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BETWEEN THE HEDGES



Portfolio Manager's Commentary on Investing and Trading in the U.S. Financial Markets



Updated: 2016-12-08T11:53:24.075-05:00

 



Morning Market Internals

2016-12-08T11:51:40.765-05:00

NYSE Composite Index: Volume Running +14.8% Above 100-Day Average 3 Sectors Rising, 7 Sectors Declining 53.8% of Issues Advancing, 43.7% Declining 391 New 52-Week Highs, 12 New Lows 56.2% of Issues Above 200-day Moving Average Average 14-Day RSI 45.6% Vix 12.5 +2.1% Total Put/Call .71 -15.6% TRIN/Arms 1.16 +30.9% [...]



Thursday Watch

2016-12-07T21:45:33.543-05:00

Evening HeadlinesBloomberg:The Factory to the World Has a New Export: Inflation. The factory to the world has a new export: inflation. And it’s shipping faster than many thought possible just a few months ago. China’s weakening yuan, stimulus designed to ensure robust growth ahead of a crucial Communist Party Congress next year, and rebounding commodity prices are pushing up factory prices. Having turned positive in September for the first time in more than four years, producer prices rose 1.2 percent in October from a year earlier. That will almost double to 2.3 percent in November, according to analysts surveyed ahead of data due Friday.Japan Unexpectedly Cuts Third-Quarter GDP Growth Figure to 1.3%. Japan revised third-quarter economic growth to an annualized 1.3 percent, compared with a preliminary reading that showed 2.2 percent expansion. The revision was driven by drops in capital spending and in private inventories, which both dragged down growth. The official size of Japan’s economy expanded as the nation revamped how it calculates gross domestic product, classifying research and development differently.Asian Stocks Take Cue From U.S., Rising With Bonds Ahead of ECB. Fresh U.S. equity records lit a fire under the Asian market, with benchmarks from Tokyo to Sydney extending gains as bond yields declined ahead of policy updates from two of the world’s biggest central banks. The regional Asian stock index rose to a more than one-month high as banks drove Australia’s S&P/ASX 200 Index to its highest level since August and Japanese shares jumped. The euro and the yen maintained gains with gold ahead of Thursday’s European Central Bank decision, amid mounting speculation policy makers will prolong the euro-zone’s asset-buying program. The New Zealand dollar and Korean won strengthened. Yields on Australian bonds fell to their lowest level this month amid a debt rally across developed markets. Oil nudged $50 a barrel after a surge in U.S. stockpiles. The MSCI Asia Pacific Index climbed by .8% as of 10:01 am Tokyo time, rising for a third day as Japan's Topix index gained 1.1%.The World's Top Oil Market Is Starting to Lose Its Sheen. One of the biggest engines soaking up the world’s oil is starting to sputter. Growth in crude imports by China, the second largest consumer after the U.S., will probably slow by more than 60 percent in 2017, according to a Bloomberg survey of analysts including FGE and Energy Aspects Ltd. Private refiners that helped boost purchases to record levels are expected to be constrained by tighter licenses and increased scrutiny on their taxes. At the same time, the current space available for stockpiles may run out. While OPEC’s deal to curb output may help erode a glut and lift prices, Chinese imports remain key for any sustained recovery. It’s the biggest buyer in Asia, the world’s top oil market, and its insatiable appetite was a significant driver for crude’s climb to more than $100 a barrel in the past decade. Iraq Can’t Count on Kurds or Oil Companies for Help on OPEC Cuts. Iraq can’t count on the self-governed Kurds in the north or international oil companies to help it cut crude production as promised at an OPEC meeting last week. That may leave the country with no option but to slash state-controlled supplies to comply with its quota. Under the deal the Organization of Petroleum Exporting Countries reached last Wednesday, Iraq must reduce crude output by 210,000 barrels a day from October levels. But to achieve that, OPEC’s second-biggest producer may have to rely on the crude it fully controls. International companies including BP Plc and Royal Dutch Shell Plc pump most of Iraq’s oil, and the semi-autonomous Kurds contribute more than half a million barrels a day on top.A Century-Old Stock Signal Is Flashing Buy as U.S. Transports Surge. (graph)Lululemon(LULU) Surges After Third-Quarter Earnings Top Estimates. Wall Street Journal:Nearing Defeat, Rebels Seek Talks on Fate[...]



Stocks Surging into Final Hour on Economic Optimism, Less European/Emerging Markets/US High-Yield Debt Angst, Lower Long-Term Rates, Tech/Transport Sector Strength

2016-12-07T15:26:16.590-05:00

Broad Equity Market Tone:Advance/Decline Line: HigherSector Performance: Most Sectors RisingVolume: Slightly Above Average Market Leading Stocks: OutperformingEquity Investor Angst:Volatility(VIX) 11.6 -1.3%Euro/Yen Carry Return Index 127.96 +.22%Emerging Markets Currency Volatility(VXY) 10.92 +.46% S&P 500 Implied Correlation 49.88 +3.57%ISE Sentiment Index 100.0 +28.21%Total Put/Call .85 +3.66% NYSE Arms 1.23 +26.96% Credit Investor Angst:North American Investment Grade CDS Index 68.12 -2.625% America Energy Sector High-Yield CDS Index 481.0 -9.92%European Financial Sector CDS Index 99.50 -1.85%Western Europe Sovereign Debt CDS Index 23.0 -1.81%Asia Pacific Sovereign Debt CDS Index 37.17 -6.12%Emerging Market CDS Index 247.68 -4.21%iBoxx Offshore RMB China Corporate High Yield Index 132.97 +.02%2-Year Swap Spread 22.50 -.5 basis pointTED Spread 45.75 -.25 basis point3-Month EUR/USD Cross-Currency Basis Swap -51.5 +4.75 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 70.31 +.49%3-Month T-Bill Yield .50% +1.0 basis pointYield Curve 124.0 -4.0 basis pointsChina Import Iron Ore Spot $82.25/Metric Tonne +3.16%Citi US Economic Surprise Index 30.10 unch.Citi Eurozone Economic Surprise Index 64.60 -1.5 points Citi Emerging Markets Economic Surprise Index 4.2 +.3 point 10-Year TIPS Spread 1.97% -2.0 basis points100.0% chance of Fed rate hike at Feb. 1 meeting, 100.0% chance at March 15 meetingOverseas Futures:Nikkei 225 Futures: Indicating +173 open in Japan China A50 Futures: Indicating +61 open in ChinaDAX Futures: Indicating +67 open in GermanyPortfolio: Slightly Higher: On gains in my retail/tech sector longs Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) shortMarket Exposure: Moved to 75% Net Long[...]



