Weekly Outlook

U.S. Week Ahead by Reuters (video). 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising global growth fears, more emerging markets unrest, increasing Eurozone/Asian debt angst, Fed "taper" worries, more shorting and technical selling. 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 1,606.28 +.87%*




The Weekly Wrap by Briefing.com.

*5-Day Change

Weekly Scoreboard*

Indices

• S&P 500 1,606.28 +.87%

• DJIA 14,909.60 +.75%

• NASDAQ 3,403.25 +1.37%

• Russell 2000 977.48 +1.43%

• S&P 500 High Beta 24.82 +1.06%

• Value Line Geometric(broad market) 419.39 +1.50%

• Russell 1000 Growth 729.59 +.91%

• Russell 1000 Value 820.93 +1.14%

• Morgan Stanley Consumer 982.95 +.38%

• Morgan Stanley Cyclical 1,179.84 +.61%

• Morgan Stanley Technology 745.21 +.12%

• Transports 6,173.86 +1.04%

• Utilities 485.90 +2.99%

• Bloomberg European Bank/Financial Services 88.85 +.77%

• MSCI Emerging Markets 38.64 +2.89%

• HFRX Equity Hedge 1,095.54 +.33%

• HFRX Equity Market Neutral 940.65 +.16%

Sentiment/Internals

• NYSE Cumulative A/D Line 186,348 +1.76%

• Bloomberg New Highs-Lows Index -70 +916

• Bloomberg Crude Oil % Bulls 33.33 +88.84%

• CFTC Oil Net Speculative Position 274,474 -8.12%

• CFTC Oil Total Open Interest 1,809,371 -3.19%

• Total Put/Call .94 -18.97%

• OEX Put/Call 1.38 +18.97%

• ISE Sentiment 90.0 +15.38%

• NYSE Arms 1.36 +47.82%

• Volatility(VIX) 16.86 -10.79%

• S&P 500 Implied Correlation 58.05 +.75%

• G7 Currency Volatility (VXY) 10.99 -3.17%

• Emerging Markets Currency Volatility (EM-VXY) 10.96 -6.40%

• Smart Money Flow Index 11,487.81 +.80%

• Money Mkt Mutual Fund Assets $2.594 Trillion +.33%

• AAII % Bulls 30.3 -19.2%

• AAII % Bears 35.2 +17.4%

Futures Spot Prices

• CRB Index 275.62 -.88%

• Crude Oil 96.56 +2.78%

• Reformulated Gasoline 271.56 -1.17%

• Natural Gas 3.56 -6.36%

• Heating Oil 285.88 +.38%

• Gold 1,223.70 -5.70%

• Bloomberg Base Metals Index 181.25 -.19%

• Copper 305.75 -1.44%

• US No. 1 Heavy Melt Scrap Steel 337.0 USD/Ton +3.1%

• China Iron Ore Spot 116.50 USD/Ton -1.77%

• Lumber 299.0 +3.25%

• UBS-Bloomberg Agriculture 1,440.47 -2.83%

Economy

• ECRI Weekly Leading Economic Index Growth Rate 5.8% -40 basis points

• Philly Fed ADS Real-Time Business Conditions Index -.1296 +9.56%

• S&P 500 Blended Forward 12 Months Mean EPS Estimate 116.85 +.04%

• Citi US Economic Surprise Index -9.0 +3.0 points

• Citi Emerging Markets Economic Surprise Index -37.10 +6.6 points

• Fed Fund Futures imply 46.0% chance of no change, 54.0% chance of 25 basis point cut on 7/31

• US Dollar Index 83.14 +.88%

• Euro/Yen Carry Return Index 134.50 +.42%

• Yield Curve 213.0 -3 basis points

• 10-Year US Treasury Yield 2.49% -4 basis points

• Federal Reserve's Balance Sheet $3.436 Trillion +.26%

• U.S. Sovereign Debt Credit Default Swap 27.50 -6.95%

• Illinois Municipal Debt Credit Default Swap 165.0 -7.82%

• Western Europe Sovereign Debt Credit Default Swap Index 95.0 unch.
  

