E-mini Executors: Thoughts on the current market and the week ahead. 10/31

What a week for the bulls. They accomplished pretty much everything that they wanted to. The Dow is trading comfortably above their 200 day moving average and is in positive territory for the year by 650 points (not to mention they violated their August high), the Nasdaq futures remain the strongest market and are getting within striking distance of their yearly highs ($NQ_F hi-2435.50), the S&P cash took out their daily down trend and closed above their 200 day moving average for two consecutive days (that is great news for the bulls), the VIX is trading well below 30.00 (the bulls have been waiting for that to finally happen), and the only weak link that I can see (technically) are the Transports. The Transports are struggling to hold above their 200 day moving average and they are the only major Index that remains in negative territory for the year.

In order for this rally to continue I think that the Transports have to hold above their 200 day moving at 5,022 and eventually work their way into positive territory for the year (5,106). If they cannot, then I think that we will see the rest of the market soften and start to work its way lower retesting support areas. I think that the Transports are crucial because they were the leader on the way down and I think that in order for the market to continue its run higher they need the weakest link (Transports) to turn strong.

This week I will be focusing on the Transports and how the rest of the market reacts to what they are doing. If the Transports remain below their 200 day moving average at 5,022 I will be more inclined to sell rallies in the S&P. If the Transports can hold above their 200 day moving average, then I will be a buyer of breaks and be looking for the S&P cash to test their August high at 1307.38 and the E-mini futures to test their August high at 1309.75. I expect some resistance at the August highs but if the Transports are in positive territory for the year (5,106), I will be a cautious seller of the S&P. If the S&P gets above their August high then I think that we could see another pop in equities across the board.

Moving Averages; Black (10 day), Blue (20 day), Green (50 day), Pink (200 day) Purple (150 day smooth avg.). Horizontal Lines; Blue (High of the year), Red (Low of the year), Green (Unchanged for the year, Black (last summers range), Light Blue (Old highs that could be tested)