Today's Headlines

2016-12-07T15:00:35.289-05:00

Bloomberg:China's Yuan Pessimists Are Multiplying. (video) China is tightening capital controls as the imminent renewal of a foreign-exchange conversion quota adds to depreciation pressure on the yuan. Chinese citizens are allowed to convert $50,000 worth of yuan annually, and with the new year less than a month away, the potential for capital flight is building. Individuals and households are the biggest threat to the yuan now, because they can easily be influenced by short-term volatility, according to Xia Le, a Hong Kong-based economist at Banco Bilbao Vizcaya Argentaria SA. The yuan has weakened 3.1 percent this quarter amid concern the Federal Reserve will raise borrowing costs, strengthening the dollar. German Industrial Production Rose Less Than Forecast in October. German industrial production rose less than analysts forecast in October, signaling that Europe’s largest economy took a slow start to the final quarter of the year. Production, adjusted for seasonal swings, gained 0.3 percent from the previous month, when it declined a revised 1.6 percent, data from the Economy Ministry in Berlin showed on Wednesday. The reading, which is typically volatile, compares with a median estimate for a 0.8 percent increase in a Bloomberg survey. Output was up 1.2 percent from a year earlier.European Stocks Rise for a Third Straight Day. (video)AAA Ratings Return for Securities Backed by Riskier Home Loans. Two ratings firms are assigning AAA ratings to bonds backed by new riskier home loans, one of the few times such securities have won top grades since the financial crisis, according to documents obtained by Bloomberg. Fitch Ratings and DBRS Inc. are giving the ratings to more than $210 million of bonds backed by loans made by Caliber Home Loans, a unit of Lone Star Funds, and by loans from Sterling Bank & Trust and LendSure Mortgage Corp. The bonds are partially backed by mortgages in which the lender verified a borrower’s income with bank statements rather than tax returns. Another ratings firm, Moody’s Investors Service, recently called out those types of mortgages as risky. Wall Street Journal:Senate Clears Bill to Ease FDA Drug and Device Approvals. Measure includes money for NIH, cancer moonshot, precision medicine initiative. Passage of legislation aimed at speeding up Food and Drug Administration approvals, combined with an incoming president who has pledged to “cut red tape” at the agency, is expected to usher in a new, more industry-friendly era of drug and device regulation.China’s Banks Are Hiding More Than $2 Trillion in Loans. Accounting sleight of hand means banks don’t have to set aside capital for potential losses, sowing fears of a crisis; new apartments with no residents. Fox News:Manhunt under way after 1 Georgia cop killed, 1 seriously injured in shooting. (video)CNBC:Dow soars, up 250 points to record highs as telecoms rise more than 2%; S&P gains 1%. (video)Shopping for the holidays? These are 14 of the hottest toys of 2016.Paul Ryan says Obamacare is 'entering a death spiral'. (video)Zero Hedge:Denzel Washington Slams Mainstream Media For Peddling "Bullshit".Jamie Dimon Named Chairman Of Business Roundtable Scoring Another Key D.C. Post For Wall Street.Trump Taps Oklahoma Attorney General Scott Pruitt As EPA Head.David Rosenberg Throws Up On The "Trump Rally" - Here's Why. (video)France: Decomposing In Front Of Our Eyes.This Is the Purge We All Knew Was Coming: "Shutting Down Extremist Content".What's Behind The Relentless Market Surge? RBC Explains.Trump Picks Iowa Governor Branstad As US Ambassador To China, Beijing Calls Him "Old Friend".Indian Economy Crashes As Modi's "Black Money" Theory Collapses. (graph)Chinese Reserves Tumble By $69 Billion, Biggest Drop Since January. (graph)Crude Tumbles Below $50 After Biggest Cushing Build Since Jan 2009. (graph)Job Market Rolling Over: Rate Of Hiring Declines At Fastest Pace Since 2013. (graph)Saxo Bank's 10 Outrageo[...]



Bear Radar

2016-12-07T14:05:18.131-05:00

Style Underperformer: Small-Cap Growth +.3% Sector Underperformers: 1) Biotech -2.9% 2) Drugs -1.2% 3) Medical Equipment -.2% Stocks Falling on Unusual Volume: LADR, VRA, OXM, FTK, AVAV, ALR, HBI, SNCR, NUS, BLUE, AKRX, SCMP, MIK, CELG, SHPG, BLCM and BPMC Stocks With Unusual Put Option Activity: 1) VA 2) UUP 3) ALR 4) PAA 5) S Stocks With Most Negative News Mentions: 1) GLT 2) ALOG 3) MIK 4) SIGM 5) HUM Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-12-07T13:40:01.287-05:00

Style Outperformer: Small-Cap Value +1.0% Sector Outperformers: 1) Coal +2.9% 2) Steel +2.3% 3) Telecom +2.2% Stocks Rising on Unusual Volume:PLAY, UA, FNF, REGI, CS, WDC, PI, SODA, AGX, BOBE, KFY, FRAN, AIRG, CVI, BWA, CVI, PI, BNED, FNF, BX, FCE/A, UNVR and MMPStocks With Unusual Call Option Activity: 1) QVCA 2) XLB 3) HON 4) WDC 5) XHB Stocks With Most Positive News Mentions: 1) CAL 2) DFS 3) UNH 4) JNPR 5) WDC Charts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-12-07T11:27:53.262-05:00

