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BETWEEN THE HEDGES



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



Updated: 2016-09-29T22:01:19.105-04:00

 



Friday Watch

2016-09-29T22:01:19.124-04:00

Evening HeadlinesBloomberg:PBOC Seen Switching to Broad Monetary Tightening as Soon as 2017. With China’s economy stable for now and home prices in major cities soaring, analysts are dialing back forecasts for additional monetary stimulus, with some betting on a switch to tightening mode. And as its policy framework evolves, The People’s Bank of China will make its next broad move by guiding interest rates through a corridor, rather than the traditional approach of changes to benchmark lending and deposit rates, according to a Bloomberg survey of 18 economists from Sept. 19 to 26. Here’s a snapshot of the main findings:China Homes Beat Stocks, Wine as Buying Frenzy Stokes Bubble. Even amid the slowest economic growth in a quarter century, China’s homeowners are enjoying returns that put other asset classes to shame - on paper, anyway. Home prices rose the most in six years last month, defying new policies to curb excessive speculation in big cities and government warnings about asset bubbles. While gains have been most pronounced in big cities like Shenzhen, where home prices are up about 60 percent in the past year, smaller cities such as Xiamen have also seen runaway growth, where prices have risen more than 38 percent.Japan’s Consumer Prices Fall for Sixth Straight Month in August. (video) Japan’s consumer prices fell for a sixth straight month in August, underscoring the challenge Bank that Japan Governor Haruhiko Kuroda faces as he tries to spur 2 percent inflation and reflate the nation’s economy. Industrial production made a modest gain, while household spending slumped and the jobless rate held near the lowest since 1995.The U.K. Economy Is Flying Blind 100 Days After the Brexit Vote. Pubs, retailers, airlines. Name the business and it’s likely they’re looking for an answer to what Brexit will actually mean.Asian Stocks Fall as Banks Are Dragged Lower by Global Concerns. What’s set to be the best quarter for Asian stocks since 2012 is ending on a sour note as concern about the financial health of Germany’s biggest lender unnerves investors. The dollar strengthened versus most peers after U.S. data bolstered the case for an interest-rate hike this year. Financial shares were the biggest drag on the MSCI Asia Pacific Index after Deutsche Bank AG slid to a record low in the U.S. as Bloomberg News reported that some hedge funds have cut their exposure to the lender. S&P 500 Index futures also fell along with contracts on the U.K.’s FTSE 100. The MSCI Asia Pacific Index dropped 0.8 percent as of 9:20 a.m. Tokyo time, trimming its quarterly advanced to 8.7 percent. Financial stocks accounted for about a quarter of the decline in the benchmark. Japan’s Topix index slid 1.8 percent as key stock measures lost ground across markets open for trading. Markets in mainland China are shut next week for National Day holidays.Republicans Slam Clinton for Deutsche Speeches as Firm Slumps. The Republican National Committee reignited calls for Hillary Clinton to release details surrounding her paid private speeches to Deutsche Bank on Thursday just as the firm's New York-listed shares fell to a record low. Officials from the German-bank, which U.S. regulators slapped with a massive $14 billion fine earlier this month, paid the Clintons $955,000 between 2012 and 2014 for a total of four speeches, according to financial disclosure records. Hillary Clinton was paid $225,000 for an April 24, 2013 speech and $260,000 for an Oct. 7, 2014 speech. Her husband was paid $200,000 for an Oct. 10, 2012 speech and $270,000 for a speech he gave on Aug. 27, 2014.Specialty Pharma Stocks Tumble in Fear of California's Drug Price Referendum. Big Pharma has more to worry about than just Hillary Clinton. Wall Street Journal:Hackers Infect Army of Cameras, DVRs for Massive Internet Attacks. Hacking shows vulnerability of internet devices, security experts say.Iraq Quarrel on Production Number Could Sink OPEC Deal. Iraq disagrees with the output numbers that underpin an OPEC plan to b[...]



Stocks Lower into Final Hour on Eurozone Financial Contagion Fears, Rising European/Emerging Markets/US High-Yield Debt Angst, Technical Selling, Biotech/Financial Sector Weakness

2016-09-29T16:00:13.574-04:00

Broad Equity Market Tone:Advance/Decline Line: Substantially LowerSector Performance: Almost Every Sector DecliningVolume: Slightly Above Average Market Leading Stocks: Performing In LineEquity Investor Angst:Volatility(VIX) 14.64 +17.8%Euro/Yen Carry Return Index 118.42 +.41%Emerging Markets Currency Volatility(VXY) 10.29 +1.68% S&P 500 Implied Correlation 47.19 +8.92%ISE Sentiment Index 73.0 -9.88%Total Put/Call 1.01 +9.78% NYSE Arms .72 +10.99% Credit Investor Angst:North American Investment Grade CDS Index 77.74 +3.17% America Energy Sector High-Yield CDS Index 666.0 -1.69%European Financial Sector CDS Index 102.0 +.49%Western Europe Sovereign Debt CDS Index 24.45 -.81%Asia Pacific Sovereign Debt CDS Index 32.44 +3.35%Emerging Market CDS Index 239.76 +3.06%iBoxx Offshore RMB China Corporate High Yield Index 132.21 +.05%2-Year Swap Spread 25.0 +1.0 basis pointTED Spread 58.0 -1.5 basis points 3-Month EUR/USD Cross-Currency Basis Swap -49.5 -7.75 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 72.84 -.34%3-Month T-Bill Yield .24% -3.0 basis points Yield Curve 82.0 +1.0 basis pointChina Import Iron Ore Spot $56.68/Metric Tonne +.35%Citi US Economic Surprise Index -3.40 +1.7 points Citi Eurozone Economic Surprise Index 4.10 +14.5 points Citi Emerging Markets Economic Surprise Index -11.4 -.6 point 10-Year TIPS Spread 1.56% -2.0 basis points52.7% chance of Fed rate hike at Dec. 14 meeting, 56.6% chance at Feb. 1 meetingOverseas Futures:Nikkei 225 Futures: Indicating -108 open in Japan China A50 Futures: Indicating unch. open in ChinaDAX Futures: Indicating -109 open in GermanyPortfolio: Slightly Higher: On gains in my index hedges and emerging markets shorts Disclosed Trades: Added to my (IWM)/(QQQ) hedgesMarket Exposure: Moved to 25% Net Long[...]



