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Dows holds 50-point gain as bonds found buyers into close

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The major indexes have given back roughly one-half of their 01:00 PM EST gains as Treasuries found some defensive buying into their close with the 10-year YIELD ($TNX.X) finishing at 3.752%, which was right where this bond's YIELD started at the 08:20 AM EST open.

I've seen little news on the wires to explain the defensive move back toward Treasuries that we noted earlier this afternoon, but can only surmise that traders could be wondering "when, or if" the Homeland Security office might lower this morning's rumored terrorist alert to "code yellow" from "code orange," which gave markets a lift from their lows.

It may well be that market participants found the bond market's close rapidly approaching and with no confirming news of a lowered terrorist threat level, decided to take on a defensive approach and head for the perceived safety of Treasuries before that market closed.

The major indexes did indeed follow Treasury YIELDS lower, but found some bidders after the bond markets close, but this may have been a short-term recovery as my 5-minute bar charts showed deeply oversold stochastics. My thinking here is that much of today's trade has been very short-term oriented on the "code yellow" news and after some quick declines in equities on late bond buying, some bearish gains were covered. However, I'm still looking for the major indexes to finish their session relatively unchanged at this point.

Sector action has started to turn a little more mixed from our late-morning observations. The GSTI Software Index (GSO.X) 102.43 (unchanged) has briefly violated its morning lows. Sector bellwether and largest weighted QQQ and NASDAQ-100 component Microsoft (NASDAQ:MSFT) $23.45 -0.63% is trading at a session low, and may have some negative psychological impact on technology bulls. It is notable on a short-term basis that MSFT did violate yesterday's lows, and this could portend weakness into the NASDAQ-100 Index close.

On a brighter note, shares of Noven Pharmaceuticals (NASDAQ:NOVN) $9.89 +25.54% holds near its session highs and is today's biggest percentage gainer after reporting Q4 (December) EPS of $0.13 per share, which was well above consensus estimates of $0.09.

Jeff Bailey

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