NYSE Composite Index:
(image)



Wednesday Watch

2016-12-06T20:53:07.047-05:00

Evening HeadlinesBloomberg:China Is Pausing on U.S. Deals, Ex-Goldman Rainmaker Says. Chinese investors are hitting the pause button on U.S. and other outbound deals as they grapple with the ramifications of a Trump presidency and possible government curbs on overseas acquisitions, according to Fred Hu, a former Greater China chairman for Goldman Sachs Group Inc. The 53-year-old founder and chairman of Beijing-based investment firm Primavera Capital Group said in an interview in Hong Kong that he and other investors are focusing on industries spurred by consumer demand in China. Primavera has stakes in companies from e-commerce giant Alibaba Group Holding Ltd. to Yum China Holdings Inc., which operates the KFC and Pizza Hut chains there.How a China-U.S. Trade War Would Affect the iPhone. (video)Australia’s Economy Shrinks More Than Expected; Currency Slumps. Australia’s economy shrank the most in almost eight years in the third quarter as government spending fell and imports rose. The local currency slumped.The Yen's Swift Decline Could Go Too Far. The yen’s swift decline in the wake of Donald Trump’s election victory last month could go too far, according to Hakubun Shimomura, a senior member of Japan’s ruling Liberal Democratic Party. A weaker currency is generally welcome in Japan because it helps exporters and fuels desired inflationary pressures. But Shimomura, a former education minister and close ally of Prime Minister Shinzo Abe, said he worries that the currency could drive up the nation’s import bill.Stock Rally Extends Into Asia as Traders Await RBI, Aussie GDP. (video) Stock futures signaled a rally in U.S. equities will extend into Asian markets as traders await India’s central bank policy meeting, while the Australian dollar held losses before data expected to show the world’s 12th-largest economy shrank. Australia’s benchmark index jumped 0.6 percent, as equity-index contracts in Japan, Hong Kong and South Korea climbed at least 0.1 percent. Analysts forecast the Reserve Bank of India will cut its key interest rate on Wednesday, while the European Central Bank is expected Thursday to extend its bond-buying program beyond the current March end date. Australian gross domestic product probably declined 0.1 percent last quarter, its first contraction since the start of 2011. The MSCI Asia Pacific Index added 0.2 percent.Health Insurers Willing to Give Up a Key Obamacare Provision. U.S. health insurers signaled Tuesday that they’re willing to give up a cornerstone provision of Obamacare that requires all Americans to have insurance, replacing it with a different set of incentives less loathed by Republicans who have promised to repeal the law. Known as the “individual mandate,” the rule was a major priority for the insurance industry when the Affordable Care Act was legislated, and also became a focal point of opposition for Republicans. In a position paper released Tuesday -- the first since President-elect Donald Trump’s victory -- health insurers laid out changes they’d be willing to accept.Goldman Tells Stock Pickers to Rejoice as Correlations Decline. (video)Tesla(TSLA) Recalls 7,000 Charging Adapters After Two Overheat. The limited notice to customers only applies to plugs sold in the U.S. Wall Street Journal:Ad Agencies Probed Over Contracts to Produce Commercials. Justice Department examines whether ad companies rigged bids to favor in-house production units.Fox News:House Report: US facing biggest Islamic terror threat since 9/11. The United States faces its highest threat from Islamist terrorists since 9/11 and much of that stems from those radicalized at home, according to the House Homeland Security Committee’s December Terror Threat Snapshot released Tuesday. What’s more, the report said, the threat to the United States and[...]



Stocks Higher into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Yen Weakness, Short-Covering, Homebuilding/Gaming Sector Strength

2016-12-06T15:35:22.406-05:00

Broad Equity Market Tone:Advance/Decline Line: Substantially HigherSector Performance: Most Sectors RisingVolume: Slightly Below Average Market Leading Stocks: OutperformingEquity Investor Angst:Volatility(VIX) 11.8 -2.8%Euro/Yen Carry Return Index 127.60 -.30%Emerging Markets Currency Volatility(VXY) 10.86 +.28% S&P 500 Implied Correlation 51.21 -1.14%ISE Sentiment Index 87.0 +2.35%Total Put/Call .87 +1.16% NYSE Arms 1.06 +28.32% Credit Investor Angst:North American Investment Grade CDS Index 70.18 -2.62% America Energy Sector High-Yield CDS Index 533.0 +7.18%European Financial Sector CDS Index 101.38 -5.81%Western Europe Sovereign Debt CDS Index 23.42 -.34%Asia Pacific Sovereign Debt CDS Index 39.68 -2.06%Emerging Market CDS Index 257.80 -3.32%iBoxx Offshore RMB China Corporate High Yield Index 132.93 -.06%2-Year Swap Spread 23.0 -1.25 basis pointsTED Spread 46.0 -1.5 basis point3-Month EUR/USD Cross-Currency Basis Swap -56.25 +2.0 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 69.97 +.43%3-Month T-Bill Yield .49% +3.0 basis pointsYield Curve 128.0 +1.0 basis pointChina Import Iron Ore Spot $79.73/Metric Tonne +1.41%Citi US Economic Surprise Index 30.10 +1.4 pointsCiti Eurozone Economic Surprise Index 66.10 +7.2 points Citi Emerging Markets Economic Surprise Index 3.9 +.3 point 10-Year TIPS Spread 1.99% +2.0 basis points100.0% chance of Fed rate hike at Feb. 1 meeting, 100.0% chance at March 15 meetingOverseas Futures:Nikkei 225 Futures: Indicating +150 open in Japan China A50 Futures: Indicating +16 open in ChinaDAX Futures: Indicating +47 open in GermanyPortfolio: Higher: On gains in my retail/biotech/medical sector longs Disclosed Trades: Covered some of my (IWM)/(QQQ) hedgesMarket Exposure: Moved to 75% Net Long[...]



