The market’s early momentum quickly dissipated Tuesday morning, as buyers slinked away.

The S&P/TSX index is down 42 points at midday to 7,685.

Volume is strong at 116.7 million shares, with the buying volume overwhelming the selling by about seven to three.

Most of this morning’s upside volume is coming in penny stocks in the gold sector. Market breadth is actually negative, with losers edging winners by 51:47.

Golds are enjoying a huge rally as the safe haven of choice. The sector is up a hefty 7.4% in heavy trading. Almost everything else is weighing on the index.

Worries about profits and terrorists seem to be driving the big move into golds. Techs are down 3.25%, health care is down more than 2%. Financials, energy plays, consumer stocks and industrials are all down, too. Only materials and utilities are joining the golds on the upside.

Barrick is leading the huge move into gold stocks at midday. It is up 2% on 1.9 million shares. Placer Dome is up 4.4%. But the big winners today are the small cap gold companies. Bema Gold is up 37% to $2.74. There are also very strong moves in Kinross Gold, Glamis, TVX Gold, Goldcorp, Eldorado Gold, Echo Bay Mines and Cambior.

The only stock going bigger than golds, is a silver miner. Corner Bay Silver is up 43% on news of its takeover by Pan American Silver.

Throughout most of the rest of the market there’s considerable weakness. Techs are the primary culprits, led by ATI Technologies, down 4.7%. There’s also selling in Celestica, Nortel Networks and Research in Motion. Similar profit worries are hitting Ballard Power and Biovail.

Renewed terrorist worries are also hitting the transportation and travel stocks. Four Seasons is down 4%, Air Canada is off by 3%, as is CP Rail.

Financials are suffering some of the tech spillover effect, too. Bank of Nova Scotia is weakest, down 1.7%. There’s also some notable selling in CIBC, Royal Bank and TD Bank.

In M&A news, Transcontinental Media (parent of Investment Executive) has acquired Editions Versicolores and Specialites Terre a Terre, the largest gardening and horticulture publisher and distributor in Quebec. Based in Quebec City, the two companies have combined annual sales of over $7 million and employ about 20 people.

In earnings news, Peyto Exploration & Development Corp reported that it earned $5.93 million in the first quarter.

The early market momentum has also disappeared in New York, leading to another down day. The Dow Jones industrial average has dropped 50 points to 10,179. The S&P 500 is down five ticks to 1,087. The Nasdaq composite has dropped 27 points to 1,675.

For the bulls the only place to play today has been small caps. The S&P/TSX Venture index is reflecting this move, gaining 20 points at midday to 1202. Volume is strong at 23.8 million shares. The top trader is New Bullet Group, which is down 2¢ to 28¢ on 1.44 million shares traded.