The week ahead 10/24 - 10/28

The bulls are in full control of this trade.  The Transports are back above their 150 day smooth moving average, the S&P has broken out of its two month range and is also trading back above their 150 day smooth moving average, the Dow is comfortably back in positive territory for the year, and the Nasdaq continues to rally sustaining trade above all of their major moving averages.   The only thorn in the side of the bulls is the VIX.  If the VIX continues to hold above 30.00 that may stall this rally.

For the past several months news has been the main driver in this market.  It has been about Dodd Frank, downgrades of U.S. debt, debt ceiling, the Eurozone debt crisis, etc......   Now the market seems to be looking past the news and focusing more on the technicals.  

I have seen the market trade like this before......bad news forces everybody to think that the market will remain weak and traders think that we are range bound.  This keeps everybody away from buying stocks. The next thing you know we are rallying to new highs and nobody is in (riding the wall of worry).  I am not sure that we are going to make new highs but I do think that the trend could remain bullish into the end of the year.

What I will be looking for this week.....

As long as the Transports and the S&P cash remain above their 150 day smooth moving averages I will be a buyer of breaks and looking for the market to trend higher.  The main area of resistance that I will be looking for is unchanged in the S&P (1157.64) and above that I will be looking for a test of the 200 day moving average at 1274.70.  If the Transports or the S&P cash cannot hold their 150 day smooth moving averages I will turn seller (leaning on the 150 day smooth moving averages) looking for the market to sell off down to my support levels. For my day to day thoughts on the market check out my Morning Brief.  Have a great week.

S&P Cash

Dow Industrials

E-mini Nasdaq 

Dow Transports

VIX

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)

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