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Are Traders Too Bullish?

Mixed morning as the Fed begins its two-day policy meeting. Traders are sounding a bit more pessimistic this morning, noting that the put/call ratio is at .70 (7 puts for every 10 calls), a sign that traders are very bullish. Traders believe these indicators, when they are at the higher end of their ranges, often indicate at least a short-term market top.

Elsewhere:

1) Q2 Productivitycame in stronger than expected, though Q1 was revised downward.

2) A setback for CIT : down 22 percent pre-open as they raised the dreaded "substantial doubt" phrase about their ability to continue as a going concern. They have delayed filing their second quarter report, saying they would file for bankruptcy if they could not complete their debt tender offer. They reiterated they would lose $1.5 billion in the second quarter.

This is rather disappointing, since just last week the company reported "progress" on its restructuring plan and said that the bonds tendered in their debt tender offer met the minimum tender condition.

3) Lions Gate shares up 11 percent in pre-market trading after the film and TV studio reported fiscal 2010 first-quarter results of $0.30 a share, easily beating Street estimates. The studio earned $0.03 a year ago. The company credits stronger TV and film revenue, lower costs, and its TV Guide acquisition for the gains. Lions Gate produces Mad Men and Nurse Jackie, and owns the film studio Mandate Pictures, home to "Juno". Carl Icahn owns a 16.9% stake in the studio.

4) After almost doubling last week on a short squeeze and positive earnings news, Fannie Mae and Freddie Mac are up 12 percent and 4 percent respectively, and are again the most actively traded stocks pre-open.

5) China's factory outputfor the first seven months of the year was below forecasts but is still quite robust. Capital spending in the first seven months rose 32.9 percent year over year, a bit below the 33.6 percent gain in the first six months and also below the estimate of a 34 percent increase.

In addition, Chinese banks slowed lending in July, but this is probably a good thing, since loan issuance in the first half of the year came in at a record pace.

6) The Baltic Dry Index, an index of shipping rates for dry goods, is down for the 9th straight day. It's down 23 percent since hitting 2499 on July 29.

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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