Today's Headlines

2016-09-29T14:58:03.428-04:00

Bloomberg:  Some Deutsche Bank(DB) Clients Reduce Collateral on Trades. (video) A number of funds that clear derivatives trades with Deutsche Bank AG have withdrawn some excess cash and positions held at the lender, a sign of counterparties’ mounting concerns about doing business with Europe’s largest investment bank. While the vast majority of Deutsche Bank’s more than 200 derivatives-clearing clients have made no changes, some funds that use the bank’s prime brokerage service have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Millennium Partners, Capula Investment Management and Rokos Capital Management are among about 10 hedge funds that have cut their exposure, said a person familiar with the situation who declined to be identified talking about confidential client matters. The hedge funds use Deutsche Bank to clear their listed derivatives transactions because they are not members of clearinghouses. Millennium, Capula and Rokos declined to comment when contacted by phone or e-mail. The lender’s New York-listed shares fell as much as 6.5 percent as of 12:53 p.m. local time.Here's the Smoking Gun That China Has a Huge Housing Bubble. Speculative buyers have eschewed Chinese stocks in favor of property, prompting even the chief economist at the central bank of the world's second largest economy to declare that housing was in a "bubble." But when strategists at UBS AG recently compiled a list of bubblicious housing markets, there weren't any selections from mainland China due to the lack of reliable data on the subject, underscoring the continued difficulty in declaring Chinese real estate to be in overheated territory. But Deutsche Bank AG Chief China Economist Zhiwei Zhang thinks he's pinpointed "a clear sign of a bubble" in the market — one that will end in a major correction in two years' time.  Treasuries Gain as Deutsche Bank Contagion Fear Fuels Haven Bid. Treasuries rallied, reversing earlier losses, as traders sought haven assets on reports that some Deutsche Bank AG clients are pairing back their exposure to the beleaguered German lender. Treasury 10-year yields fell one basis point, or 0.01 percentage point, to 1.56 percent as of 2:43 p.m in New York, according to Bloomberg Bond Trader data. The price of the 1.5 percent security due in August 2026 climbed to 99 13/32.European Stocks Fail to Maintain Gains After U.S. Economic Data. (video) The rally in energy producers wasn’t enough for European equities to maintain their gains after U.S. data stocked concern about the economy as the Federal Reserve contemplates raising interest rates. The Stoxx Europe 600 Index gained less than 0.1 percent, almost completely erasing its advance in the last hour of trading. A report showed U.S. pending home sales slumped in August, just as Fed Bank of Atlanta President Dennis Lockhart said the central bank is nearing its goals of maximum employment and steady inflation near 2 percent.With Deal Done, OPEC Faces Hurdles in Making Output Cuts Work. (video) The challenges OPEC will confront trying to limit output were evident just minutes after the group agreed on the new plan. In an angry and sometimes incoherent briefing, Iraq’s oil minister railed against the journalists and analysts who estimate the amount of crude each member produces. Why? Those estimates will be key to setting quotas and evaluating which countries are meeting their commitments to cap production and which aren’t. Iraq’s minister, Jabbar al-Luaibi, complained Wednesday in Algiers that published estimates of Iraqi output were too low and warned that Iraq will refuse to accept figures that don’t match its own.OPEC Nudges Ruble to Level That Sparked Putin Warning: Chart.Oil Analysts Remain OPEC Skeptics as Pump-at-Will Policy Ditched. (video) Oil analysts, many of whom were surprised by OPEC’s decision on Wednesday to set out the[...]



Bear Radar

2016-09-29T14:15:05.023-04:00

Style Underperformer: Small-Cap Growth -1.8% Sector Underperformers: 1) Biotech -2.9% 2) Drugs -2.5% 3) Steel -2.3% Stocks Falling on Unusual Volume:  ITCI, DKT, DB, DTK, COTY, PG, FGP, DXB, SN, PRGS, SNY, SBH, SYNA, TEVA, VA, EXEL, LSI, DXCM, FIT, TPX, MYL, GOGO, CLSD, BUD, KLAC, CUZ, PKY, RHI, VLO, ITCI, FIT and MPC Stocks With Unusual Put Option Activity: 1) EWG 2) VLO 3) XLE 4) XBI 5) COST Stocks With Most Negative News Mentions: 1) FIT 2) SONS 3) ITCI 4) MOS 5) MS Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-09-29T13:59:08.244-04:00

Style Outperformer: Mid-Cap Value -.8% Sector Outperformers: 1) Oil Service +1.9% 2) Semis +.8% 3) Airlines -.4% Stocks Rising on Unusual Volume:MIME,  AMTD, ECA, OAS, CAG, NXPI, MRC, CLR, DO, LL and SPNStocks With Unusual Call Option Activity: 1) MPC 2) SVU 3) VIAB 4) LL 5) PFE Stocks With Most Positive News Mentions: 1) EMMS 2) KOS 3) SMRT 4) EXC 5) EGRXCharts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-09-29T11:18:04.692-04:00

NYSE Composite Index: Volume Running +11.3% Above 100-Day Average 4 Sectors Rising, 6 Sectors Declining 36.6% of Issues Advancing, 60.7% Declining 778 New 52-Week Highs, 11 New Lows 62.4% of Issues Above 200-day Moving Average Average 14-Day RSI 42.1% Vix 12.6 +2.0% Total Put/Call .85 -7.6% TRIN/Arms .70 +7.9% [...]