Today's Headlines

2016-12-06T15:08:21.643-05:00

Bloomberg:China Urged to Stop ‘Disappearing’ Officials in Graft Crackdown. A global rights advocacy group is calling on China to stop detaining Communist Party members indefinitely without charge, releasing a report criticizing the system on the unofficial anniversary of Xi Jinping’s four-year-old corruption crackdown. The practice, known as shuanggui, which the Communist Party uses to secure confessions from corruption suspects, lacks legal basis and perpetuates rights abuses, Human Rights Watch said in a report released Tuesday in Hong Kong. Such extrajudicial detentions are a key feature of Xi’s anti-graft campaign, which began on Dec. 6, 2012, with the investigation of Li Chuncheng, then a deputy party chief in the southwestern province of Sichuan.Asia’s New Tiger Economy Fears Currency Slide. Myanmar’s central bank is braced for a deeper slide in the nation’s currency and has little scope to tackle the decline after the kyat fell the most in Asia, according to one of the monetary authority’s top officials. The kyat has weakened about 10 percent against the dollar in the past six months, data compiled by Bloomberg show. The drop could deepen if the U.S. Federal Reserve increases interest rates this month as expected, said U Win Thaw, the director general of the foreign-exchange management department in the Central Bank of Myanmar.South Korean President ‘Ready’ to Face Friday Impeachment Vote. SocGen's "Most Worrying Chart" Shows Markets Still Shrugging Off Political Risk. Credit spreads should be twice as wide.Goldman Sachs(GS) Slashes Indian Growth Estimates Amid Currency Crackdown. The impact of India's high-value cash ban is now showing up in the data.Rally in Banks Spurs More Gains in European Stocks Ahead of ECB. (video) European stocks capped their biggest back-to-back gains since the U.S. election as banks jumped ahead of this week’s European Central Bank meeting and utilities climbed on a German court ruling. The Stoxx Europe 600 Index climbed 1 percent at the close, with banks surging the most since June on optimism of more stimulus from the ECB. Italian lenders UniCredit SpA and Mediobanca SpA climbed 9.9 percent or more.Oil Falls From 16-Month High as OPEC Production Keeps on Rising. (video) Futures slid as much as 2.9 percent in New York after rising 15 percent over the previous four sessions. OPEC boosted production to 34.16 million barrels a day last month, according to a Bloomberg News survey, with Angola, Libya and Nigeria leading the gains. Attention is shifting to which non-OPEC producers will join Russia in reducing output when they meet in Vienna on Saturday. OPEC is hoping they will cut 300,000 barrels a day further than the 300,000 already promised by Russia. Saks’ Owner HBC Tumbles as Department-Store Slump Crimps Sales. Hudson’s Bay Co. tumbled as much as 6.8 percent after third-quarter results missed estimates, a sign the owner of Saks Fifth Avenue and Lord & Taylor is struggling to cope with a moribund department-store industry. Excluding nonrecurring items, the company posted a third-quarter loss of 56 cents a share in the period, which ended Oct. 29. Analysts had projected a deficit of 22 cents, according to data compiled by Bloomberg. Sales and adjusted earnings also fell short of predictions.U.S. CEOs Become More Optimistic on Outlook for Sales, Jobs. Chief executive officers of some of the largest U.S. companies became more optimistic about their sales and hiring prospects in the weeks before and after last month’s presidential election, even as they pared plans for capital spending. The Business Roundtable’s CEO Economic Outlook Index -- a measure of expectations for revenue, capital spending and employment -- increased by 4.6 points to 74.2 in the fourth qua[...]



Bear Radar

2016-12-06T13:39:18.826-05:00

Style Underperformer: Large-Cap Growth unch. Sector Underperformers: 1) Social Media -.7% 2) Gold & Silver -.7% 3) Oil Service -.6% Stocks Falling on Unusual Volume: SBSI, MIK, STWD, SNCR, FET, CMG, OMCL, TEVA, BNED, MTDR, RCII, HMST, AGIO, GBT, COT, AMCX, JUNO, AKRX, SCSS, LPLA and BLCM Stocks With Unusual Put Option Activity: 1) TOL 2) SPWR 3) EWT 4) XME 5) GLW Stocks With Most Negative News Mentions: 1) RCII 2) SPWR 3) JUNO 4) SCSS 5) ABM Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-12-06T13:25:11.824-05:00

Style Outperformer: Small-Cap Value +.5% Sector Outperformers: 1) Airlines +2.3% 2) Homebuilders +1.9% 3) Gaming +1.5% Stocks Rising on Unusual Volume:IL, ZG, FRAN, BOBE, CONN, ING, TOL, UBS, CS, TLYS, CAVM, HSBC, DB, FCE/A and BWAStocks With Unusual Call Option Activity: 1) WPX 2) Z 3) TOL 4) LNKD 5) SWKS Stocks With Most Positive News Mentions: 1) IDTI 2) BKE 3) PLUG 4) IDTI 5) BA Charts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-12-06T11:49:42.744-05:00

NYSE Composite Index:
(image)



