Stocks Slightly Lower into Afternoon on China Trade Deal Worries, Brexit Concerns, Profit-Taking, Energy/Homebuilding Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Most Sectors Declining
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.0 +6.9%

• Euro/Yen Carry Return Index 125.94 +.29%

• Emerging Markets Currency Volatility(VXY) 6.95 +.29%

• S&P 500 Implied Correlation 33.59 -.91%

• ISE Sentiment Index 63.0 -33.0%
  

• Total Put/Call .82 +3.8%

• NYSE Arms 1.36 +44.7%

Credit Investor Angst:

• North American Investment Grade CDS Index 52.53 +2.72%
  

• America Energy Sector High-Yield CDS Index 524.0 +.50%

• European Financial Sector CDS Index 61.83 +6.59%

• Italian/German 10Y Yld Spread 196.5 +2.25 basis points
  

• Asia Ex-Japan Investment Grade CDS Index 57.86 +.62%
  

• Emerging Market CDS Index 157.17 +.05%
  

• iBoxx Offshore RMB China Corporate High Yield Index 165.14 +.05%

• 2-Year Swap Spread 2.5 -.5 basis point

• TED Spread 14.75 -2.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -25.5 -1.75 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 67.29 -.05%
• 3-Month T-Bill Yield 2.10% -1.0 basis point

• Yield Curve 20.75 -.25 basis point

• China Iron Ore Spot 115.0 USD/Metric Tonne +.75%

• Citi US Economic Surprise Index -37.4 -.2 point

• Citi Eurozone Economic Surprise Index -40.90 -3.4 points

• Citi Emerging Markets Economic Surprise Index -17.5 +2.9 points

• 10-Year TIPS Spread 1.76 -2.0 basis points
• 100.0% chance of Fed rate cut at Sept. 18th meeting, 100.0% chance of cut at October 30th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +2 open in Japan 
• China A50 Futures: Indicating +10 open in China

• DAX Futures: Indicating -2 open in Germany

Portfolio:

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

• Disclosed Trades: None

• Market Exposure: 100% Net Long

Bear Radar

Style Underperformer:

• Small-Cap Growth -.8%

Sector Underperformers:

• 1) Oil Service -3.6% 2) Internet -1.6% 3) Paper -1.2%

Stocks Falling on Unusual Volume: 

• EXAS, NSP, CTB, VET, TEAM, GTT, TTD, MDB, CYBR, AWI and TNET

Stocks With Unusual Put Option Activity:

• 1) SIRI 2) LL 3) EXAS 4) NWL 5) MYL

Stocks With Most Negative News Mentions:

• 1) CTB 2) GPRE 3) EQT 4) DPZ 5) BE

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.1%

Sector Outperformers:

• 1) Road & Rail +1.1% 2) REITs +.6% 3) Pharma +.5%

Stocks Rising on Unusual Volume:

• LHC, MYL, TSEM, GHDX, CAF, YNDX, VGR, SNBR, ENVA, SLP, THC, FISV, TPB, HAIN, BUD, BAH, ARRY, IBN, LK, AZN, CMG, AUDC, GRUB, OSTK, NTUS, HAIN, ENVA and GHDX

Stocks With Unusual Call Option Activity:

• 1) KNX 2) HLT 3) HPQ 4) NOW 5) NSC

Stocks With Most Positive News Mentions:

• 1) FRED 2) DBD 3) NI 4) PYPL 5) FDX

Charts:

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

Mid-Day Market Internals

NYSE Composite Index:

• Volume Running -7.8% Below 100-Day Average
• 5 Sectors Rising, 6 Sectors Declining
• 45.5% of Issues Advancing, 51.2% Declining
• 188 New 52-Week Highs, 66 New Lows
• 63.5% of Issues Above 200-day Moving Average
• Average 14-Day RSI 50.1%
• Vix 12.8 +4.9%
• Total Put/Call .78 -1.3%
• TRIN/Arms 1.56 +66.0%

Monday Watch

Today's Headlines

Bloomberg:    

• U.S.-China Talks Set to Resume as Neither Seems Eager for a Deal.

• Hong Kong Police Fire Tear Gas at Protesters in Residential Area.

• China’s U.S. Soybean Purchases Slump to 2004 Low.    

• Negative Rates Are About the Only Tool Central Banks Have Left.

