Stocks Falling into Afternoon on Brexit Fears, Earnings Outlook Worries, Technical Selling, Biotech/Tech Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Slightly Above Average

• Market Leading Stocks: Performing In Line
  

Equity Investor Angst:

• Volatility(VIX) 19.7 +1.7%

• Euro/Yen Carry Return Index 122.75 +.38%

• Emerging Markets Currency Volatility(VXY) 10.79 -1.46%

• S&P 500 Implied Correlation 57.25 +1.49%

• ISE Sentiment Index 111.0 +30.59%
  

• Total Put/Call 1.13 -19.29%

• NYSE Arms 1.05 -16.97% 

Credit Investor Angst:

• North American Investment Grade CDS Index 82.73 -.14%
  

• America Energy Sector High-Yield CDS Index 811.0 +2.0%

• European Financial Sector CDS Index 111.55 -1.72%

• Western Europe Sovereign Debt CDS Index 29.66 -2.64%

• Asia Pacific Sovereign Debt CDS Index 54.25 -.24%

• Emerging Market CDS Index 301.31 -.83%
  

• iBoxx Offshore RMB China Corporate High Yield Index 129.52 +.10%

• 2-Year Swap Spread 15.25 +.75 basis point
  

• TED Spread 40.25 +.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -36.75 +3.0 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.66 +.53%
• 3-Month T-Bill Yield .26% +1.0 basis point

• Yield Curve 93.0 +4.0 basis points
  

• China Import Iron Ore Spot $51.05/Metric Tonne +.69%

• Citi US Economic Surprise Index -19.90 +1.7 points

• Citi Eurozone Economic Surprise Index -5.80 -.7 point

• Citi Emerging Markets Economic Surprise Index -2.8 +1.1 points

• 10-Year TIPS Spread 1.45% -2.0 basis points
  
• 21.0% chance of Fed rate hike at Sept. 21 meeting, 21.0% chance at Nov. 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +21 open in Japan 
• China A50 Futures: Indicating -52 open in China

• DAX Futures: Indicating +33 open in Germany

Portfolio: 

• Lower: On losses in my medical/biotech/tech sector longs
  

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 25% Net Long

Bear Radar

Style Underperformer:

• Large-Cap Growth -.5%

Sector Underperformers:

• 1) Disk Drives -2.0% 2) Semis -1.4% 3) Internet -1.3%

Stocks Falling on Unusual Volume:

• CMTL, SYNA, MGEE, LLTC, SHEN, NEOG, TR, CVG, SLAB, CAVM, GOOG, TRV, GOOGL, UFCS, SR, LTC, BLKB, MMM, NP, GWRE, JJSF, SAIC, DCM, NHI, POWI, EGHT, FIVN, EXAS and RARE

Stocks With Unusual Put Option Activity:

• 1) KMX 2) TXN 3) ORCL 4) MOS 5) GM

Stocks With Most Negative News Mentions:

• 1) AAPL 2) REGN 3) CMTL 4) SYNA 5) VZ

Charts:

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

Bull Radar

Style Outperformer:

• Mid-Cap Value +.4%

Sector Outperformers:

• 1) Oil Service +2.2% 2) Steel +1.9% 3) Gaming +1.8%

Stocks Rising on Unusual Volume:

• RDEN, SWHC, FNSR, TGP, LL and CRZO

Stocks With Unusual Call Option Activity:

• 1) SYMC 2) WPZ 3) SWHC 4) FNSR 5) BMRN

Stocks With Most Positive News Mentions:

• 1) TOWR 2) MGM 3) FNSR 4)RDEN 5) REV

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running +32.8% Above 100-Day Average
• 5 Sectors Rising, 5 Sectors Declining
• 62.6% of Issues Advancing, 32.7% Declining
• 59 New 52-Week Highs, 5 New Lows
• 53.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 39.8%
• Vix 19.5 +.9%
• Total Put/Call 1.18 -15.7%
• TRIN/Arms 1.05 -16.9%

Friday Watch

Night Trading 

• Asian equity indices are +.25% to +1.0% on average.
• Asia Ex-Japan Investment Grade CDS Index 147.5 -1.0 basis point. 
• Asia Pacific Sovereign CDS Index 54.50 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 71.40 +.15%. 
• S&P 500 futures +.07%. 
• NASDAQ 100 futures +.17%.

Morning Preview Links

Earnings of Note
Company/Estimate 

• None of note

Economic Releases  
8:30 am EST

• Housing Starts for May are estimated to fall to 1150K versus 1172K in April.
• Building Permits for May are estimated to rise to 1145K versus 1116K in April. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The Canadian CPI report and (ARIA) analyst day could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.

Stocks Slightly Lower into Afternoon on Rising European/Emerging Markets/US High-Yield Debt Agnst, Yen Strength, Oil Decline, Transport/Oil Service Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Below Average

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 21.4 +6.2%

• Euro/Yen Carry Return Index 122.28 -1.99%

• Emerging Markets Currency Volatility(VXY) 11.09 +1.46%

• S&P 500 Implied Correlation 60.31 +1.69%

• ISE Sentiment Index 75.0 -19.35
  

• Total Put/Call 1.46 +24.8%

• NYSE Arms 1.41 +44.8% 

Credit Investor Angst:

• North American Investment Grade CDS Index 85.12 +1.26%
  

• America Energy Sector High-Yield CDS Index 825.59 +1.52%

• European Financial Sector CDS Index 113.5 -1.51%

• Western Europe Sovereign Debt CDS Index 30.46 +5.2%

• Asia Pacific Sovereign Debt CDS Index 55.5 +2.58%

• Emerging Market CDS Index 307.59 +1.86%
  

• iBoxx Offshore RMB China Corporate High Yield Index 129.39 +.05%

• 2-Year Swap Spread 14.5 -1.0 basis points
  

• TED Spread 40.0 +2.25 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -39.75 -4.25 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 71.37 -.20%
• 3-Month T-Bill Yield .25% unch.

• Yield Curve 89.0 -2.0 basis points
  

• China Import Iron Ore Spot $50.70/Metric Tonne +.10%

• Citi US Economic Surprise Index -21.60 +1.3 point

• Citi Eurozone Economic Surprise Index -5.10 -.5 point

• Citi Emerging Markets Economic Surprise Index -3.9 -1.5 points

• 10-Year TIPS Spread 1.47% -3.0 basis points
  
• 17.4% chance of Fed rate hike at Sept. 21 meeting, 19.2% chance at Nov. 2 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +181 open in Japan 
• China A50 Futures: Indicating -270 open in China

• DAX Futures: Indicating +55 open in Germany

Portfolio: 

• Higher: On gains in my medical sector longs, index hedges and emerging market shorts
  

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

• Market Exposure: Moved to 50% Net Long