Tuesday Watch

2016-12-05T21:16:51.081-05:00

Evening HeadlinesBloomberg: Emerging Market Crisis Echoes Grow Louder. Everyone who covers emerging markets has heard the mantra: Yes, there's a lot of debt but, unlike the late 1990s, sovereign balance sheets are fine. Corporations are the ones to worry about, and they are hardly ever sources of systemic risk. That may have been true five years ago. It isn't any longer, if the companies that specialize in assessing credit strength are to be believed. Asian Stocks Join Italy Relief Rally as Swings Ease; Crude Drops. Asian stocks joined the global relief rally, as investors switched their focus back to the outlook for U.S. monetary policy following the defeat of Italy’s constitutional referendum. The Korean won climbed, while bonds and crude oil retreated. Mining and bank shares led the Asian equity benchmark higher, with Japanese stocks rising for the first time in three days following the Dow Jones Industrial Average’s return to a record. The won increased for the first time in three days, and the euro was near its strongest level since mid-November after wiping out an initial slump Monday on the Italian premier’s resignation. The Australian dollar was close to a more than two-week high, while the nation’s bonds fell with debt in the region amid expectations interest rates will be held in a review. Oil snapped a four-day climb as the yen and gold tried to rally. The MSCI Asia Pacific Index jumped .9% as of 9:57 a.m. Tokyo time, with Japan's Topix index rising .9% as well.Trump’s ‘Retribution’ Tax Stirs Questions, GOP Resistance. Donald Trump’s threats to use taxes as “retribution” against U.S. companies that move jobs overseas are legally dubious, tax specialists say -- and they’re prompting resistance from some Republican leaders who fear a coming era of economic protectionism or international trade wars. “There’s other ways to achieve what the president-elect is talking about,” House Majority Leader Kevin McCarthy told reporters Monday, arguing that changing the tax code is the way to entice companies to create jobs and keep them in the U.S. “I don’t want to get into some type of trade war,” McCarthy said. Implementing large tariffs like those Trump proposed had little apparent support in the Senate either, where most Republicans have long backed deals lowering trade barriers, not raising them.The Pessimist's Guide to 2017. Why U.S. Stocks May Be Poised for a Correction. (video) Wall Street Journal:For Europe’s Unity, 2017 Will Be a Year of Reckoning. Mainstream parties are feeling pressure from populist politicians, setting up votes next year in several core European nations that will help determine fate of open borders and the euro.Italian Prime Minister Matteo Renzi Resigns, Ushering in Period of Uncertainty. President accepts resignation but asks premier to stay until 2017 budget gets Senate approval. Harsh Political Winds Test Euro’s Stability and Future. Some question how long the common currency can survive amid repeated tests, political and economic, across the Continent.Donald Trump Picks Ben Carson to Head Housing Agency. The one-time political rival would be the first African-American appointed to a senior position so far during the transition. Donald Trump Shuffles the Ideological Deck. The president-elect’s moves so far don’t adhere to strict conservative or outsider themes. Fox News:Ellison's bid to lead DNC complicated by calls to relinquish House seat. (video)CNBC:Five tools that would let Trump follow through on his tariff threats. (video)Amazon Go is the first of 3 or more new Amazon food store formats, reports say. (video)Tech giants to cooperate on removal of extrem[...]



Stocks Rising into Final Hour on Less European/Emerging Markets/US High-Yield Debt Angst, Short-Covering, Yen Weakness, Energy/Homebuilding Sector Strength

2016-12-05T15:31:39.514-05:00

Broad Equity Market Tone:Advance/Decline Line: Substantially HigherSector Performance: Almost Every Sector RisingVolume: Slightly Below Average Market Leading Stocks: OutperformingEquity Investor Angst:Volatility(VIX) 12.47 -11.69%Euro/Yen Carry Return Index 127.85 +1.11%Emerging Markets Currency Volatility(VXY) 10.92 -.27% S&P 500 Implied Correlation 51.73 -2.85%ISE Sentiment Index 92.0 +12.2%Total Put/Call .82 -10.87% NYSE Arms .74 -25.81% Credit Investor Angst:North American Investment Grade CDS Index 72.14 -1.15% America Energy Sector High-Yield CDS Index 500.0 -9.07%European Financial Sector CDS Index 107.63 +2.75%Western Europe Sovereign Debt CDS Index 23.50 +1.38%Asia Pacific Sovereign Debt CDS Index 40.51 -2.33%Emerging Market CDS Index 266.42 -2.35%iBoxx Offshore RMB China Corporate High Yield Index 133.0 +.04%2-Year Swap Spread 21.75 +1.25 basis pointsTED Spread 48.5 +1.0 basis point3-Month EUR/USD Cross-Currency Basis Swap -58.25 +2.75 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 69.69 +.51%3-Month T-Bill Yield .46% -1.0 basis pointYield Curve 127.0 -2.0 basis pointsChina Import Iron Ore Spot $78.62/Metric Tonne +1.07%Citi US Economic Surprise Index 28.70 +4.0 pointsCiti Eurozone Economic Surprise Index 58.90 -2.5 points Citi Emerging Markets Economic Surprise Index 3.6 +2.1 points 10-Year TIPS Spread 1.97% +2.0 basis points100.0% chance of Fed rate hike at Feb. 1 meeting, 100.0% chance at March 15 meetingOverseas Futures:Nikkei 225 Futures: Indicating +136 open in Japan China A50 Futures: Indicating +46 open in ChinaDAX Futures: Indicating +8 open in GermanyPortfolio: Slightly Lower: On losses in my index hedges and emerging markets shorts Disclosed Trades: NoneMarket Exposure: 25% Net Long[...]