• Stocks Look Mixed With Trade Talks, Fed in Focus. Asian stocks looked set to start the week on a mixed note as U.S.-China trade talks resume and the Federal Reserve is expected to deliver its first interest-rate cut in a decade. Futures pointed to modest gains in Japan and Australia, while Hong Kong contracts inched lower. U.S. futures were flat in early Asian trading after the S&P 500 and Nasdaq Composite indexes hit fresh records Friday as technology shares rallied. Treasuries were little changed and the dollar advanced against its major peers after White House adviser Larry Kudlow said the U.S. has ruled out plans to intervene in foreign-exchange markets. Futures on the Nikkei 225 rose 0.3% earlier. Australia’s S&P/ASX 200 Index contracts rose 0.3%. Hong Kong’s Hang Seng Index futures dipped 0.1%. S&P 500 futures were little changed.  

• Five Things You Need to Know to Start Your Day.

• Fed Chair Jerome Powell Likes the Economy Hot.

• The Tax Biden Wants to Double and Trump Would Slash.

• Traders on Edge as Fed Looks Poised for Data-Independent Easing.

Wall Street Journal:

• Chinese High-Yield Debt Is a Rare Bright Spot.

• China Trade Talks Set to Resume With Modest Expectations.

• With Stocks at Fresh Highs, Investors’ Portfolios Look Alike.

• Iran Rebuffs European Efforts to Defuse Gulf Tensions.

• Hong Kong Police Fire Tear Gas at Demonstrators as Tensions Flare.

• Medicare for All Question Vexes 2020 Democrats.

MarketWatch.com:

• Here are the stock market’s winners and losers in the first half of 2019. 

• Deutsche Bank pegs its derivatives exposure at about $22 billion — and faces challenges in shedding those assets.

Fox News:

• President Trump picks Texas Republican to replace intel director after feuds

• Mulvaney: Nadler impeachment push an effort to avoid loss to 'the next AOC'.

• Trump hits Dems over accusations of racism, slams Cummings' 'poor job' in Baltimore.

CNBC:

• Passive investing boom could cause a market bubble, but not in the stocks you would expect.

• From private insurance to tariffs, here are the business issues to watch in next Democratic debate.

Zero Hedge:     

• "The July Crisis" - For The First Time, Beijing Will Officially Respond To Hong Kong Protests.

• Dan Coats Out As Top Intelligence Chief After Series Of Public Clashes With Trump.

• Capitalism Isn't The Reason We're Unhappy.

• Russia Probe Twist: The FBI, A Convicted Russian Agent, & A Billionaire American CEO.

• Buchanan: After Mueller Debacle, Where Do Democrats Go?

• Americans Didn't Need The Original "New Deal".

• Giant 'Shark Spy Drone' Featured At Chinese Military Expo.

• The CIA's "Intelligence Authorization Act" Would Criminalize Whistleblowers And Reporters.

• FAA Let Boeing Sign Its Own Safety Certifications On The 737 Max.

Business Insider:

• Bernie Sanders compared Baltimore to a 'third world country' in an old clip dug up by Trump's 2020 re-election campaign.

Night Trading

• Asian indices are unch. to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 57.50 unch.

• China Sovereign CDS 39.50 +.25 basis point.

• Bloomberg Emerging Markets Currency Index 67.33 unch.

• FTSE 100 futures +.09%.

• S&P 500 futures -.05%.

• NASDAQ 100 futures -.04%.

Morning Preview Links

Earnings of Note

Company/Estimate

Before the Open:

• (AMG)/3.18

• (BAH)/.72

• (CTB)/.50

After the Close:

• (AKS)/.06

• (BYND)/-.08

• (CGNX)/.23

• (ILMN)/1.34

• (NXPI)/1.78

• (SBAC)/1.73

• (TEX)/1.34

• (RIG)/-.34

• (TREX)/.64

• (VNO)/.86

Economic Releases

10:30 am EST

• The Dallas Fed Manufacturing Activity Index for July is estimated to rise to -5.0 versus -12.1 in June.

Upcoming Splits

• None of note
  

Other Potential Market Movers

• The China trade talks with Lightheizer and Japan industrial production report could also impact trading today.

BOTTOM LINE: Asian indices are modestly higher, boosted by industrial and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed.  The Portfolio is 100% net long heading into the week.