• Emerging Markets Sovereign Debt CDS Index 248.74 +1.09%
  

• Israel Sovereign Debt Credit Default Swap 127.0 -.58%

• China Blended Corporate Spread Index 406.0 -5 basis points

• 10-Year TIPS Spread 1.99% +5 basis points

• TED Spread 24.25 +1 basis point

• 2-Year Swap Spread 15.25 -4.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -10.5 +2.75 basis points

• N. America Investment Grade Credit Default Swap Index 86.14 -6.64%
  

• European Financial Sector Credit Default Swap Index 166.84 -7.54%
  

• Emerging Markets Credit Default Swap Index 320.02 -15.12%
  

• CMBS AAA Super Senior 10-Year Treasury Spread  to Swaps 135.0 +15 basis points

• M1 Money Supply $2.494 Trillion -.59%

• Commercial Paper Outstanding 1,039.80 +.20%

• 4-Week Moving Average of Jobless Claims 345,800 -2,500

• Continuing Claims Unemployment Rate 2.3% unch.

• Average 30-Year Mortgage Rate 4.46% +53 basis points

• Weekly Mortgage Applications 629.20 -3.04%

• Bloomberg Consumer Comfort -28.3 +1.1 points

• Weekly Retail Sales +2.80% -10 basis points

• Nationwide Gas $3.51/gallon -.08/gallon

• Baltic Dry Index 1,171 +14.02%

• China (Export) Containerized Freight Index 1,013.26 -.38%

• Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 20.0 -11.11%

• Rail Freight Carloads 252,807 -.57%

Best Performing Style

• Mid-Cap Value +1.9%

Worst Performing Style

• Large-Cap Growth +.9%

Leading Sectors

• Alt Energy +5.1%

• Oil Tankers +4.5%

• REITs +3.9%

• Biotech +3.1%

• Utilities +3.0%

Lagging Sectors

• Agriculture -1.1% 

• Computer Services -1.3%

• Gold & Silver -1.4%

• Steel -2.4%

• Coal -8.8%

Weekly High-Volume Stock Gainers (31)

• VHS, KEYN, ISIS, HOMB, INSY, HWAY, MEI, CYTK, SSNI, REV, GMED, BBCN, WMK, COHU, WWWW, WAGE, SIVB, RXN, UMBF, KMR, PRGS, HTGC, MBFI, IGTE, CAMP, UCBI, NWBI, FHN, STBA, FMER and IRBT

Weekly High-Volume Stock Losers (16)

• UFPI, ACRE, BCC, ORCL, AHT, NCI, RGLD, HAWK, FCFS, AGN, PMC, APOL, TREX, BKS, MG and AVD

Weekly Charts
ETFs

• High-Volume Gainers

• High-Volume Losers

Stocks

• High-Volume Gainers

• High-Volume Losers

*5-Day Change

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Technical Selling, Homebuilding/Financial Sector Weakness

Today's Market Take:

Broad Equity Market Tone:

• Advance/Decline Line: Slightly Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Underperforming

Equity Investor Angst:

• Volatility(VIX) 16.63 -1.36%

• Euro/Yen Carry Return Index 134.66 +.73%

• Emerging Markets Currency Volatility(VXY) 10.96 +.74%

• S&P 500 Implied Correlation 57.76 -2.51%

• ISE Sentiment Index 93.0 +47.62%

• Total Put/Call .92 -9.8%

• NYSE Arms 1.08 -5.82% 

Credit Investor Angst:

• North American Investment Grade CDS Index 87.03 +.22%

• European Financial Sector CDS Index 166.84 +2.17%

• Western Europe Sovereign Debt CDS Index 95.0 unch.