Today's Headlines

2016-12-05T15:09:20.156-05:00

Bloomberg:Europe Caught in Headlights as Populists Hinder ‘Radical’ Change. (video) Votes in Italy and Austria say little about whether populist parties will sweep elections elsewhere in Europe, but they do spell more political paralysis. Both were widely watched as indicators of whether the anti-establishment upsets of Brexit in the U.K. and President-elect Donald Trump in the U.S. will continue through a bumper year of major European elections in 2017. The answer was hardly comforting for investors or centrist parties. Sunday’s defeat of a far-right presidential candidate in Austria and of a constitutional referendum in Italy suggest pressure from the extreme left and right continues to grow, just not as a post-Trump wave of election victories fated to sweep the continent, said Wolfango Piccoli, co-president of consultants Teneo Intelligence. That risks discouraging Europe’s leaders from tackling the fundamental economic reform that might address the root causes of the popular discontentment. “The question isn’t so much whether the populists win -- they are here to stay, they will impact politics,” said Piccoli. “You have to look at each set of local conditions separately.”China Regulator Slams Leveraged Stock Acquirers as ‘Robbers’. China’s top securities regulator resorted to unusually harsh language to denounce leveraged acquisitions of shares in listed companies, as officials move to rein in financial risks associated with a surge in dealmaking. China Securities Regulatory Commission Chairman Liu Shiyu also questioned the legitimacy of the funding sources at acquirers that he didn’t identify, saying their behavior challenges the nation’s rules, as well as their own professional ethics. Such acquisitions show “retrogress and decay in humanity and commercial morals, and is by no means financial innovation,” Liu, 55, said. “By using improperly obtained money to conduct leveraged acquisitions, you’ve gone from strangers at the gate, to barbarians and eventually robbers of the industry, ” he said at a meeting of the Asset Management Association of China in Beijing on Saturday, a transcript of which was posted on the regulator’s website. “That’s not allowed.”What Happens If Trump Labels China a Manipulator? (video)The World's New Fear Gauge Is Ringing Alarm Bells in the Era of Trump. (graph) A key barometer of risk aversion soared after Trump's victory fueled a dollar rally. OPEC Target Gets Harder as African Members Boost November Output. OPEC’s mission to implement last week’s historic deal to curb production for the first time in eight years just got a little bit harder after three of its African members increased output in November. Crude production from the Organization of Petroleum Exporting Countries rose to a record 34.16 million barrels a day in November with gains led by Angola, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data. That’s up from a revised 33.96 million barrels a day in October.Trump, Gore Meet on Climate After Talks Opened With Ivanka. Donald Trump met in New York Monday with Al Gore to discuss an issue the Republican president-elect has long scoffed at: Global warming. The meeting at Trump Tower was initially scheduled with the president-elect’s daughter, Ivanka Trump. After Gore emerged, the Democratic politician-turned climate activist told reporters he wound up spending "the bulk of the time" with Trump himself.Trump Vows Prompt Review of Rejection of Dakota Pipeline. President-elect Donald Trump backs the Dakota Access Pipeline and will revi[...]



Bear Radar

2016-12-05T14:21:20.919-05:00

Style Underperformer: Large-Cap Value +.4% Sector Underperformers: 1) HMOs -1.6% 2) Airlines -.3% 3) Gaming -.2% Stocks Falling on Unusual Volume: CNSL, AGIO, TLYS, BLCM, OMCL, GBT, TLRD, SPB, HUM, AET, RETA, ETP, UNH, FNV, ROK, TCAP, FIVE, WDC, JEC, WLB, LPLA, ALK, XLRN, NWE and BLCM Stocks With Unusual Put Option Activity: 1) ACAD 2) VFC 3) WMB 4) DD 5) AET Stocks With Most Negative News Mentions: 1) TLRD 2) KEY 3) UNH 4) CNC 5) LUV Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-12-05T14:04:12.746-05:00

Style Outperformer: Small-Cap Value +1.5% Sector Outperformers: 1) Coal +3.7% 2) Steel +3.2% 3) Oil Service +2.3% Stocks Rising on Unusual Volume:FRP, MCRN, EDU, GMED, HMST, WDAY, SITE, NSR, GIII, GCO, KITE, CLF, CUBI, NSR, CVGW, VSI, PLAB, SLM, RPD, RHP, IBKC and SITEStocks With Unusual Call Option Activity: 1) HLT 2) COG 3) HUM 4) TOL 5) RH Stocks With Most Positive News Mentions: 1) FGP 2) VNCE 3) SAFM 4) MHK 5) SMTC Charts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-12-05T11:13:18.560-05:00

NYSE Composite Index:
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Monday Watch

2016-12-04T21:17:55.319-05:00

Today's Headlines Bloomberg: Renzi Resigns After Populists Defeat Italy Reforms in Referendum. (video) Prime Minister Matteo Renzi resigned in the early hours of Monday after accepting defeat in a constitutional referendum he’d staked his job on. With exit polls showing about 59 percent of Italians had voted against his plans to rein in the power of the Italian Senate, the prime minister said he will hand his resignations to President Sergio Mattarella. The euro fell to a 20-month low as he spoke. “I have lost,” Renzi said in a televised statement. “We gave the Italians an opportunity to change, but we didn’t succeed.”Italy's Constitutional Referendum: Live Results.Trump Takes on China in Tweets About Currency, South China Sea. Donald Trump took on the Chinese government via social media on Sunday, rejecting criticism of his decision to take a phone call from Taiwan’s president at the risk of triggering backlash from Beijing. The U.S. president-elect told his 16.6 million Twitter followers that he wouldn’t be told by China who he should or shouldn’t talk to, and reiterated some of the grievances about China used in his winning presidential campaign. “Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete), heavily tax our products going into their country (the U.S. doesn’t tax them) or to build a massive military complex in the middle of the South China Sea? I don’t think so!” Trump tweeted.Euro Slips With Asian Stocks While Bonds Rise as Italy Votes No. The euro retreated with riskier assets, while bonds rose, amid concern the failure of Italy’s referendum on constitutional reform will destabilize the country, emboldening anti-Europe and nationalist forces. The common currency touched its weakest point in 20 months as Prime Minister Matteo Renzi conceded defeat and said he’ll quit as results showed his bid to overhaul legislative decision-making in Italy had been voted down. Stocks from Tokyo to Sydney declined as the surprise resignation of New Zealand’s premier exacerbated pressure on the local currency. Government debt tracked a rebound in Treasuries from Friday, when mixed U.S. jobs data weighed on the dollar and stocks. Gold fluctuated, while oil fell with copper. The MSCI Asia Pacific Index declined .4%, with Japan's Topix index retreating .6%, Australia's S&P/ASX 200 Index down .7%, the Kospi losing .1% in Seoul and New Zealand's S&P/NZX50 Index dropping .4%. Oil Market’s New Engine Losing Steam on Modi’s Cash Crackdown. Oil demand growth in the world’s fastest-growing crude market may weaken as the government’s cash crackdown slows the economy. Diesel and gasoline use, which account for more than half of India’s oil demand, will slow or contract this month and possibly early next year, according to Ivy Global Energy Pte., FGE and Centrum Broking Ltd. Expansion in the world’s fastest-growing major economy is widely expected to ease temporarily after Prime Minister Narendra Modi last month withdrew high-value currency notes in a country where almost all consumer payments are in cash.Wall Street Journal:Italy Votes ‘No’ in Referendum, Projections Indicate. Between 57% and 61% of voters opposed constitutional changes sought by Prime Minister Matteo Renzi, according to Istituto Piepoli projections.Italy’s ‘No’ Poses Trouble for Eurozone. Populist win marks sobering start for what could be defining year for European Union. Italian Referendum: Live Cove[...]



