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Sideways after the open

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The major market averages have traded in a rather tight range after this morning's lower open with the Dow Industrials (INDU) 8,636 -1.2% trading in a 50-point range the last three hours. Similar action has been found in the S&P 500 Index (SPX.X) 898 -1.1% with a 7 point range, while the NASDAQ Composite (COMXP) 1,297 -0.68% slightly stronger after trying to fill in this morning's gap lower to the upside, with a session high of 1,301 in the last hour.

Breadth remains negative with decliners outnumber advancers at roughly the same levels found at 11:00 EST. On the NYSE decliners have the upper hand on advancers by a 2 to 1 margin, while NASDAQ breadth has decliners outnumbering advancers by 3 to 2.

We've seen some marginal "widening" in the new high versus new lows since 11:00, with 26 stocks hitting new highs on the NYSE versus 55 new lows (17 to 42 at 11:00), while the NASDAQ has 14 new highs versus a deteriorating new lows of 104 (13 to 80 at 11:00).

Volume levels on both the NYSE and NASDAQ are light today, ahead of tomorrow's FOMC interest rate decision. Volume on the NYSE is anemic at just 572 million shares traded, while light volume of 615 million is found at the NASDAQ.

Shares of US Airways (NYSE:U) $2.41, remain halted after pre- market prints of $0.50, when the company announced its bankruptcy filing over the weekend.

It was announced today that Continental Airlines (NYSE:CAL) $8.31 -8.88% would be replacing US Airways (U) in the Dow Transportation Average (TRAN) 2,291 -2.57%.

Both Continental Airlines (CAL) and US Airways (U) are components of the Airline Index (XAL.X) 47.66 -6.6%, which leads today's sector decliner list. Other components in the XAL.X are (ALK, AMR, AWA, DAL, KLM, LUV, NWAC and UAL). All the stocks in this group are showing losses today, with AMR Corp. (NYSE:AMR) $8.51 -11.26% and UAL Corp. (NYSE:UAL) $4.20 -19% outpacing declines.

Treasuries are finding some buying again today ahead of tomorrow's Fed meeting. Only the very short-term 13-week YIELD ($IRX.X) 1.626% finds selling as YIELD jumps from Friday's closing YIELD of 1.575%, and hints that bond traders may not give much more than a 25% chance of a rate cut tomorrow by the Fed. The longer-dated maturities has the 5-year YIELD ($FVX.X) lower at 3.227%, but not violating last week's low YIELD of 3.128%, while both the 10-year YIELD ($TNX.X) 4.203% and 30-year YIELD ($TYX.X) 5.060% drop to fresh multi-week lows, signaling a more defensive posture toward equities near-term.

Jeff Bailey
Senior Market Technician
Option Investor

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