• Emerging Market CDS Index 319.50 +.81%

• 2-Year Swap Spread 15.25 +.25 bp

• TED Spread 24.25 +1.5 bps

• 3-Month EUR/USD Cross-Currency Basis Swap -10.50 +1.25 bps

Economic Gauges:

• 3-Month T-Bill Yield .03% -2 bps

• Yield Curve 212.0 +1 bp

• China Import Iron Ore Spot $116.50/Metric Tonne +1.04%

• Citi US Economic Surprise Index -9.0 -1.9 points

• Citi Emerging Markets Economic Surprise Index -37.10 -.8 point 

• 10-Year TIPS Spread 1.99 +1 bp

Overseas Futures:

• Nikkei Futures: Indicating +218 open in Japan

• DAX Futures: Indicating +11 open in Germany

Portfolio: 

• Slightly Lower: On losses in my tech 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:

• China Bad-Loan Alarm Sounded by Record Bank Spread Jump. Borrowing costs for Chinese banks have surged the most in at least six years this month as rating companies say a cash crunch threatens to swell bad loans. The yield spread for one-year AAA bank bonds over similar-maturity sovereign notes jumped 56 basis points so far this month to 163 basis points, the most in ChinaBond records going back to 2007. The similar AA gap widened 59 basis points to 188. Even as China Construction Bank Corp. (939) President Zhang Jianguo said yesterday cash conditions have normalized, the benchmark seven-day repurchase rate was fixed at 6.85 percent, almost twice the 3.84 percent average for this year. Money-market rates touched the highest level last week since at least 2003, prompting three of the largest rating agencies to warn banks may run out of cash to pay investors in their wealth management products and to extend new loans, increasing the risk their customers will default. The People’s Bank of China is seeking to wring speculative lending out of the system after total credit approached 200 percent of gross domestic product, according to Fitch Ratings. “There could be unintended consequences from the central bank’s approach,” said Liao Qiang, a Beijing-based director at Standard & Poor’s. “We expect some deleveraging at banks’ interbank and wealth management businesses to unfold. Credit growth would slow. This could pressure banks’ asset quality.”
• Lula Default Scare Echoed in Brazil’s Worst Bond Sell-Off. Brazilian government bonds are suffering the biggest quarterly losses since the run-up to former President Luiz Inacio Lula da Silva’s election in 2002 led to speculation that the nation would default. Dollar-denominated bonds from Brazil, Latin America’s biggest nation, plunged 7.55 percent since the end of March, the biggest slide since a 16 percent drop in the third quarter of 2002 before Lula’s October election that year. The loss this quarter exceeds a decline of 6.15 percent for countries with triple-B ratings, according to Bank of America Corp. Investors are becoming concerned that President Dilma Rousseff’s administration is undoing the progress of her mentor and predecessor, who overcame bondholder skepticism to win the nation’s first-ever investment grade in 2008. Brazil is now grappling with inflation above its 6.5 percent target, the prospect of a credit downgrade and the biggest street protests in more than two decades as speculation increases the Federal Reserve will reduce its unprecedented bond buying that had pushed investors into higher-yielding emerging markets.