Weekly Outlook

2016-12-04T19:30:30.470-05:00

BOTTOM LINE: I expect US stocks to finish the week modestly lower on commodity weakness, rising European/Emerging Markets/US High-Yield Debt Angst, yen strength, technical selling, profit-taking and rising long-term rates. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.
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Today's Headlines

2016-12-03T19:04:51.175-05:00

Bloomberg:Erdogan Says Turkey Faces ‘Economic Sabotage’ as Lira Plunges. Turkish President Recep Tayyip Erdogan on Saturday said his political enemies are trying to sabotage the economy by speculating on the stock market, foreign exchange rate and interest rates after failing to overthrow his administration in July. The lira plunged to record lows over the past week even as Erdogan urged Turks to convert their foreign currency savings into liras and gold while vowing to keep up his fight against high interest rates.Italy Referendum: What to Watch Into the Night on Sunday.Electric Cars Could Take an OPEC-Sized Bite From Oil Demand. Summers Slams Trump’s Carrier Move as Threat to Capitalism. Former U.S. Treasury Secretary Lawrence Summers blasted Donald Trump’s deal with United Technologies Corp. to keep factory jobs in Indianapolis, labeling the president-elect’s intervention as a dangerous shift away from American capitalism. Summers, a Democrat who was Treasury chief under then-President Bill Clinton, argued that rich and successful countries have a strong foundation of rules-based capitalism. He said Trump skirted that tradition when he used a “combination of carrots and sticks” to prevent United Technologies from sending jobs at its Carrier plant to Mexico. He called that “an act of ad hoc deal capitalism.”Wall Street Journal:Regulator Will Start Issuing Bank Charters for Fintech Firms. Office of the Comptroller of the Currency will allow upstarts to become ‘special purpose national banks’.Fox News:Officials say 9 dead in Oakland warehouse party fire, death toll could rise to 40. (video)CNBC:Rent prices show signs of calming down, with NYC, San Francisco and DC sliding.Russia bets on Trump as gateway to eased sanctions.Italy's referendum explained: What you need to know. (video)Zero Hedge:Trump's Lead in PA Shrinks By 22,000 Votes As Stein Seeks Statewide Recount.The Shocking Truth About How Barack Obama Was Able To Prop Up The U.S. Economy.Ford CEO Expresses Interest In Working With Trump; Says Less Regulation Is Key To Saving U.S. Jobs. Michigan Recount Devolves Into Chaos As Multiple Federal Lawsuits Filed.Trump Risks Major Diplomatic Scandal With China Following Taiwan Phone Call.Buyers Remorse? Trump Supporter Was Foreclosed On By Treasury Pick Steve Mnuchin.Chinese Developers Rethink U.S. Real Estate Projects: "I See Danger...U.S. Real Estate Is Peaking".Trump Targets Second Indiana Company Planning To Outsource Jobs To Mexico.Jill Stein Raises Fundraising Goal Again To $9.5MM - Almost 4 Times Her Initial Target. This Is The "Most Dangerous Moment In Human History," Stephen Hawking Warns.The New American Dream - A Life In Hock.Michigan Rejects Trump's Objection - Recounts Are Cleared To Start Next Week.Sudden Scramble For Gold In China Sends Premiums To 3 Year High.Weekend Reading: Trumponomics.Tech, Small Caps Suffer Worst Week In 10 Months As Trump Hangover Hits.Business Insider:Sears(SHLD) is on the brink of catastrophe as stores closures loom and top execs flee the company.Bowe Bergdahl has asked Obama for a pardon before Trump takes office.Walmart's(WMT) new gas-and-grocery hybrids could become a major threat to Amazon and Kroger.CNN apologizes, disciplines producer after employee was caught on hot mic joking about Trump's plane crashing.The Telegraph:Renzi defeat won't break the euro, but a Le Pen victory most certainly will.Europe holds its breath as Italy heads to the polls for critical referendum.[...]



