The financial sector and gold mining stocks led the market yesterday, but they couldn’t quite bring the Dow Jones Industrial Average (DJI) to a gain for the day. The problem with the Dow was that the telecom sector was hit hard by weakness in AT&T (T) and Verizon (VZ). But strength in Alcoa (AA), up 2.5%, helped offset the other losses and the blue-chip index closed only slightly lower.

The U.S. dollar showed gains yesterday, following two days of heavy selling, so we would have expected the energy sector to be lower. Crude oil did drop, but oil stocks closed higher and were the next best performing sector, finishing 0.6% higher.

Analysts are expecting the S&P 500 (SPX) to show a 25% decline in profits for Q3, which is slightly better than the second quarter’s 27% decline. According to a Wall Street Journal article, the biggest declines are expected in the energy and materials sectors.

Positive earnings were reported by Yum Brands (YUM), Costco (COST) and Family Dollar (FDO). But despite a gain in earnings, Monsanto (MON) fell 1.37% when management reaffirmed downside guidance for 2010.

At the close, the Dow was off 6 points to 9,726, the S&P 500 rose 3 points to 1,058, and the Nasdaq (NASD) was up 7 points to at 2,110.

Volume was again light, with the NYSE trading just over 1 billion shares with advancers slightly ahead of decliners. On the Nasdaq, decliners were slightly ahead on volume of 648 million shares.

November crude oil fell $1.31 to $69.57 a barrel, and the Energy Select Sector SPDR (XLE) rose 42 cents to $54.80.

Gold had another good day with the December contract rising $4.70 to $1,044.40 an ounce. This morning spot gold in Asia broke to a new all-time high of $1,054.35. Traders say that the next resistance is at $1,070 an ounce. The PHLX Gold/Silver Index (XAU) gained $2.54 and closed at $174.80.

What the Markets Are Saying

Stock prices ground higher for the third-consecutive day on the S&P 500 despite a slight pullback for the Dow. But even the Dow made a run for it at the close and almost made it to the plus side, while the S&P 500, Nasdaq and NYSE Composite all closed higher. As for the Dow, Vince Lombardi said it best: “We didn’t lose; we just ran out of time.”

The recovery at day’s end pushed stocks to closing prices that were near to the session’s highs. A strong late-day recovery is significant in that it demonstrates that buyers are anxious to put money to work and are willing to take the risk of losing money rather than staying away and missing another rally.

With that type of buyer anxiety, the chances are getting stronger that the current rally will not only take prices to the top of the bull channel at S&P 1,080, but through it. The top of the current rally will most likely be made when the anxiety is satisfied at much higher prices, and when almost all of the public is on board. And that will be the time for us to lighten up.

Morningstar reported recently that nine of this year’s top 10 selling mutual funds were bond funds. And by the March bottom there were more assets in money-market funds than there were in all equity-based funds.

Again, the public has missed the boat — the average return on bond funds this year is flat, according to the Investment Company Institute’s official survey of the fund industry, and many money markets are actually at a loss after management fees, while the unmanaged S&P 500 is up 16.7% and Nasdaq is up 33.7%.

Today’s Trading Landscape

Earnings to be reported include: Infosys Technologies Ltd. (INFY), International Speedway Corp. (ISCA), Marriott International (MAR), Pacific Continental Corp. (PCBK), PepsiCo (PEP) and Wal-Mart de Mexico S.A.B. de C.V. (WMMVY).

Economic reports due: jobless claims (the consensus expects 540,000), DJ-BTMU economic barometer, wholesale trade, EIA natural gas inventories, money supply, Fed discount window borrowing, foreign central bank holdings and chain store sales.

Late news: Alcoa (AA) posted a profit of 4 cents versus an estimated loss of 9 cents. IBM (IBM) is facing a Justice Department inquiry into alleged monopolistic behavior in the mainframe computer market.

The old ways of investing don’t work anymore. But trading options founded on scientific principle can and does work in volatile times like these. Learn how to leverage the power of technical analysis to identify the short window when a trade is set to go straight up or down. Get your FREE copy here!