On Friday, investors bid farewell to one of the strongest Octobers on record, with stocks advancing 3.4%. But instead of celebrating, investors focused on the upcoming meeting of the Federal Reserve governors and Tuesday’s election, and stocks traded in a narrow range for the entire session.

Strong earnings were reported by some of the big caps, but the market ignored them and better-than-expected GDP results, as well. In Q3, the economy grew at a slightly faster pace than in Q2, but according to economists, it is not growing fast enough to have a positive impact on the high unemployment numbers.

Both Microsoft Corporation (NASDAQ: MSFT) and Merck & Co., Inc. (NYSE: MRK) exceeded earnings expectations. Mr. Softee turned in a creditable performance, up 1.5%, but Merck fell 1.7%. Chevron Corporation (NYSE: CVX) missed their earnings target and the stock fell 2.2%, and despite better earnings, 3M Company (NYSE: MMM) fell 1%.

The U.S. dollar lost 0.2% versus a basket of currencies. Treasurys were strong on Friday, as investors bet that the Fed would buy more government bonds this week in order to support a lagging economy. The benchmark 10-year note was up 0.375%, pushing the yield down to 2.616%, and the 30-year bond’s yield fell to 3.997%.

At the close, the Dow Jones Industrial Average was up 5 points to 11,118, the S&P 500 fell a point to 1,183, and the Nasdaq was unchanged at 2,507. The NYSE traded just over 1 billion shares with advancers over decliners by 1.5-to-1. The Nasdaq crossed 585 million shares with advancers ahead by 1.25-to-1.

For the week, the Dow fell 0.1%, the S&P 500 rose 0.18%, and the Nasdaq gained 1.1%.

On Friday, crude oil for December delivery fell 75 cents to $81.43 a barrel due to the modest growth in the third quarter. The Energy Select Sector SPDR (NYSE: XLE) closed at $59.24, up 4 cents. December gold rose $15.10 to $1,257.60 an ounce, and the PHLX Gold/Silver Sector Index (NASDAQ: XAU) was up 2.7 points to 204.3.

What the Markets Are Saying

As noted in Friday’s Daily Market Outlook, falling momentum, which has now had an impact on all of the major indices, is telling us that the market has exhausted itself and will likely move to a modest consolidation. Our other internal indicators flashed short-term sell signals earlier in the week.

For the S&P 500, the pullback will most likely be contained within the 1,130 to 1,150 zone of support. For the Dow, the numbers look like 10,700 to 10,900. And the Nasdaq could drop to 2,320 to 2,425 with the first support line at 2,450.

As for sentiment, Investors Intelligence (II) noted that the advisers are becoming increasingly neutral, so that doesn’t add much to the picture. But the AAII sentiment survey strengthened the case for a short-term pullback with its readings very strong on the buy side. As our readers know, this is not good for the bulls since this index, along with the II survey, is a contra-indicator, meaning high bullish readings are bad for the market and high bearish readings are good for the market. Last week, AAII bullish numbers jumped to 51.2%, up 1.6% from the prior week. This is the highest bullish reading since May 8, 2008.

Over the weekend, the Wall Street Journal reviewed some current thoughts on the price of gold with an article “The World Does Not Need to End.” It reported that the manager of the $330 million pension fund for the Texas Teacher Retirement System predicts that gold will hit $10,000 an ounce. Shayne McGuire says his fund is up 25% since its inception last year.

According to McGuire, “$10,000 gold is possible if enough other pension funds and big investors jump-start buying and move as little as 1% of total global stocks and bonds holdings into the metal. Such a migration into gold would equal enough demand to push prices up tenfold from their current level.”

The Journal went on to say, “Of course, the same argument would be true for nearly every other investment class. Mr. McGuire has confidence in his argument, however, because he believes inflation will return, which typically pushes gold prices higher.”

From a technical standpoint, there is no way to predict a run in gold to $10,000 an ounce. The Daily Market Outlook began recommending gold over two years ago and has regularly included gold investments in the Trade of the Day section. The largest ETF that mirrors gold’s daily moves trades is the SPDR Gold Shares (NYSE: GLD). We’ve provided recommendations on a number of gold mining stocks. For the most part, they’ve done well and the charts suggest that they will go higher. But $10,000 an ounce? That reminds me too much of other bubbles when outlandish targets were thrown to a voracious public.

I’d remain long gold and gold equivalents, but as with every other investment, there is a time to buy and a time to sell. And the time to sell is when everyone has bought.

For one gold ETF that is still headed higher, see the Trade of the Day.

Today’s Trading Landscape

Earnings to be reported before the opening include: Acorda Therapeutics, Administaff, Advanced Energy, Alberto-Culver, Alere, Allergan, Anadigics, Atlas Air Worldwide, Baker Hughes, Calgon Carbon, CLECO Corp., CNA Financial, Cognizant Technology, Cooper Tire, Corning, Drew Industries, Endo Pharmaceuticals, Everest Re, Haemonetics, Humana, IntercontinentalExchange, Interline Brands, IPG Photonics, JinkoSolar Holding, K-Sea Transportation, Loews Corp., Mercury General, Momenta Pharmaceuticals, Old National Bancorp, Pactiv Corp., Senior Housing, Simon Properties, Tasty Baking, Weingarten Realty, and Wilmington Trust.

Earnings to be reported after the close include: Altra Holdings, American Financial, Anadarko Petroleum, AXIS Capital, Brigham Exploration, Brookdale Senior Living, Carmike Cinemas, Cognex, Comstock, Concurrent, Corporate Executive Board, Cutera, Deltek, DepoMed, Douglas Dynamics, Ducommun, DXP Enterprises, Evergreen Solar, Extreme Networks, Fabrinet, Forest Oil, Franklin Electric, Guidance Software, Harleysville Group, Herbalife, Hutchinson, Interactive Intelligence, Intevac, Kaman, kforce.com, Kindred Healthcare, Leapfrog, LHC Group, Meadowbrook Insurance, MEMC Electronic, Mindspeed, Mortons Restaurant Group, Nutrisystem, Parexel, Parkway Properties, Penson Worldwide, Petrohawk Energy, Post Properties, Principal Financial, PS Business Parks, Regal-Beloit, Rogers Corp., Rudolph Technologies, Sanmina-SCI, Skilled Healthcare, Stereotaxis, Summer Infant, Sykes Enterprises, Terremark Worldwide, Texas Roadhouse, TNS, Vulcan Materials, Winn-Dixie Stores and WMS Industries.

Economic reports due: Personal income and outlays (the consensus expects 0.3% for personal income and 0.4% for consumer spending), ISM manufacturing index (the consensus expects 54.5), and construction spending (the consensus expects -0.5%).

If you have questions or comments for Sam Collins, please e-mail him at samailc@cox.net.