Weekly Scoreboard*

2016-12-02T15:47:36.435-05:00

IndicesS&P 500 2,191.73 -1.05%DJIA 19,172.0 +.03%NASDAQ 5,255.43 -2.78%Russell 2000 1,314.76 -2.46%S&P 500 High Beta 36.52 +1.42% Goldman 50 Most Shorted 119.80 -1.98% Wilshire 5000 22,787.90 -1.23%Russell 1000 Growth 1,032.33 -2.04%Russell 1000 Value 1,078.85 -.18%S&P 500 Consumer Staples 516.36 -1.67%Vanda Cyclicals-Defensives 1.3137 -.008% Morgan Stanley Technology 1,182.85 -3.50%Transports 9,050.91 -.09%Utilities 633.61 -1.31%Bloomberg European Bank/Financial Services 85.17 -.1%MSCI Emerging Markets 35.20 -.24%HFRX Equity Hedge 1,153.39 +.38%HFRX Equity Market Neutral 997.98 -.17%Sentiment/InternalsNYSE Cumulative A/D Line 268,516 -.64%Bloomberg New Highs-Lows Index 240-400Bloomberg Crude Oil % Bulls 56.41 +26.94% CFTC Oil Net Speculative Position 276,320 unch. CFTC Oil Total Open Interest 1,995,504 -1.58% Total Put/Call .95 +24.05%OEX Put/Call 1.21 -83.57%ISE Sentiment 93.0 -21.74%NYSE Arms .88 -15.53%Volatility(VIX) 14.12 +14.83%S&P 500 Implied Correlation 52.96 -.8%G7 Currency Volatility (VXY) 10.67 +1.52%Emerging Markets Currency Volatility (EM-VXY) 10.95 -2.41% Smart Money Flow Index 19,137.31 -.5%ICI Money Mkt Mutual Fund Assets $2.719 Trillion +.51%ICI US Equity Weekly Net New Cash Flow -$.844 BillionAAII % Bulls 43.8 -12.3%AAII % Bears 25.1 +13.7% Futures Spot PricesCRB Index 191.69 +3.21%Crude Oil 51.66 +12.38% Reformulated Gasoline 155.99 +13.66%Natural Gas 3.45 +12.44%Heating Oil 166.28 +13.17%Gold 1,176.30 -.59%Bloomberg Base Metals Index 173.62 -1.88% Copper 262.70 -1.92%US No. 1 Heavy Melt Scrap Steel 207.0 USD/Ton unch.China Iron Ore Spot 77.79 USD/Ton -2.29%Lumber 336.90 +.75%UBS-Bloomberg Agriculture 1,134.20 -2.5%EconomyAtlanta Fed GDPNow Forecast +2.9% -70.0 basis points ECRI Weekly Leading Economic Index Growth Rate +8.3% +210.0 basis pointsPhilly Fed ADS Real-Time Business Conditions Index -.1274 +6.05% S&P 500 Blended Forward 12 Months Mean EPS Estimate 130.29 +.29%Citi US Economic Surprise Index 24.70 +15.4 pointsCiti Eurozone Economic Surprise Index 61.40 -1.9 pointsCiti Emerging Markets Economic Surprise Index 1.5 +7.1 points Fed Fund Futures imply 0.0% chance of no change 100.0% chance of 25 basis point hike on 12/14US Dollar Index 100.78 -.76%MSCI Emerging Markets Currency Index 1,500.32 +.27% Euro/Yen Carry Return Index 126.67 +1.03% Yield Curve 128.0 +4.0 basis points10-Year US Treasury Yield 2.39% +3.0 basis pointsFederal Reserve's Balance Sheet $4.407 Trillion -.46%U.S. Sovereign Debt Credit Default Swap 29.9 +3.45% Illinois Municipal Debt Credit Default Swap 358.0 -.02% Western Europe Sovereign Debt Credit Default Swap Index 23.19 -1.23%Asia Pacific Sovereign Debt Credit Default Swap Index 41.47 -6.38%Emerging Markets Sovereign Debt CDS Index 99.97 -1.23%Israel Sovereign Debt Credit Default Swap 71.09 -3.41% Iraq Sovereign Debt Credit Default Swap 760.05 +1.38% Russia Sovereign Debt Credit Default Swap 222.33 -3.29% iBoxx Offshore RMB China Corporate High Yield Index 132.95 +.05%10-Year TIPS Spread 1.95% +2.0 basis pointsTED Spread 47.0 +2.5 basis points 2-Year Swap Spread 20.5 +.75 basis point3-Month EUR/USD Cross-Currency Basis Swap 615.0 -5.75 basis pointsN. America Investment Grade Credit Default Swap Index 72.83 -.44% America Energy Sector High-Yield Credit Default Swap Index 551.0 -10.26% European Financial Sector Credit Default Swap Index 104.75 -3.6%Emerging Markets Credit Default Swap Index 272.82 +.69%CMBS AAA Super Senior 10-Year Treasury Spread to Swaps 135.0 [...]



Stocks Slightly Lower into Final Hour on European Debt Angst, Yen Strength, Profit-Taking, Financial/Restaurant Sector Weakness

2016-12-02T15:13:31.820-05:00

Broad Equity Market Tone:Advance/Decline Line: HigherSector Performance: MixedVolume: Around Average Market Leading Stocks: Performing In LineEquity Investor Angst:Volatility(VIX) 14.09 +.14%Euro/Yen Carry Return Index 126.60 -.36%Emerging Markets Currency Volatility(VXY) 10.95 +.09% S&P 500 Implied Correlation 52.71 -4.51%ISE Sentiment Index 105.0 +25.0%Total Put/Call .98 +4.26% NYSE Arms .91 +36.38% Credit Investor Angst:North American Investment Grade CDS Index 72.82 -.81% America Energy Sector High-Yield CDS Index 551.0 -3.23%European Financial Sector CDS Index 104.75 -1.76%Western Europe Sovereign Debt CDS Index 23.18 -.79%Asia Pacific Sovereign Debt CDS Index 41.47 -.38%Emerging Market CDS Index 272.82 -.17%iBoxx Offshore RMB China Corporate High Yield Index 132.95 -.02%2-Year Swap Spread 20.5 +.75 basis pointTED Spread 47.5 +1.75 basis points3-Month EUR/USD Cross-Currency Basis Swap -61.0 -4.0 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 69.34 +.21%3-Month T-Bill Yield .47% unch.Yield Curve 129.0 unch.China Import Iron Ore Spot $77.79/Metric Tonne -.73%Citi US Economic Surprise Index 24.70 +6.5 pointsCiti Eurozone Economic Surprise Index 61.40 +.1 point Citi Emerging Markets Economic Surprise Index 1.5 +3.0 points 10-Year TIPS Spread 1.95% -5.0 basis points100.0% chance of Fed rate hike at Feb. 1 meeting, 100.0% chance at March 15 meetingOverseas Futures:Nikkei 225 Futures: Indicating -51 open in Japan China A50 Futures: Indicating +12 open in ChinaDAX Futures: Indicating -8 open in GermanyPortfolio: Slightly Higher: On gains in my medical/biotech/tech/retail sector longs Disclosed Trades: NoneMarket Exposure: 25% Net Long[...]



Morning Market Internals

2016-12-02T10:46:38.332-05:00

NYSE Composite Index:
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