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Bull's eek out gains in tightly traded session

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For a third straight session, the major indexes hover near unchanged level, with bull's getting a slight edge at the halfway point with the Dow Industrials (INDU) 8,810 holding a 24-point gain and trading just above today's intra-day pivot of 8,800, while the broader S&P 500 Index (SPX.X) 928 shows a 2-point gain as it too holds just above its intra-day pivot of 927.72.

Despite news out of the U.N. that it may have found Iraq to have partaken in some weapons smuggling activities after Hans Blix's team found large quantities of illegal materials in Iraq. However, Blix admitted that it was too early to determine whether the materials found are related to weapons of mass destruction. Blix is due to submit an initial report on the inspections to the U.N. Security Council on January 27th.

While the new from Mr. Blix did find a bid coming into the Treasury bond market, stocks have managed to seemingly ignore today's news. There had also been trading floor rumors and reports by Reuters in late-morning trade that U.N. weapons inspectors had been asked to leave the country, but I have yet to see any confirmation or denial of these reports.

Sector action, especially in the telecom and telecom equipment sectors remains positive with today's reversal of past guidance by Alcatel (NYSE:ALA) $7.28 +24.6% giving a lift to the Networking Index (NWX.X) 172 +5.3%, along with Wireless Telecom (YLS.X) 63.87 +3.2% and Fiber Optic (FOP.X) 60.21 +3.09%.

Sector weakness is rather limited with the Gold/Silver Index (XAU.X) 75.61 -1.47% leading today's sector loser list. Sector trader will be keeping an eye on this sector for support at 75.00, which has held as support the past 15 trading sessions.

Also exhibiting weakness is the Oil Service Index (OSX.X) 80.34 -1.29% as it falls to a two-month low after this weekend's OPEC decision to increase crude production by 1.5 million barrels a day. While oil service stocks fall, we see divergence with the March Light, Sweet Crude Oil futures (cl03h) $31.84 +0.79% trading higher on concern that OPEC 1.5 million increase is not enough to offset bullish momentum in the oil commodity trade, and that the OPEC cut won't take into effect until early February, which then takes about 5 weeks for the extra oil to arrive on U.S. shores.

Also adding to the higher price of oil in the commodity itself, is comments from industry observers that U.S. inventories, outside of the strategic petroleum reserve, are at their lowest levels not seen in nearly 20 years, and that the world is still losing oil production from Venezuala, which normally produces 3 million barrels per day. Some believe if war does break out between the U.S. and Iraq, the world would likely lose about 2 million barrels per day out of Iraq.

The CBOE Oil Index (OIX.X) 258.36 +0.01%, which holds a basket of oil producers trades steady right at its rather flat, but trying to round higher 50-day SMA.

While the equity markets remain rather flat, we are continuing to monitor the Market Volatility Index (VIX.X) 27.07 -1.63%, which not unlike the major indexes themselves, continues to trade in a rather tight range and giving little indication or confirmation toward market direction.

Jeff Bailey

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