Thursday Watch

2016-09-28T22:01:17.518-04:00

Evening HeadlinesBloomberg: China Fund Exodus Accelerates as Further Yuan Weakness Expected. China’s capital outflow through cross-border sales of funds is accelerating amid expectations the yuan will weaken further. Mainland investors’ accumulative net buying of Hong Kong-registered public funds under the mutual recognition of fund program more than doubled to 7.8 billion yuan ($1.2 billion) as of Aug. 31 from a month earlier, according to data released by the State Administration of Foreign Exchange on Wednesday. That’s almost 96 times the sales of mainland funds in Hong Kong. Experts Warn of China Property Bubble. (video)China’s Big Ball of Money Isn’t Going Anywhere Near Stock Market. This year is seen going down as the worst since 2011 for China’s stock investors as the memory of last summer’s rout lingers and speculative buying switches to the housing market. The Shanghai Composite Index will end the year at 3,075, according to the median forecast in a Bloomberg poll of 10 strategists and fund managers. That implies a 13 percent drop over the 12-month period, the steepest in five years, and a gain of 2.9 percent from Wednesday’s close. Fading prospects for monetary easing, a slowing economy and the risk of higher U.S. borrowing costs spurring yuan weakness were among factors weighing on the nation’s shares, the survey showed.Japan’s Retail Sales Decline for First Time in Three Months. Japan’s retail sales fell for the first time in three months, signaling that consumer spending is struggling to maintain traction.Turkey Risks Kurdish War on Two Fronts as Army Advances in Syria. Mustafa Denktas had twin sons. One of them, a Kurdish militant, was killed fighting the Turkish army in 2012. Denktas was still in mourning when news arrived three weeks later that the other son had met the same fate. Back then Turkey’s war with separatist Kurds, however bloody and protracted, was essentially a domestic issue. Now it’s an international conflict. When President Recep Tayyip Erdogan sent his army into Syria last month, he wasn’t just striking a blow against Islamic State: a second goal was to stop Kurds from creating a de facto state.‘Hard Brexit’ Looms as 28 Red Lines Turn Deeper Shade of Scarlet. European Union governments are refusing to grant the U.K. any leeway on the link between immigration and trade as it prepares to leave the bloc, raising the likelihood of a “hard Brexit.” Almost 100 days since a referendum signaled the end of Britain’s four decades of EU membership, a Bloomberg News analysis has identified a hardening of positions with even the U.K.’s traditional allies such as Ireland insisting it cannot “cherry pick” in the looming divorce talks.Asia Stocks Rise With Ringgit as OPEC Deal Boosts Oil; Yen Falls. Asian stocks rose with Malaysia’s ringgit and oil climbed to a three-week high after OPEC agreed to a preliminary deal that will cut crude production for the first time in eight years. Energy shares led gains on the MSCI Asia Pacific Index as benchmarks advanced across regional markets open for trading. The MSCI Asia Pacific Index gained 0.5 percent as of 9:18 a.m. Tokyo time, extending its quarterly advance to about 10 percent. A gauge of energy shares surged 2 percent as Santos Ltd. and Inpex Corp. jumped more than 6 percent. U.S. Aluminum Producers Step Up Calls for China Policy Probe. The U.S. aluminum industry’s anti-China drumbeat is gaining volume in Washington this week. A group that represents aluminum companies is calling for a “meaningful dialogue” with Chinese authorities in a bid to end what they say are incentives and subsidies that are fueling a global glut and squeezing U.S. producers out of the market. The Aluminum Association is pressing for a deeper investigation by the U.S. International Trade Commission into Chinese po[...]



Stocks Rising into Final Hour on Less US High-Yield Debt Angst, Oil Bounce, Yen Weakness, Energy/Metals & Mining Sector Strength

2016-09-28T15:34:27.287-04:00

Broad Equity Market Tone:Advance/Decline Line: Modestly HigherSector Performance: MixedVolume: Below Average Market Leading Stocks: UnderperformingEquity Investor Angst:Volatility(VIX) 12.37 -5.57%Euro/Yen Carry Return Index 117.90 +.22%Emerging Markets Currency Volatility(VXY) 10.11 -.39% S&P 500 Implied Correlation 43.07 -6.17%ISE Sentiment Index 80.0 +19.4%Total Put/Call .87 -11.22% NYSE Arms .70 -36.23% Credit Investor Angst:North American Investment Grade CDS Index 75.50 -2.46% America Energy Sector High-Yield CDS Index 676.0 -1.66%European Financial Sector CDS Index 101.50 -.55%Western Europe Sovereign Debt CDS Index 24.65 +.43%Asia Pacific Sovereign Debt CDS Index 31.65 -1.85%Emerging Market CDS Index 234.81 +.04%iBoxx Offshore RMB China Corporate High Yield Index 132.15 +.05%2-Year Swap Spread 24.0 -1.5 basis pointsTED Spread 59.5 -2.0 basis points 3-Month EUR/USD Cross-Currency Basis Swap -41.75 +.25 basis pointEconomic Gauges:Bloomberg Emerging Markets Currency Index 73.06 -.07%3-Month T-Bill Yield .27% +2.0 basis points Yield Curve 81.0 unch.China Import Iron Ore Spot $56.48/Metric Tonne -.25%Citi US Economic Surprise Index -5.10 +.1 point Citi Eurozone Economic Surprise Index -10.40 +.3 point Citi Emerging Markets Economic Surprise Index -10.8 +.9 point 10-Year TIPS Spread 1.58% +4.0 basis points54.3% chance of Fed rate hike at Dec. 14 meeting, 57.2% chance at Feb. 1 meetingOverseas Futures:Nikkei 225 Futures: Indicating +90 open in Japan China A50 Futures: Indicating +31 open in ChinaDAX Futures: Indicating +53 open in GermanyPortfolio: Slightly Lower: On losses in my biotech sector longs, index hedges and emerging markets shorts Disclosed Trades: Covered some of my (IWM)/(QQQ) hedgesMarket Exposure: Moved to 50% Net Long[...]



