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enter image description here

What is the next image? The small circle seems to follow the arrow, which would eliminate C and E.

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    $\begingroup$ It seems that you found this puzzle somewhere; could you please add a source? We have an attribution policy. Thanks! $\endgroup$ – samm82 Mar 12 at 19:40
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I think the next image is:

B

Explanation:

I'm going to use W, X, Y, and Z to denote the top left, top right, bottom left, and bottom right corners of each image, respectively.
The circle with the lines going from the top left to the bottom right moves in each image in the sequence, yielding the pattern WZYXW..., so we can expect it to be in Z next. Assuming your small circle theory is correct (I have no reason to think otherwise), this further eliminates D, leaving just A and B.
Applying the same rationale to the other circle gives us XYZXY..., so we can expect it to be in Z next, leaving only B as the final answer.
I can't find an obvious rule for the direction of the arrow, but if it's assumed that its only role is to show where the small circle will be in the next image, than its orientation can be arbitrary.

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