new laws and regulations going into effect next year -- mostly on Wednesday.

CNBC:

• Why the market could see a 17% drop in 2014.

ZeroHedge:

• Volgograd Rocked By Second Suicide Bombing In 24 Hours, 14 Killed. (video)

• Record ECB Bond Sterilization Failure. (graph)

• Pending Home Sales Plunge At Fastest Pace Since April 2011. (graph)

• Americans React To End Of Jobless Benefits: “I Just Don’t Know What To Do, Except Pray”.

• Shots Fired At German Ambassador's Home In Athens.

• Daniel Hannan Crushes The Euro-Enthusiasts' Contempt For The Masses.

Business Insider: 

• Cisco(CSCO) Investigates Claims That The NSA Is Using Cisco Equipment To Spy On People.

Forbes:

• Pants On Fire: PolitiFact Tries To Hide That It Rated 'True' in 2008 Obamacare's 'Keep Your Health Plan' Promise.

IBD:

• 3D Printer Market Competition Will Intensify In 2014.

Reuters: 

• Commodity hedge fund Higgs Capital winding down -founders.

• EMERGING MARKETS-Latam stocks set to close year down while others soared.

Bild:

• Schaeuble Says Low-Rate Policies Can't Last Forever. German Finance Minister Wolfgang Schaeuble in Bild-Zeitung interview says "low-interest rate policies of the central banks can't last forever." Schaeuble says expansive monetary polices lead to problems for long-term investments.

Xinhua:

• China to Keep Child Policy, Birth Level Stable. China will keep child policy stable and ensure that birth level won't be volatile, citing a statement from the State Council on improving child policy. China will seek to manage the imbalance proportion of newborns' gender and strictly control births thta aren't in accordance with policy.

Bear Radar

Style Underperformer:

• Large-Cap Growth -.25%

Sector Underperformers:

• 1) Gold & Silver -.83% 2) Coal -.78% 3) Energy -.53%

Stocks Falling on Unusual Volume:

• TWTR, MYGN, NOAH, NMM, IEP, OILT, CSV, VISN, LNG, PKX, MSB, NM, BMA, SEAS, OKS, TYL, MONT, ACOR, SODA, STMP, SALE, PINC, ESI, HAR, PCLN and CLMT

Stocks With Unusual Put Option Activity:

• 1) CTB 2) LLY 3) TIF 4) X 5) WHR
  

Stocks With Most Negative News Mentions:

• 1) MYGN 2) NFLX 3) HD 4) WFC 5) SBUX
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Small-Cap Growth -.03%

Sector Outperformers:

• 1) Gaming +.93% 2) Networking +.58% 3) Hospitals +.47%
  

Stocks Rising on Unusual Volume:

• KNDI, CROX, ORMP, ICLD, INVN, NQ and KRO

Stocks With Unusual Call Option Activity:

• 1) CROX 2) INVN 3) SYMC 4) GALE 5) DTV

Stocks With Most Positive News Mentions:

• 1) AAPL 2) TWTR 3) FB 4) WFC 5) BX
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume