Bull Radar

Style Outperformer:

• Small-Cap Growth +.1%

Sector Outperformers:

• 1) Gold & Silver +5.6% 2) REITs +.9% 3) Utilities +.9%

Stocks Rising on Unusual Volume:

• PHH, MBLY, SLW, ABX, AU, GG, AEM and NEM

Stocks With Unusual Call Option Activity:

• 1) JBLU 2) ETFC 3) NUGT 4) RGLD 5) DUST

Stocks With Most Positive News Mentions:

• 1) BAS 2) FIRT 3) RTN 4) XON 5) KATE

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -43.2% Below 100-Day Average
• 6 Sectors Rising, 4 Sectors Declining
• 66.1% of Issues Advancing, 30.0% Declining
• 37 New 52-Week Highs, 7 New Lows
• 56.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 40.6%
• Vix 13.1 +15.9%
• Total Put/Call 1.0 +11.1%
• TRIN/Arms 1.22 -14.4%

Thursday Watch

Evening Headlines

Bloomberg:

• China Fault Lines: Where Economic Turbulence Could Erupt in 2017. China’s balancing act isn’t getting any easier. Policy makers are grappling with how to attack excessive borrowing and rein in soaring property prices while maintaining rapid growth. They’re also battling yuan depreciation and capital outflow pressures as U.S. interest rates rise, while on the horizon looms the risk of confrontation with America’s President-elect Donald Trump on trade and Taiwan. It’s a high-wire act with the potential to produce shocks, like the one erupting in the bond market as tighter liquidity threatens financing for small companies. President Xi Jinping told top officials he’s open to growth below the 6.5 percent target to 2020 if it carries too much risk, a person familiar with the situation said last week. Leaders have pledged to reduce hazards for 2017.
• S.Korea Government Cuts 2017 Growth Projection to 2.6% From 3%.
• Asian Stocks Set to Follow U.S. Lower, Dollar Firm: Markets Wrap. Nikkei 225 index futures dropped 0.7 percent in Osaka and Singapore. MSCI Taiwan futures and futures on Korea’s Kospi 200 were 0.3 percent lower. FTSE China A50 futures were little changed.

Wall Street Journal:

• John Kerry Defends U.S. Approach to Israel After U.N. Vote on Settlements. Secretary of state warns that two-state solution is ‘in jeopardy’.
• Aluminum Billionaire Planning Escape From China: Lawyer. Giant aluminum stockpile in Mexico and Vietnam may represent an effort to get wealth out of China by Liu Zhongtian, chairman of China Zhongwang Holdings.
• Electric Cars: Still Unpopular with Buyers and Unprofitable for Sellers. Auto makers face hurdles to widespread adoption despite rollout of midpriced vehicles.

Fox News:

• Netanyahu slams Kerry's speech defending UN vote as 'unbalanced'. (video)

CNBC:

• Citron Research's Andrew Left says the market simply got ahead of itself on Nvidia(NVDA).
• Market rally is in seventh or eighth inning, expert says. (video)

Zero Hedge:

• Trump Announces Sprint Bringing 5,000 Jobs Back To US, Says UN Might Be "Waste Of Time & Money".
• It's The Dollar, Stupid!
• HuffPo Turns On Obama: He Presided Over The "Destruction Of The Democratic Party".
• More Bad News For NYC Real Estate As Luxury Co-Op Contracts Collapse 25%.
• Is 100% Of "US Warming" Due To NOAA Data Tampering?
• How Government Regulation Makes Us Poorer.
• House Flipping Makes A Comeback As 2016 Volume Soars To Highest Since 2007. (graph)
• Oil Slides After Biggest Inventory Build In 6 Weeks. (graph)
• George Soros Conjures Hitler In Attack On 'Ascendant Populists', Warns "Democracy Is Now In Crisis".
• Bank EPS Misses On Deck: Rising Rates Lead To Biggest Bank Portfolios Losses Since The "Taper Tantrum". (graph)
• Rebalance Rout: Stocks Slump Most Since October As Bonds, Bullion Bounce. (graph)

Night Trading 

• Asian equity indices are -.75% to -.25% on average.
• Asia Ex-Japan Investment Grade CDS Index 121.25 +8.0 basis points.
• Asia Pacific Sovereign CDS Index 37.75 +.5 basis point.
• Bloomberg Emerging Markets Currency Index 69.55 +.04%. 
• S&P 500 futures +.04%. 
• NASDAQ 100 futures -.02%.

Morning Preview Links

Earnings of Note
Company/Estimate

• None of note

Economic Releases
8:30 am EST

• Advance Goods Trade Balance for November is estimated at -$61.6B versus -$61.9B in October.
• Preliminary Wholesale Inventories MoM for November are estimated to rise +.2% versus a -.4% decline in October.
• Initial Jobless Claims are estimated to fall to 265K versus 275K the prior week.
• Continuing Claims are estimated to fall to 2027K versus 2036K prior.     

11:00 am EST

• Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,266,670 barrels versus a +2,256,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +155,560 barrels versus a -1,309,000 barrel decline the prior week. Distillate supplies are estimated to rise by +733,330 barrels versus a -2,420,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.25% versus a +1.0% gain prior. 

Upcoming Splits 

• None of note

Other Potential Market Movers

• The $28B 7Y T-Note auction, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.

BOTTOM LINE:  Asian indices are lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.

Stocks Reversing Lower into Final Hour on Disappointing US Economic Data, Yen Strength, Technical Selling, Tech/Homebuilding Sector Weakness

Broad Equity Market Tone:

• Advance/Decline Line: Substantially Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Light

• Market Leading Stocks: Underperforming
  

Equity Investor Angst:

• Volatility(VIX) 12.94 +7.92%

• Euro/Yen Carry Return Index 127.28 -.77%

• Emerging Markets Currency Volatility(VXY) 11.35 -.53%

• S&P 500 Implied Correlation 49.26 -.12%

• ISE Sentiment Index 113.0 +73.85%
  

• Total Put/Call .89 -12.75%

• NYSE Arms 1.12 +78.62%

Credit Investor Angst:

• North American Investment Grade CDS Index 67.73 +1.96%
  

• America Energy Sector High-Yield CDS Index 453.0 -.13%

• European Financial Sector CDS Index 94.14 +2.87%

• Western Europe Sovereign Debt CDS Index 20.39 -.68%

• Asia Pacific Sovereign Debt CDS Index 37.32 +.03%

• Emerging Market CDS Index 242.37 -.57%
  

• iBoxx Offshore RMB China Corporate High Yield Index 133.18 +.18%

• 2-Year Swap Spread 23.5 -4.75 basis points

• TED Spread 47.5 +1.5 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -77.75 -11.5 basis points
  

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 69.52 -.14%
• 3-Month T-Bill Yield .51% unch.

• Yield Curve 125.0 -8.0 basis points
  

• China Import Iron Ore Spot $80.68/Metric Tonne +1.59%

• Citi US Economic Surprise Index 24.30 +.2 point

• Citi Eurozone Economic Surprise Index 53.70 +7.7 basis points

• Citi Emerging Markets Economic Surprise Index 10.60 +.2 point

• 10-Year TIPS Spread 1.99% -2.0 basis points
• 33.3% chance of Fed rate hike at March 15 meeting, 43.7% chance at May 3 meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -32 open in Japan 
• China A50 Futures: Indicating -24 open in China

• DAX Futures: Indicating -37 open in Germany

Portfolio: 

• Lower: On losses in my tech/retail/biotech sector longs and emerging markets shorts

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

• Market Exposure: Moved to 25% Net Long

Today's Headlines

Bloomberg:

• No Happy New Year in China as Currency, Liquidity Fears Loom. (video) China bulls could be facing a grim New Year’s eve. The first day of 2017 is when an annual $50,000 quota to convert the yuan into foreign exchange resets, stoking concern there will be a rush to sell the local currency. With tax payments and a regulatory assessment also tightening liquidity in the money market toward year-end, January may bring scant relief as lenders prepare for stronger cash demand before Lunar New Year holidays, which are only a month away. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. The declines are capping off a tough year for investors during which bonds, shares and currency all slumped.
• Hao Hong: China Property Market Will Deflate. (video)
• What Are the Most Prevalent Risks for China in 2017? (video)
• Record Run for Company-Bond Sales Seen Coming to a 2017 Halt. Breaking habits can be hard, especially when they involve making money. That’s the prospect for bond investors in the coming year. After six straight years of growing U.S. investment-grade corporate-debt sales, bankers and investors are pegging 2017 as the year the frenzy finally fades. The new year has several hurdles in place already. For one, interest rates have risen to two-year highs, making borrowing more costly. And the pipeline for new-acquisition financing is smaller than 2016’s, which saw such mega-deals as Anheuser-Busch InBev NV’s $46 billion sale to fund its SABMiller Plc takeover, and Dell Inc.’s $20 billion offering to support its EMC Corp. bid. Uncertainty around potential tax reform and trade wars in a Trump administration may also sideline more issuers.
• Trump Shatters Peace With Obama With Tweet on ‘Roadblocks’. Donald Trump accused President Barack Obama of hobbling the transition to the Republican’s administration with unspecified “inflammatory” statements and “roadblocks,” as tensions between the two men spilled into the open less than a month before Inauguration Day. “Doing my best to disregard the many inflammatory President O statements and roadblocks,” the president-elect tweeted on Wednesday. “Thought it was going to be a smooth transition -- NOT!” Trump’s Twitter eruption was the culmination of a growing set of grievances topped by Obama’s decision last week to have the U.S. abstain from a vote on a United Nations Security Council resolution declaring Israeli settlements in the West Bank illegal. The move allowed the measure to pass, infuriating Israeli Prime Minister Benjamin Netanyahu. Trump has promised to be friendlier to the U.S. ally, a theme he emphasized on Twitter Wednesday. “We cannot continue to let Israel be treated with such total disdain and disrespect,” Trump tweeted. “The beginning of the end was the horrible Iran deal, and now this (U.N.!) Stay strong, Israel, January 20th is fast approaching!”
• Here Are the Best and Worst Performing Assets of 2016. (video)
• Pharma's Pricing Troubles Will Get Worse in 2017. 

Wall Street Journal:

• As Home Prices Rise, Flippers Make a Comeback. Number of investors flipping homes returns to precrisis levels; big banks also get back in the game.
• France Poised for Pro-Russia Pivot. François Fillon and Marine Le Pen have spoken out against sanctions and argue for closer ties between Paris and Moscow.
• Toshiba Shares Crash After Write-Down Warning. Shares in Toshiba fall more than 20% after a warning about a multibillion-dollar write-down.
• ‘If I Had Run Again’. Coach Obama says his team’s big loss wasn’t his fault.

Fox News:

• Kerry defends US role in UN's Israel censure amid backlash. (video) A defiant Secretary of State John Kerry on Wednesday defended the U.S. decision allowing the United Nations to condemn Israeli settlements, while lashing out at the so-called “settler agenda” which he claimed is hurting prospects for peace – in a wide-ranging speech that inflamed tensions with Israel and drew a swift rebuke from the prime minister. During a farewell speech at the State Department, Kerry explained the U.N. decision in his most extensive terms yet. He said it was about preserving the two-state solution, which he called the only way to a “just and lasting peace.” “That future is now in jeopardy,” he warned.

CNBC:

• Oil faces a dollar 'double whammy': Lower demand and higher odds of OPEC cheating. (video) The U.S. dollar has been on a tear that threatens to derail the oil price rally and OPEC's effort to balance an oversupplied crude market, the editor of The Schork Report warned on Wednesday.
• Mohamed El-Erian: Don't underestimate the Fed. (video)

Zero Hedge:

• Global Debt Sales Hit A Record $6.6 Trillion In 2016. (graph)
• Ritterbusch Warns OPEC Agreement May "Collapse Within Months": Here's Why. (graph)
• China's Central Bank Slams "Irresponsible" Media Reports Than Yuan Broke The "Psychological Threshold" Of 7.00/$. (graph)
• Pending Home Sales Tumble As Surging Mortgage Rates Paralyze Housing Market. (graph)
• German Police Detain Alleged Accomplice To Berlin Truck Attack Suspect.
• A Market Update From JPM, And A Warning.

Business Insider:

• Short-seller Andrew Left has a new target. Citron Research has a new target for the new year: Nvidia Corporation.
• 'Enough is enough': Lindsey Graham says US sanctions 'will hit Russia hard'.
• Jewish settler leader: John Kerry is 'a stain on American foreign policy'.

Bear Radar

Style Underperformer:

• Small-Cap Growth -1.2%

Sector Underperformers:

• 1) Semis -1.7% 2) Alt Energy -1.7% 3) Homebuilders -1.2%

Stocks Falling on Unusual Volume: 

• NVDA, IFN, CBI, YELP, FRED, ELF, CNXC, AMD, AMC, CIM, NRZ, SHG, WATT, PMT, WGO, BXMT, CAJ, AI, PI, CIT, ARI, PKX, MTN, KT and MNK

Stocks With Unusual Put Option Activity:

• 1) BHI 2) NVDA 3) OIL 4) FEYE 5) ZNGA

Stocks With Most Negative News Mentions:

• 1) ANTH 2) DAL 3) ITW 4) BBY 5) FC

Charts:

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