Today's Headlines

2016-09-28T15:08:13.959-04:00

Bloomberg: Why People Have Been Worrying About Deutsche Bank, in 12 Charts.Draghi Lays Blame for European Banks’ Woes on Industry Behavior. Mario Draghi said the financial industry must stop blaming the actions of central banks for their problems and focus on fixing internal management and risk failings. “Many banks have problems that don’t have primarily to do with the low level of interest rates but possibly with other reasons,” the European Central Bank president said after a meeting with German lawmakers in Berlin on Wednesday. He cited business models and risk management and said this was “generally acknowledged” by those at the talks. Draghi’s appearance follows criticism by some politicians that the ECB’s policies are hurting savers and weakening banks. The talks also come amid increasing concern about Frankfurt-based Deutsche Bank AG, which had its share price fall to a record low this week as investors questioned the lender’s ability to weather rising legal charges.China's Red-Hot Property Market Risks Missing Lessons From Japan's Crash. China is turning Japanese. That’s the increasingly held view of observers comparing China’s frenzied real-estate market with the epic bust that more than two decades ago hobbled one of its biggest economic rivals. While the two scenarios aren’t a carbon copy, similarities between China’s record credit boom in recent years and Japan’s bubble era have been made at various times by a number of economists and investors. Now, those voices are being heard more often -- even within China. Huang Yiping, a Peking University professor who advises China’s central bank, warned Saturday about leverage that continues to climb, saying that the top risk is more and more investment generates less growth. “That’s exactly the story that unfolded in Japan.” China Said to Mull Bigger Cut in Solar Prices in Some Regions. China may cut the amount of money that solar power generators receive for electricity by more than previously planned, according to two people familiar with the matter. The National Development and Reform Commission may reduce tariffs for solar farms in regions that receive the least amount of sunlight by about 13 percent in 2017 from the 2016 level of 0.98 yuan (15 cents) a kilowatt-hour, said the people, who asked not to be identified because the information isn’t public. The cut compares with a 2 percent reduction the agency had planned for 2017. The move hasn’t been finalized and may be adjusted later, said the people.U.S. Warns Russia It’s Poised to Stop Syria War Cooperation. Secretary of State John Kerry warned that the U.S. will suspend contacts with Russia over Syria unless President Vladimir Putin’s government stops a bombing campaign by Russian and Syrian forces in the besieged city of Aleppo. “The Secretary made clear the United States and its partners hold Russia responsible for this situation, including the use of incendiary and bunker-buster bombs in an urban environment, a drastic escalation that puts civilians at great risk,” State Department spokesman John Kirby said Wednesday in a statement after a call between Kerry and Russian Foreign Minister Sergei Lavrov. How Actual Nuts and Bolts Are Bringing Down Oil Prices. Last spring, Statoil ASA announced it had used the same oil well design and components to drill three reservoirs for the price of one. While the specs for Norwegian Sea drilling might provoke reactions akin to the oil field’s name—the Snorre—such standardized pipes and casings could hold the key to a pervasive mystery about today’s energy market: Why is everyone still drilling when prices are in the basement?Yellen Cornered by Lawmaker in Heated Exchange Over Fed Politics. (video) Federal Reserve Chair Janet Yellen’s defense [...]



Bear Radar

2016-09-28T13:59:18.959-04:00

Style Underperformer: Mid-Cap Growth -.2% Sector Underperformers: 1) Restaurants -1.2% 2) Retail -1.1% 3) Biotech -1.0% Stocks Falling on Unusual Volume:  FGP, VSAR, TPX, FIZZ, SONC, EXEL, YRD, FDS, PAYX, JOBS, NKE, BABY, LEG, KITE, PLAY, HSEA, CBOE, JACK, BGSF, SCSS, SBH, JUNO, DXCM, HTZ, ICUI, PLAY and FGP Stocks With Unusual Put Option Activity: 1) JNK 2) GPS 3) TWLO 4) EWW 5) HES Stocks With Most Negative News Mentions: 1) FIZZ 2) BIDU 3) TPX 4) SONC 5) M Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-09-28T13:23:00.306-04:00

Style Outperformer: Mid-Cap Value -.1% Sector Outperformers: 1) Oil Service +1.4% 2) Steel +1.1% 3) Energy +.9% Stocks Rising on Unusual Volume:MYOK, TTS, INCY, SRPT, DDS and NLNKStocks With Unusual Call Option Activity: 1) JNPR 2) GLW 3) SYMC 4) EXEL 5) RSX Stocks With Most Positive News Mentions: 1) VALE 2) TASR 3) SPWR 4) TWTR 5) DDSCharts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-09-28T11:11:50.070-04:00

NYSE Composite Index: Volume Running -11.2% Below 100-Day Average 1 Sector Rising, 9 Sectors Declining 43.5% of Issues Advancing, 53.8% Declining 66 New 52-Week Highs, 8 New Lows 61.1% of Issues Above 200-day Moving Average Average 14-Day RSI 39.5% Vix 13.3 +1.6% Total Put/Call .83 -15.2% TRIN/Arms 1.33 +20.8% [...]



