Stocks Reversing Higher into Final Hour on Bargain-Hunting, Technical Buying, Short-Covering, Retail/Tech Sector Strength

 Broad Equity Market Tone:

• Advance/Decline Line: Substantially Higher
  

• Sector Performance: Almost Every Sector Rising
  

• Volume: Around Average

• Market Leading Stocks: Outperforming

Equity Investor Angst:

• Volatility(VIX) 28.6 -4.6%

• Euro/Yen Carry Return Index 131.22 -.51%

• Emerging Markets Currency Volatility(VXY) 9.73 -.31%

• S&P 500 Implied Correlation 51.06 +7.4%

• ISE Sentiment Index 82.0 -22.6%
  

• Total Put/Call .87 -7.45%

• NYSE Arms .99 +47.8%

Credit Investor Angst:

• North American Investment Grade CDS Index 88.16 -.75%
  

• America Energy Sector High-Yield CDS Index 809.0 -3.52%

• European Financial Sector CDS Index 111.99 -2.94%

• Italian/German 10Y Yld Spread 250.0 -8.0 basis points
  

• Asia Pacific Sovereign Debt CDS Index 11.75 unch.

• Emerging Market CDS Index 208.65 -1.13%
  

• iBoxx Offshore RMB China Corporate High Yield Index 151.12 +.30%

• 2-Year Swap Spread 14.5 +1.0 basis points

• TED Spread 41.25 -.5 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap 1.50 +2.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.94 +.25%
• 3-Month T-Bill Yield 2.37% -6.0 basis points

• Yield Curve 20.5 +2.0 basis points

• China Iron Ore Spot 69.58 USD/Metric Tonne +.1%

• Citi US Economic Surprise Index -17.9 -2.5 points

• Citi Eurozone Economic Surprise Index -73.30 +.5 point

• Citi Emerging Markets Economic Surprise Index -7.7 -3.3 points

• 10-Year TIPS Spread 1.74 -3.0 basis points
• 5.7% chance of Fed rate hike at March 20th meeting, 9.5% chance at May 1st meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating +60 open in Japan 
• China A50 Futures: Indicating +48 open in China

• DAX Futures: Indicating +32 open in Germany

Portfolio: 

• Higher: On gains in my tech/biotech/retail/medical/industrial sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my emerging market shorts

• Market Exposure: Moved to 100% Net Long

Bear Radar

Style Underperformer:

• Mid-Cap Growth -.3%

Sector Underperformers:

• 1) Gold & Silver -1.3% 2) Energy -.6% 3) Homebuilding -.6%

Stocks Falling on Unusual Volume: 

• GOLD and EQM

Stocks With Unusual Put Option Activity:

• 1) AET 2) WATT 3) RSX 4) ETSY 5) PXD

Stocks With Most Negative News Mentions:

• 1) IPAR 2) DXC 3) WBT 4) CMCM 5) ALGN

Charts:

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

Bull Radar

Style Outperformer:

• Large-Cap Value +.3%

Sector Outperformers:

• 1) Steel +1.8% 2) Oil Service +1.4% 3) Semis +1.1%

Stocks Rising on Unusual Volume:

• NHF, FRC, ODT, CDZI, BHFAL, CHT, MSG, VYMI, NFEC, AUTL, BPT, NGG, ISCA, CTBB, BTI, CRH, WVE, TCP, AB, ZYME, CACC, MSBI, PUK, CTDD, DMRC and ETG

Stocks With Unusual Call Option Activity:

• 1) BSX 2) CMCSA 3) SYF 4) DHI 5) VNQ

Stocks With Most Positive News Mentions:

• 1) NVDA 2) HTGM 3) CURO 4) MGI 5) BC

Charts:

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

Morning Market Internals

NYSE Composite Index:

• Volume Running -2.4% Below 100-Day Average
• 8 Sectors Rising, 3 Sectors Declining
• 52.4% of Issues Advancing, 45.3% Declining
• 3 New 52-Week Highs, 65 New Lows
• 11.4% of Issues Above 200-day Moving Average
• Average 14-Day RSI 37.2%
• Vix 30.9 +3.1%
• Total Put/Call .77 -18.1%
• TRIN/Arms 1.12 +67.2%

Friday Watch

Evening Headlines

Bloomberg:          

• December Early Indicators Show China Slowed for a Seventh Month.   

