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Dollar action appears to be directing traffic

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The intra-day action and trading in the U.S. Dollar really appears to be one of the major influences on stock price action today. As the US Dollar Index (dx00y) 107.60 -0.55% has moved lower in the past couple of hours, stocks as depicted by the broader market averages have followed the move lower.

The major market averages are now in the red with the Dow Industrials (INDU) 9,181 -1.08%, S&P 500 (SPX.X) 980.80 -1.19%, NASDAQ Composite (COMPX) 1427 -2.28% and Russell 2000 Index (RUT.X) 453 -1.29% all lower.

Conversely, precious metals stocks as depicted by the Gold/Silver Index (XAU.X) 77.36 -1.26% have recovered somewhat from earlier losses that had this index down as much as 3% at one point.

While this afternoon's 01:00 update had a bit of a "theme park" them to it, its been a roller coaster ride today and right now, it's a downhill ride for the broader market averages.

There's been little intra-day news to drive stock action after today's earlier release of economic data.

In the last hour, it was reported that defense contractors Lockheed Martin (NYSE:LMT) $67.51 and Northrop Grumman (NYSE:NOC) $125.41 -2.27% has won a $17 billion multi-year Coast Guard contract to replace aging ships and aircraft. There have been no major press releases on this, but the Coast Guard web site at www.uscg.mil/uscg.shtm says there will be a press release given at 04:30 PM EST.

Both stocks are trading lower as is the defense group as depicted by the Philadelphia Stock Exchange Defense Index ($DFX.X) 192.65 -2.76%.

As stocks meander at their session lows, its given some traders time to kick around rumors. One interesting rumor is that long- standing Dow components AT&T (NYSE:T) $10.09 -2.13 which will soon be spinning off its broadband assets to Comcast (NASDAQ:CMCSK) $24.28 -2.17%, will be getting the boot and that drug maker Pfizer (NYSE:PFE) $34.04 -0.67%.

We would note that any such move would leave the Dow Industrials more "underweight" in telecom with SBC Communications (NYSE:SBC) $29.93 -1.7% the only other telecom stock in this major market average, and an "overweight" in the drug category with Merck (NYSE:MRK) $48.98 -1.01% currently the loan drug representative.

Jeff Bailey
Senior Market Technician
Option Investor

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