Wednesday Watch

2016-09-27T21:58:32.890-04:00

Evening HeadlinesBloomberg:Hong Kong-Shanghai Link Looks Lopsided as Outflows Jump: Chart. Asian Stocks Drop as Topix Shares Go Ex-Dividend, Oil Volatile. Asian stocks fell, pushed down by declines in Japanese shares and a weaker oil price as hopes of an output cut fizzled. The MSCI Asia Pacific Index declined 0.5 percent to 141.33 as of 9:06 a.m. in Tokyo. The Topix index dropped 1.1 percent, the most in two-and-a-half weeks, as more than half the companies on the benchmark traded without the right to the next dividend. The yen was at 100.49 per dollar. Oil trading was volatile, with the price below $45 a barrel as investors scaled back expectations of a deal on output cuts when OPEC ministers meet later Wednesday.Bond Market in Deepest Central Bank-Induced Slumber Since 2014. (video) Concerns about a contentious U.S. presidential election and the health of Germany’s largest bank still aren’t enough to stir a Treasuries market emboldened by accommodative central banks. A measure of expected price swings in Treasuries sank to its lowest level since December 2014 as turmoil elsewhere in financial markets pushed investors into haven assets. Benchmark 10-year securities rallied for a second day after Monday’s U.S. presidential debate and as European stocks halted a two-day rout amid concern about Deutsche Bank AG’s financial footing.Wall Street Journal:Donald Trump’s Blunt Defense of Business Record Poses Political Risks. Citing rough-and-tumble capitalism could appeal to some, repel others. Donald Trump jumped right in when Hillary Clinton accused him during Monday’s presidential debate of rooting for the housing market to collapse a decade ago so he could profit off an eventual rebound.Wells Fargo(WFC) Claws Back Millions From CEO After Scandal. CEO John Stumpf to forfeit $41 million in unvested equity awards, forgo salary during investigation; former retail banking head Carrie Tolstedt to forfeit $19 million in unvested equity awards. Two Years Into Oil Slump, U.S. Shale Firms Are Ready to Pump More. Shale industry has proved resilient despite low prices thanks to cost cuts, efficiency improvements.Fox News:Trump: Campaign has raised nearly $18 million since debate. (video)CNBC:This is where oil could go if OPEC goes home empty-handed.OPEC is shooting itself in the foot, oil expert says. (video)Zero Hedge:SocGen Explains The Recent Surge In Health Care Costs.Billionaire Capital Turns Into Ghost Town: "Home Contracts Down 80%", Trophy-Cars Pile Up In Showrooms.Bridgewater Calculates How Much Time Central Banks Have Left. (graph) US Bonds, Stocks Rally As Most Systemically Dangerous Bank In The World Collapses. (graph)Deutsche Bank(DB) Explains Why Central Banks Are Stuck. WA Goes After Pre-Crime: Gun Confiscation Proposed For Those "Likely To Commit Violence In The Near Future". The FT Goes Full Fearmonger: Electing Trump "Would Unravel The World". Oil Pops After Crude Inventories Unexpectedly Drop. (graph)Deutsche Bank Fears Spark Buying Panic In Bunds (Despite Rising Germany Sovereign Risk). (graph)$356 Billion Fund Manager: "Now Is The Most Treacherous Time Ever. I've Never Seen This In My Career". Why Did Cheryl Mills Require Criminal Immunity?Bond-Stock Correlation Reaches Record High. (graph)Business Insider:The maker of TempurPedic(TPX) mattresses is crashing by more than 25%.No one is buying Deutsche Bank's 'comfortable' story.Nike(NKE) beat on earnings, but an important measure of future sales whiffed.Night Trading Asian equity indices are -1.0% to unch. on average.Asia Ex-Japan Investment Grade CDS Index 115.25 -7.25 basis points.  Asia Pacific Sovereign CDS Index 32.25 -.25 basis point.Bloomberg Emerging Markets Curren[...]



Stocks Rising into Final Hour on Diminished Political Uncertainty, Less Emerging Markets/US High-Yield Debt Angst, Technical Buying, Tech/Airline Sector Strength

2016-09-27T15:23:52.767-04:00

Broad Equity Market Tone:Advance/Decline Line: Modestly HigherSector Performance: Most Sectors RisingVolume: Below Average Market Leading Stocks: Performing In LineEquity Investor Angst:Volatility(VIX) 13.22 -8.9%Euro/Yen Carry Return Index 117.53 -.30%Emerging Markets Currency Volatility(VXY) 10.14 -2.62% S&P 500 Implied Correlation 46.50 -6.36%ISE Sentiment Index 71.0 +39.2%Total Put/Call .97 -15.65% NYSE Arms 1.31 +10.3% Credit Investor Angst:North American Investment Grade CDS Index 77.76 -1.78% America Energy Sector High-Yield CDS Index 684.0 -.76%European Financial Sector CDS Index 102.07 +2.62%Western Europe Sovereign Debt CDS Index 24.54 +2.1%Asia Pacific Sovereign Debt CDS Index 32.58 +.48%Emerging Market CDS Index 235.26 -1.69%iBoxx Offshore RMB China Corporate High Yield Index 132.08 +.04%2-Year Swap Spread 25.5 -.25 basis pointTED Spread 61.5 -7.0 basis points 3-Month EUR/USD Cross-Currency Basis Swap -42.0 -4.75 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 73.10 +.40%3-Month T-Bill Yield .25% +7.0 basis points Yield Curve 81.0 -4.0 basis pointsChina Import Iron Ore Spot $56.63/Metric Tonne -.25%Citi US Economic Surprise Index -5.20 +.2 point Citi Eurozone Economic Surprise Index -10.70 -1.2 points Citi Emerging Markets Economic Surprise Index -11.7 +2.1 points 10-Year TIPS Spread 1.54% -2.0 basis points49.9% chance of Fed rate hike at Dec. 14 meeting, 53.0% chance at Feb. 1 meetingOverseas Futures:Nikkei 225 Futures: Indicating -193 open in Japan China A50 Futures: Indicating -29 open in ChinaDAX Futures: Indicating +21 open in GermanyPortfolio: Slightly Lower: On losses in my index hedges and emerging markets shorts Disclosed Trades: Covered some of my (IWM)/(QQQ) hedgesMarket Exposure: Moved to 50% Net Long[...]



Today's Headlines

2016-09-27T15:01:16.283-04:00

Bloomberg: China Exchange Said to Mull Tighter Property Bond Sale Rules. The Shanghai Stock Exchange is considering raising the threshold for property developers to sell exchange-traded notes, according to people familiar with the matter. Under the rules being considered, the exchange would only accept note-offering applications from developers rated AA or higher, according to the people, who asked not to be identified because the details haven’t been announced. The firms would also need to meet at least one of the following requirements: be listed either onshore or offshore; be owned by a province, a provincial capital, some major city or the central government; or be among the top 100 builders ranked by the China Real Estate Association.China’s Xiaomi Guns for Apple(AAPL) With Latest Premium Smartphone.China’s Shibor Climbs to Seven-Week High as PBOC Withdraws Funds. Yuan borrowing costs in Shanghai rose to a seven-week high as China’s central bank pulled funds from the financial system for the second day in a row. The one-month Shanghai Interbank Offered Rate climbed to 2.74 percent, the highest since Aug. 4, according to the National Interbank Funding Center. The fixing was released after the nation’s monetary authority drained a net 95.1 billion yuan ($14.3 billion) from the financial system, adding to Monday’s 245 billion yuan withdrawal that was the biggest in six months.Yen Erases Drop as Traders Switch Focus to Europe’s Banking Woes. The yen rebounded, erasing an earlier decline, as stocks fell and Deutsche Bank AG dropped to a fresh record. The resurgence in demand for the relative safety of the Japanese currency showed the post-U.S. presidential debate effect inherited from Asian markets didn’t last long in the European day. Instead, renewed concerns over the health of the continent’s banking sector and the prospect of U.S. fines for Volkswagen AG came into play, reducing the yen’s fall.Saudi Stocks Drop Most in World After Kingdom Cuts Pay, Bonuses. Saudi Arabian stocks fell more than any other market in the world as the kingdom announced measures to cut the budget deficit that are likely to damp consumer spending. Not a single stock rose on the Tadawul All Share Index, which retreated 3.8 percent on Tuesday, the most since January. The hotel and media indexes were the biggest decliners on a percentage basis, while Al Rajhi Bank was the largest contributor to the main gauge’s loss.Europe Stocks Halt 2-Day Rout as Banks Pare Drop After U.S. Data. (video) European stocks halted a selloff after better-than-forecast U.S. economic data helped recoup most intraday losses in bank shares. The Stoxx Europe 600 Index added less than 0.1 percent at the close, wiping out a drop of as much as 0.7 percent after data showed American consumer confidence in September rose to a 2007 high, while the services industry expanded more than estimated. Europe’s equity gauge rose 0.7 percent earlier in the session, following a two-day slide. A gauge of Stoxx 600 banks was down 0.2 percent, after slipping as much as 1.3 percent. Commerzbank AG fell 2.2 percent after a report it plans to cut jobs and suspend dividend payments. Credit Suisse Group AG slid 3.3 percent after its chief said the lender is mulling further cost cuts at the global markets unit that posted a loss earlier this year. Deutsche Bank AG was unchanged at a record low. “Markets are nervous, but panic levels haven’t been triggered yet,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm oversees $260 million. “Some European financials are really not in a very healthy shape, [...]



Bear Radar

2016-09-27T13:33:58.493-04:00

Style Underperformer: Mid-Cap Value -.1% Sector Underperformers: 1) Oil Tankers -3.9% 2) Gold & Silver -1.1% 3) Utilities -.5% Stocks Falling on Unusual Volume:  SXL, DKT, RICE, DTK, FDS, WLH, LGND, DXB, IRT, LXK, CRI, CAR, NEOG, MTN, EQT, PBYI, PNRA, CXW, GWPH, ACOR, BABY, GPRO, GPOR, LNKD and HTZ Stocks With Unusual Put Option Activity: 1) NKE 2) CZR 3) EWY 4) TXN 5) DXJ Stocks With Most Negative News Mentions: 1) CRI 2) GILD 3) SJM 4) CPS 5) CHK Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-09-27T13:21:01.055-04:00

Style Outperformer: Large-Cap Growth +.6% Sector Outperformers: 1) Airlines +1.7% 2) Internet +1.3% 3) Semis +1.3% Stocks Rising on Unusual Volume: KITE, BITA, JUNO, YRD, ERII, BOFI, SNX and RMPStocks With Unusual Call Option Activity: 1) HTZ 2) ARRY 3) KITE 4) KO 5) JUNO Stocks With Most Positive News Mentions: 1) PII 2) CVX 3) DLTR 4) DISCA 5) LENCharts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-09-27T11:30:04.413-04:00

NYSE Composite Index:
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Tuesday Watch

2016-09-26T20:51:09.079-04:00

Evening HeadlinesBloomberg:Asian Stocks Fall as Investors Shun Risk Ahead of U.S. Debate. Asian stocks fell, tracking declines in European and U.S. stocks, as financial shares tumbled and the first U.S. presidential debate raised risks for global investors. MSCI Asia Pacific Index dropped 0.4 percent to 140.27 as of 9:01 a.m. in Tokyo, retreating for the third day after closing at a 14-month high on Thursday. The Topix index slipped 1.1 percent as the yen traded at 100.34 per dollar. European stocks fell the most in two months as Deutsche Bank AG sank to a record low on speculation that Germany’s biggest bank will need to raise capital, dragging global financial shares lower. Investors also became more risk averse ahead of the first U.S. presidential debate Monday, with Democratic candidate Hillary Clinton and Republican Donald Trump tied in a close contest. A gauge of Asian finance companies fell 0.4 percent.Iran Now Has the Edge in the Fight Over Oil Prices With Saudi Arabia. Suddenly the tables have been turned on Saudi Arabia. The biggest oil exporter has swapped its traditional role as price dove with regional foe Iran, for years OPEC price hawk. The government in Riyadh is now offering a deal -- including its first output cut in eight years -- to boost prices; Tehran is dragging its feet. At the center of the reversal is their contrasting thresholds for enduring economic pain. "Both countries are coming from different positions," said Jason Tuvey, Middle East economist at consulting firm Capital Economics. "Iran has been under sanctions until recently, so it’s getting an economic boost as investment returns and oil output rises. Meanwhile, Saudi Arabia is facing steep fiscal cuts."Two 2017 Fed Voters Differ on Rate Hike After Latest Decision. Two Federal Reserve officials who will vote on monetary policy next year offered different views on whether to raise interest rates now, highlighting both sides of a debate that drew a rare three hawkish dissents from policy makers last week. Dallas Fed President Robert Kaplan said he would have been comfortable with a rate hike this month, while Minneapolis Fed chief Neel Kashkari, speaking at a separate event, questioned whether the global economy can sustain such a move. Both presidents will rotate into voting slots on the Federal Open Market Committee for the first time in 2017. Their comments followed remarks by Richmond’s Jeffrey Lacker in an Fox News interview, in which he said that “I think we need to get on with it.”Wall Street Journal:Deutsche Bank(DB) Shares Drop on Fears of Capital Raising. Investors are concerned about a potentially hefty U.S. fine related to mortgage-securities probes.Fox News:Turning Point? Tightening polls give 1st Trump-Clinton debate added importance. (video) Donald Trump will enter his first official presidential debate Monday night with something few pundits would have granted him even a month ago: a respectable shot at winning the White House. The tightening of the polls in the run-up to this historic face-off between the Republican nominee and Democrat Hillary Clinton has injected added drama into the forum, already expected to draw record audiences thanks in no small part to the personalities on stage. With the race a virtual dead heat nationally and seemingly in flux in key battlegrounds, though, what happens on the Hofstra University stage Monday has the potential to decidedly tilt the race.Presidential Debate: Live Blog.Zero Hedge:Germany "Other" Bank: Commerzbank To Fire 9,000, 18% Of Its Entire Work[...]