• China Has the World's Worst Stock Market With $2.3 Trillion Loss.

• Furious U.S. Rebound Fails to Stoke Asia's Stocks. Wall Street’s wild afternoon rebound failed to carry through to Asia on Friday, with Japanese shares dropping at the open and U.S. futures sliding. The yen edged up, heading for its best two-week advance since February. Equity benchmarks fell in Tokyo, and saw modest gains in Sydney and Seoul after the S&P 500 Index erased a drop of almost 3 percent in its afternoon rebound -- the biggest upward reversal since 2010. It’s been a week of superlatives for stock traders, after American shares climbed the most in more than nine years on Wednesday. In other markets, 10-year Treasury yields held below 2.80 percent, and oil traded around $45 in New York. “From a time perspective, it’s a historic bull market and when you get that far into the cycle, people get more jittery,” said Sean O’Hara, president at Pacer ETFs. “It’s hard to explain moves” like the ones recently seen, he said. The MSCI Asia Pacific Index dipped 0.3 percent as of 9:09 a.m. in Tokyo. Japan’s Topix dropped 0.7 percent and the Nikkei 225 slipped 0.3 percent.
  Australia’s S&P/ASX 200 rose 0.3 percent. Kospi advanced 0.6 percent. Futures on the S&P 500 Index fell 0.3 percent after the underlying gauge climbed 0.9 percent at the close in New York.  

• Your Evening Briefing.

• U.S. Trade Goals, Fed Should Slow Hikes, China Slowdown: Eco Day.

• What Investment Advisers Are Saying On the Dow's 871-Point Bounce.

• Shutdown Likely to Go Into 2019 as Trump Fumes, Congress Is Idle.   

• The Casualties of a Dismal Year for Hedge Funds.  

• Oil Watchers See $70 a Barrel in 2019 as Recession Fears Fade. 

• Beaten-Down Chip Equipment Stocks Lead Semiconductor Rebound.

• U.S. Leveraged Loan Fund Outflows Rose to Fresh Record High.

Wall St. Journal:

• Apple Has Lost $9 Billion on Its Own Stock.

• Who Will Win the Shutdown?

• The Year in Graphics: 2018.

• Ten Best Stories of 2018.

MarketWatch.com:

• Stampede of the ‘decacorns’: Here are the big-name startups preparing for 2019 IPOs. 

• Lululemon(LULU) tops two analysts’ lists for 2019.

Fox News:

• Suspect in fatal California cop shooting is in US illegally, still on the run, authorities say.

CNBC:  

• After-hours buzz: Aphria, IBM and P&G.

• Retail just did something it hasn’t done since 2008, and it could point to a bigger rally.

• Dow closes more than 250 points higher in wild session, erases 600-point drop.

Zero Hedge:   

• Riots Loom As Food Stamp Cash Will Run Out By End Of January If Government Shutdown Continues.

• Kevin Hassett: Trump-Powell Meeting Would Be "A Very Favorable Thing".

• In Wake Of Minority Transcript Fraud Scandal, Ivy League Silent On Admissions Process.

• 4th Biggest Buy Program Of All Time Sends Dow Soaring Over 900 Points.

• Who Got Hit: Here Are The Best And Worst Performing Hedge Funds Of 2018.

Night Trading 

• Asian equity indices are .25% to +.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 97.5 -1.25 basis points. 

• Asia Pacific Sovereign CDS Index 11.75 unch.

• Bloomberg Emerging Markets Currency Index 66.80 +.04%.

• FTSE 100 futures +1.06%.

• S&P 500 futures -.29%.

• NASDAQ 100 futures -.31%.

Morning Preview Links

Earnings of Note
Company/Estimate
Before the Open:

• None of note

After the Close:

• None of note

Economic Releases

9:45 am EST

• The Chicago Purchasing Manager Index for Dec. is estimated to fall to 60.3 versus 66.4 in Nov.

10:00 am EST

• Pending Home Sales MoM for Nov. are estimated to rise +1.0% versus a -2.6% decline in Oct.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone PMI report could also impact trading today.

BOTTOM LINE:  Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher.  The Portfolio is 75% net long heading into the day.