Outlook for the week

Friday's action confirmed that the bias is to the upside for the next few days. There is a lot of congestion around the 885 area on the S&P futures (ES). The downtrend line from last week crossed Monday at about 895, Friday's close was 885.5 and the 20 day EMA is 877. The bulls have to push through 908, and then 919. If that happens, the race will be on to 948, and the rally is over and we'll start a downturn. Get your puts in the 930's/940's after a double-top in the high 940's and you'll have a nice return within a few weeks.

FYI, the 50-day EMA is 933. The last time we exceeded the 50-day EMA intraday was 9/19. The last time we closed above it was 8/28. We've lost 32% since that date as of Friday. The above short-term bullish expectation also assumes the inability to hold the 50 day EMA, which would bring a lot of bears out of hibernation. If that happens, it really should be a whipper of a drop.

On the downside risk, if we break below 850 before we get up to 945, run for cover. We'll be testing all the way down to 740.

Either way, whether we first run up to 948 or simply break down below 850 this week, the shorts that you are holding from last week are fine. In both cases the next leg down takes us to at least 800/805.

Joe