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No sooner mentioned, it then happens

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In our 01:00 EST Update, we talked about the Gold futures and how they were hanging in there and holding up despite some interventions in the currency markets to prop the U.S. Dollar against the Japanese Yen and the passing of a budget bill to raise the Treasuries debt ceiling.

However, since that update, we've seen a rather sharp break lower in Gold Futures at around 01:20 PM EST, as the previously reviewed December Gold Futures (gc02z) fell rather quickly below the $318 level to as low as $312, before recovering to the $315.90 level.

That had gold stocks as depicted by the Gold/Silver Index (XAU.X) 71.50 -2.61% dropping rather quickly to a session low of $71.50 and firmly violating the 73 level we thought this index needed to hold for "gold bugs" to remain near-term bullish the sector.

That break in Gold futures did seem to ignite a brief spark under the broader market averages as the Dow Industrials sprinted to a session high of 9,362, but has since pulled back from those levels at 9,316 (+0.54%).

The S&P 500 Index (SPX.X) 996.81 +0.62% came close to matching its morning high of 1,001.79, but fell short by just 9-cents and it too has seen selling since that late after-noon rally attempt.

The U.S. Dollar continues to exhibit intra-day weakness against a basket of foreign currencies as the U.S. Dollar Index (dx00y) 106.23 -0.13% fails to respond with any type of recovery move, despite the decline in gold.

Earnings woes and accounting issues look to be weighing on the markets and today's stock market rally looks suspect still.

Dow Component General Electric (NYSE:GE) $29.34 -1.87 has failed to show any type of rally attempt as concerns grow regarding its GE Capital unit and exposure to Xerox (NYSE:XRX) $7.08 -11.62%, which earlier today said it may have inflated revenues by nearly $6 billion over the last several years.

At around 01:21 PM EST, Merrill Lynch said that it estimates that GE's (NYSE:GE) GE Capital unit has just over $2 billion of receivable exposure to Xerox (NYSE:XRX), which has been largely secured by the cash flows of receivables. According to Merrill analyst's, this would represent under 0.5% of GE Capital's assets. While Ge Capital's exposure would be to the individual credits that GE has underwritten and risks are estimated to be "fractional at best," that news did look to stall the late afternoon rally attempt of the broader market averages.

Shares of Japan-based Sony Corp. (NYSE:SNE) $53.30 +5.96% , which trades as an American Depository Receipt (ADR) here in the U.S. have been a topic of conversation in today's market monitor as the stock rebounds from the $50 level.

Gains in Sony (SNE) most likely were fueled by yesterday's 3.5% jump in the Nikkei rallied 3.5% after some bullish comments out of fellow electronic maker Matsushita Electric (NYSE:MC) $13.62 +3.18% after the company raised its first-half profit forecast to reflect pension-related changes.

Breaking news

Stocks have given back all of their session gains as I've been typing on reports that the U.S. Capital has been evacuated due to "the smell of smoke." At this point details are limited, but it does look to have spooked the stock markets and triggered some selling.

Jeff Bailey
Senior Market Technician
Option Investor

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