Stocks Falling into Final Hour on Surging European/Emerging Markets/US High-Yield Debt Angst, Rising Political Uncertainty, Yen Strength, Financial/Drug Sector Weakness

2016-09-26T14:56:09.089-04:00

Broad Equity Market Tone:Advance/Decline Line: Substantially LowerSector Performance: Most Sectors DecliningVolume: Below Average Market Leading Stocks: Performing In LineEquity Investor Angst:Volatility(VIX) 14.37 +16.92%Euro/Yen Carry Return Index 117.98 -.31%Emerging Markets Currency Volatility(VXY) 10.53 +1.25% S&P 500 Implied Correlation 49.17 +10.4%ISE Sentiment Index 47.0 -45.98%Total Put/Call 1.12 +7.69% NYSE Arms 1.01 -9.32% Credit Investor Angst:North American Investment Grade CDS Index 78.16 +1.72% America Energy Sector High-Yield CDS Index 683.0 +.79%European Financial Sector CDS Index 99.46 +2.85%Western Europe Sovereign Debt CDS Index 24.04 +1.82%Asia Pacific Sovereign Debt CDS Index 32.25 +4.1%Emerging Market CDS Index 239.05 +2.80%iBoxx Offshore RMB China Corporate High Yield Index 132.03 +.03%2-Year Swap Spread 25.75 -.75 basis pointTED Spread 68.5 -1.0 basis point 3-Month EUR/USD Cross-Currency Basis Swap -37.25 -4.5 basis pointsEconomic Gauges:Bloomberg Emerging Markets Currency Index 72.81 -.01%3-Month T-Bill Yield .18% +1.0 basis point Yield Curve 85.0 -1.0 basis pointChina Import Iron Ore Spot $56.77/Metric Tonne -.04%Citi US Economic Surprise Index -5.40 -1.0 point Citi Eurozone Economic Surprise Index -9.50 +9.8 points Citi Emerging Markets Economic Surprise Index -13.8 +.9 point 10-Year TIPS Spread 1.56% -3.0 basis points50.5% chance of Fed rate hike at Dec. 14 meeting, 53.6% chance at Feb. 1 meetingOverseas Futures:Nikkei 225 Futures: Indicating -240 open in Japan China A50 Futures: Indicating -45 open in ChinaDAX Futures: Indicating -22 open in GermanyPortfolio: Slightly Higher: On gains in my index hedges and emerging markets shorts Disclosed Trades: NoneMarket Exposure: 25% Net Long[...]



Today's Headlines

2016-09-26T14:31:29.332-04:00

Bloomberg:Germany Sees ‘No Grounds’ for Speculation Over Deutsche Bank Aid. (video) Chancellor Angela Merkel’s government sees “no grounds” for speculation over state funding for Deutsche Bank AG, her chief spokesman said, pushing back against a magazine report that the German leader has ruled out any such aid. “There are no grounds for such speculation,’’ German government spokesman Steffen Seibert told reporters in Berlin on Monday when asked about the report. “The government won’t participate in any such speculation.’’ Deutsche Bank's(DB) Pain in Germany's Too. Why Deutsche Bank’s Shares Are at a Record Low: QuickTake Q&A.Shorts Waded Into Financials Just in Time for Deutsche Bank Rout. (video) Even before Deutsche Bank AG’s drop to a record low dragged down U.S. financial shares on Monday, investors were braced for the worst. Blame the Federal Reserve’s decision to hold interest rates steady last week, prolonging the wait for higher yields on cash holdings for financial firms. Traders responded by pushing short interest on an exchange-traded fund tracking the industry to a seven-month high, according to data compiled by Bloomberg and IHS Markit Ltd. That proven prescient as concerns over Deutsche Bank’s weakened finances sent an index of financial companies in the S&P 500 Index down 1.2 percent at 12:37 p.m. in New York, while the benchmark index lost 0.6 percent. It marked the latest hiccup for a sector already maligned by an 11 percent plunge this month for scandal-plagued Wells Fargo & Co., formerly the biggest U.S. bank by market value.Draghi Says U.K. Shouldn’t Get Any Favors in Brexit Deal. (video) Mario Draghi said the U.K. shouldn’t be granted any special favors on single-market access during negotiations over its exit from the European Union. “Any outcome should ensure that all participants are subject to the same rules,” the European Central Bank president told European Parliament lawmakers on Monday. “It is very hard to imagine that any agreement that will be perceived as discriminatory against some subjects or in favor of other subjects could be a source of stability for the future of our EU.” Moody’s Cut Spurs Worst Rout for Turkey Assets Since Failed Coup. (video) Turkish assets plummeted the most since an attempted coup in July and credit risk climbed after Moody’s Investors Service cut the country’s sovereign rating to junk. The currency was headed for the the lowest level in two weeks as of 4:23 p.m. in Istanbul, the Borsa Istanbul 100 Index posted the steepest decline among about 90 gauges tracked by Bloomberg globally, and the nation’s dollar debt due 2026 sank the most since July. Moody’s lowered Turkey’s sovereign rating one level to Ba1 late Friday, the highest non-investment grade, citing rising risks due to its external financing needs and slowing economic growth. China Stocks Decline Most in Two Weeks as Volatility Resurfaces. (video) Chinese stocks slumped the most in two weeks as volatility returned before the start of a week-long holiday. The Shanghai Composite Index dropped 1.8 percent to close below the 3,000 level, with 13 stocks declining for each that rose. A gauge of 10-day volatility jumped to the highest in a month. Hong Kong’s Hang Seng Index retreated 1.6 percent, paring Asia’s best quarterly performance. The sudden drop came after turnover on China’s equity exchanges fell to the lowest level in two years as a boom[...]