• Merkel Says She Blocked Car Carbon Curbs to Shield Auto Jobs. German Chancellor Angela Merkel said that she blocked a draft European Union law aimed at reducing carbon-dioxide emissions from cars over concerns the measure would cost jobs in the auto industry. A coalition of EU states led by Germany prevented approval of the measure at a meeting of diplomats in Brussels earlier this week. Merkel said that she moved to delay the proposal -- which would cap average carbon discharges by passenger vehicles in the bloc at 95 grams a kilometer in 2020 -- to defend jobs. “This is also about employment,” Merkel told reporters in Brussels today after a European Union summit. “That’s why we need time to review and evaluate and decide what we will do. That’s why the vote didn’t happen.” 
• European Stocks Drop After U.S. Business Activity Report. European stocks dropped, paring their biggest weekly gain in almost two months, as drugmakers retreated and a measure of business activity in the U.S. fell more than economists had projected. Air France-KLM Group (AF), Europe’s second-biggest airline by sales, retreated 2.8 percent. Mediaset SpA climbed 2.8 percent after Credit Suisse Group AG raised its price target on the Italian broadcaster. Serco Group Plc added 2.7 percent after predicting that its revenue growth in the first half will exceed its previous estimates. The Stoxx 600 declined 0.5 percent to 285.02 at 4:30 p.m. in London, after earlier advancing as much as 0.4 percent. The equity benchmark has increased 1.6 percent this week, halting a five-week decline. The gauge has still dropped 5.3 percent in June, paring its gain this year to 1.9 percent. 
• Gold Rebounds From 34-Month Low on Physical Demand. Gold prices rebounded from a 34-month low on signs of increased demand for jewelry, coins and bars after the metal headed for the biggest quarterly drop in at least 93 years. “We did see physical buying come in a bit, and if that continues it will provide some support,” Marc Ground, a commodity strategist at Standard Bank Plc in Johannesburg, said in a telephone interview. Through yesterday, the spot price slid 25 percent this quarter, poised for the largest decline since 1920, when Bloomberg data starts. Standard Chartered Plc advised buying gold around $1,200 an ounce. “There is definitely some increase in the pace of physical purchases,” Matt Zeman, a strategist at Kingsview Financial in Chicago, said in a telephone interview. “We are also seeing some short covering after prices started rising.” Gold for immediate delivery advanced 1.5 percent to $1,218.81 at 11:56 a.m. New York time. Earlier, the price touched $1,180.50, the lowest since August 2010.
• Corn Leads Grain Plunge as U.S. Acreage Tops Analysts Estimates. Corn, soybean and wheat futures tumbled to the lowest prices in a year after the government said U.S. farmers will plant more grain than forecast and the largest oilseed crop ever. Planting of corn, the biggest domestic crop, jumped to 97.379 million acres, the most since 1936, the U.S. Department of Agriculture said today in a report. Analysts in a Bloomberg survey expected 95.431 million. Wheat acreage reached a four-year high of 56.53 million, and soybeans were sown on a record 77.728 million.
• BlackBerry Falls Most in 12 Years After Touch-Screen Model Flops. BlackBerry’s shares tumbled the most since 2001 after the company reported a surprise loss and weak sales of a new touch-screen model, underscoring its challenges in competing directly with the iPhone and Android devices. The company shipped 6.8 million smartphones last quarter, including about 2.7 million new BlackBerry 10 models -- primarily its flagship Z10 touch-screen phone. Analysts had estimated total shipments of 7.5 million, with about 3.6 million BlackBerry 10 units.

