heading into December option expiration day, the market is most likely get pin at the 1100 level on the S&P 500 index. In a longer term, Thursday’s trading action suggested strongly that the market is headed for a retest of the bottom of the 5-week trading range, around S&P 1080.

the lack of follow-through from Thursday’s rally and the fact that the market had given up all of its strong gain is very discouraging. In fact, recent trading actions suggesting strongly that risk aversion is now the predominant theme. Although given that the market had gained more than 50% in less than eight months, it would make sense for stocks to take a breather. What this means is that, as long as the S&P 500 index holds above the 1020 level and the U.S. dollar stops rallying, then this decline is nothing more than a temporary setback or another blip in the multi month rally.

the near-term technical outlook remains bullish and should provide foundation for further advance. Buyers however, should be aware of the negative divergence on the Money Flow measure. While this does not necessarily mean that a significant correction is underway, it indicates a waning upside momentum, which in turn suggests that the market could be in the final leg of the present rally. So investors need to be careful about buying stocks and need to get some downside protections for those that have already been bought

recent trading action suggested strongly that an important low has been established and the market is in an early stage of a new up-leg that points to a test of September high, around the 1080 level on the S&P 500 index.

Thursday’s trading action suggested strongly that an important high has been established and the S&P 500 index is in an early stage of a new down-leg that points to a test of 980. Fortunately, fundamental trumps technical. Given that the market had now priced in a “big bad” non-farm payrolls report, any numbers that meet or beat current forecast should be bullish for stocks. If so, we could see a nice rebound, which is also known as Buy-the-Bad-News, immediately follows tomorrow payrolls report.