Bear Radar

2016-09-26T13:55:52.266-04:00

Style Underperformer: Small-Cap Value -1.0% Sector Underperformers: 1) I-Banks -2.5% 2) Banks -2.3% 3) Gaming -1.9% Stocks Falling on Unusual Volume:  BABY, GLPG, CBOE, LE, DKT, ACOR, DTK, FCB, DB, CYBE, DXB, SWHC, CALM, ACIA, VA, CCL, NLNK, MYOK, TWTR, IHG, FNBC, LMCK, CUK, CPA, MG, SHLD and FII Stocks With Unusual Put Option Activity: 1) EWG 2) HP 3) JWN 4) AXP 5) NKE Stocks With Most Negative News Mentions: 1) HIMX 2) SALE 3) NLS 4) BAC 5) NKE Charts: ETFs Falling on Unusual Volume Stocks Falling on Unusual Volume [...]



Bull Radar

2016-09-26T13:24:18.198-04:00

Style Outperformer: Mid-Cap Value -.3% Sector Outperformers: 1) Oil Service +.6% 2) Steel +.4% 3) Computer Hardware +.3% Stocks Rising on Unusual Volume: CHMT, CPPL, ZYNE, GWPH, SBH and DBDStocks With Unusual Call Option Activity: 1) ARRY 2) HLT 3) ABBV 4) TAP 5) RPTP Stocks With Most Positive News Mentions: 1) DBD 2) OSK 3) MKRS 4) ARRY 5) FLCharts: ETFs Rising on Unusual Volume Stocks Rising on Unusual Volume [...]



Morning Market Internals

2016-09-26T11:38:18.582-04:00

NYSE Composite Index: Volume Running -15.4% Below 100-Day Average 1 Sector Rising, 9 Sectors Declining 33.0% of Issues Advancing, 64.0% Declining 36 New 52-Week Highs, 13 New Lows 62.2% of Issues Above 200-day Moving Average Average 14-Day RSI 41.3% Vix 14.0 +13.5% Total Put/Call 1.24 +19.2% TRIN/Arms 1.01 -9.0% [...]



Monday Watch

2016-09-25T23:07:59.230-04:00

Today's Headlines Bloomberg:   West Slams Russia Over Aleppo Bombings at UN Security Council. Western powers traded barbs with Russia during an acrimonious emergency meeting of the UN Security Council to halt intensive bombing of Aleppo, the center of opposition to the government of Syria’s Bashar al-Assad, without reaching agreement. UN special envoy Staffan de Mistura said Sunday that nearly 2 million people in Aleppo, Syria’s largest city and former commercial center, are without running water following an escalation in fighting over the past few days. At least 231 civilians have been killed in violence in Aleppo and its outskirts since a truce collapsed this week, according to the Syrian Observatory for Human Rights, a monitoring organization. Contagion Risks Rise as China Banks Fund Each Others’ Loans. China’s smaller banks have never been more reliant on each other for funding, prompting rating companies to warn of contagion risks in any crisis. Wholesale funds, including those raised in the interbank market, accounted for a record 34 percent of small- and medium-sized bank financing as of June 30, compared with 29 percent on Jan. 31 last year, Moody’s Investors Service estimated in an Aug. 29 note that analyzed central bank data. Shanghai Pudong Development Bank Co.’s first-half earnings showed its short-term borrowings and repurchase agreements surged by 75 percent in the past three years, while its consumer deposits rose just 24 percent.China Warns on City Bank Risks as Regulator Cites Global Crisis. China’s banking regulator told the nation’s city banks to learn the lesson of the global financial crisis and get back to their traditional businesses, building pressure for the lenders to curb opaque shadow financing. “City commercial banks should change as soon as possible the situation of allocating more funds into investing than lending, and developing their off-balance-sheet businesses too fast,” Shang Fulin, the chairman of the China Banking Regulatory Commission, said in a transcript posted on the agency’s website.China's Runaway Housing Market Poses Latest Challenge for Yuan. Here's the latest uncertainty facing China's currency: sky high house prices. A runaway boom in the largest cities will push investors to look for cheaper alternatives overseas, draining money out of China and putting downward pressure on the yuan in the process, according to analysis by Harrison Hu, Chief Greater China Economist at Royal Bank of Scotland Group Plc. in Singapore. An "enlarged differential between domestic and foreign asset prices will lead to capital outflows and depreciation, until parity is restored,” Hu wrote in a note. He said that the 30 percent year-on-year price gain in Tier 1 and leading Tier 2 cities implies a 25 percent rise in dollar terms, which far outpaces the 5 percent gain in major U.S. cities. That ratio is here in red: Communist China Looks for Independent Thinking as Problems Loom. The southern Chinese manufacturing hub of Dongguan’s decision to lure elite workers with cash payments of up to $3,000 owed much to a think tank founded in late 2013 after President Xi Jinping urged a greater role for research houses in policy making. Dongguan Talent Institute submitted a report early last year to local officials that showed the region’s nascent robotics industry was [...]