Wall Street Journal: 

• Euro Zone Set to Keep Shrinking. Continued Slump. Will Likely Be Accompanied by Rise in Unemployment. An indicator that has correctly recorded contractions in the euro zone suggests the currency area's economy shrank for a seventh straight quarter, extending its longest postwar slump. Official figures for second-quarter economic activity won’t be released until Aug. 14, but the monthly Eurocoin measure of euro-zone output released Friday signaled a contraction for June, having earlier signaled declines in activity in April and May.

Fox News:

• House panel finds IRS official waived Fifth Amendment right, can be forced to testify in targeting probe. A House Republican-led committee approved a resolution Friday declaring that high-ranking IRS official Lois Lerner waived her Fifth Amendment right against self-incrimination by delivering a statement before the committee in May. 

MarketWatch:

• Noodles & Co. shares soar in trading debut. Shares of Noodles & Co. soared in their trading debut on Friday. The shares were last up 95% at $35.11 in midday trade, after surging to an intraday high of $37.69. The casual-restaurant chain had priced its initial public offering at $18, exceeding its revised range of $15 to $17.
• Home health companies hammered by proposed cuts from Medicare. Home health-care companies took it on the chin Friday after the Centers for Medicare and Medicaid recommended what one analyst called the “worst possible outcome” in rate cuts to the facilities over the next four years.
• U.S. investors stuck in emerging markets crunch. Commentary: Abandoning American stocks was a huge mistake. The iShares MSCI Emerging Markets index ETF EEM +0.43% has lost 16% of its value since its recent high in January — and unlike U.S. indexes, which have made all-time highs this year, it’s still a third below its 2007 peak. That suggests major emerging markets — especially the popular BRIC countries — are in a long-term, secular bear market, leaving little hope for investors counting on outsized returns.

CNBC:

• New Investors Shouldn't Go to China, Starnes Says. (video) American businessman Chip Starnes—who had been held hostage by his workers in China—told CNBC Friday that he was in a no-win situation and received no help from local officials in resolving the pay dispute that started his ordeal.

Zero Hedge:

• Richmond Fed's Lacker: "Falling Markets Should Not Be Too Surprising... Further Volatility Seems Likely".
• Chicago PMI Plummets By Most In Over 4 Years; Weather Blamed. (graphs)
• A Week In Italian Banking Stocks. (graph)
• Weak Close Leaves European Stocks Red Year-To-Date.

Business Insider:

• The Power Of The Financial Lobby: 'For 25 Years, It’s Never Been The Right Moment' To Tighten.
• Horrific Retail Sales In Greece. There had been talk, recently, of "green shoots" (so to speak) in the Greek economy. This strongly suggests otherwise. Latest retail sales numbers from Greece are horrific.
• The Markets Are Facing Some Major Headwinds.
• SocGen: China's Massive Credit Misallocation Will End In A Painful Burst.

New York Times:

• Merkel Plays to Germans as She Jousts With Europe. As European leaders from 27 countries once again trudged off to Brussels on Thursday, this time to discuss how to help their millions of unemployed, few could have any illusion about whose wishes carried the most weight: those of Chancellor Angela Merkel and her country, Germany.

Risk Reversal: 

• Macro Wrap – 3 Reasons to Expect Continued Volatility, $VIX, $SPX. Most of our recent trade strategies have been long volatility structures.  Whether that’s long outright calls or puts, long call spreads or put spreads, or long calendars, our trade structure selection is much different than it was in the spring.  A major reason for that shift is that the underlying volatility regime for the broader market seems to have shifted.

Washington Examiner:

• Europe exits climate money pit as Obama jumps in. What does America have to show for the billions of taxpayer dollars spent to stop climate change? Is the climate better now because of 20 years of throwing money at it? The issue is the climate, not the loads of exorbitantly expensive subsidy scandals, secretive scientists and bureaucratic claptrap we've generated to allegedly stop climate change. The question is, did the claptrap make the climate better?

Reuters:

• Fed's Stein puts focus on September as time to assess QE3. September could be an opportune time for the Federal Reserve to consider scaling back its assets purchase, an influential official of the U.S. central bank said on Friday, though he said the Fed must take a long view of economic progress and not be blinded by the most recent data. 
• Fitch: ESM, Bank Resolution Positive but Sovereign Link Unbroken.

Bear Radar

Style Underperformer:

• Small-Cap Growth -.30%

Sector Underperformers:

• 1) Computer Services -2.32% 2) Homebuilders -1.32% 3) Hospitals -.73%

Stocks Falling on Unusual Volume:

• ACN, SAP, DB, BCS, BSBR, BHP, BBL, FSL, PBR, UPL, RRC, CTCM, CPL, CMS, AMED, BBRY, AZZ, RDA, EQM, SRE, GEVA, SYT, IBM, AMT, OC, HCA, LEN, ALEX, LNN, POT, BTI, NGVC, APD, FFIV and RMD

Stocks With Unusual Put Option Activity:

• 1) CVC 2) NKE 3) BK 4) RYL 5) IBM
  

Stocks With Most Negative News Mentions:

• 1) OC 2) TROW 3) F 4) BBRY 5) JCP
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume