Good day! After running into May's highs in the S&P 500 and Dow Jones Industrial Average, the market has been struggling to keep up the pace. Last week began on a strong note, but that was beginning to slow well within the first hour of the day on Tuesday. The remainder of the week was a tug-of-war, with very little follow-through either way. Volume was light as the week came to a close. It was marked by choppy trading throughout the session with a bias in favor of the bears, particularly heading into Friday afternoon.

The Dow experienced the greatest relative strength Friday morning despite the Nasdaq managing a slight upside gap. The pace for the bulls held fairly well for the first two hours or so, but the upside was swiftly crushed with sharp retracements back into support. By the early afternoon the bulls had backed off completely. Volume declined on the upside moves and began to pick up with each selloff on the small intraday time frames. After 12:00 ET the bears took over the game, albeit with initial hesitation.

Around 13:15 ET the market fell briefly, but decisively, back into the lower end of the day's range. The Dow, which began on such a strong note, was making new intraday lows by 13:30 ET. That reversal period held, but only served to create a bear flag into 15 minute 20 sma resistance intraday. This held perfectly as well in the Dow and Nasdaq and the downside began to gain conviction. The selloff continued into the close, with only an abbreviated bear flag into the 15:30 ET reversal period.

Even with the afternoon turn-around, the overall trading range for the session on Friday was much smaller than average. The losses totaled only -39.38 points in the Dow Jones Ind. Average ($INDU), -3.30 points in the S&P 500 ($SPX), and - 11.59 points in the Nasdaq Composite ($COMPX). All three of the major indices saw gains on the quarter. The Dow even made an attempt at a record closing high and rose 4.7% for Q3. The S&P 500 hit 5.5 year highs and ended Q3 with a gain of 5.2%. The Nasdaq Composite gained 4% on the quarter.

October is a typical correction month for the market. As it sits now, it stands a good chance of kicking off a pullback in the indices. During the last couple of weeks the indices have managed to gain ground, but most of it was done in relatively short bursts, punctuated by a great deal of congestion. This is common ahead of a correction.  I will be using a lot more caution on longs this week than I will be compared to the bearish side of things.

Economic Reports and Events
Oct. 2: Contraction Spending for Aug. and ISM Index for Sept. (10:00 am)
Oct. 3: Auto and Truck Sales for Sept. (12:00 am)
Oct. 4: Factory Orders for Aug. and ISM Services for Sept. (10:00 am), Crude Inventories 9/29 (10:30 am)
Oct. 5: Initial Claims 9/30
Oct. 6: Average Workweek, Hourly Earnings, Nonfarm Payrolls and Unemployment Rate for Sept. (8:30 am), Consumer Credit (3:00 am)

Earnings Announcements of Interest
Only stocks with an average daily volume of 500K+ are listed. List may not be complete so be sure to always check your stock's earnings date before holding a position overnight.
Oct. 2: -
Oct. 3: LWSN, PBG, MOS
Oct. 4: ARRO, CPRT, GY, BLUD, RPM, VTS, WWW
Oct. 5: STZ, MAR, MU, SLR
Oct. 6: -
Note: All economic numbers and earnings reports are in lines with those compiled by Yahoo Finance. Occasionally changes will occur that are made after the posting of this column.

Toni Hansen is President and Co-founder of the Bastiat Group, Inc., and runs the popular Trading From Main Street. She can be reached at Toni@tradingfrommainstreet.com.