Dow Jones - Breaking Down

Dow Jones - STRONG SELL SIGNAL

With the market continuing to sell off and moving down sharply, the Dow Jones has broken yet another critical support level; the daily 200 day MA.


The last time the 200 day MA was broken was at the beginning of the year 2008, and I don't need remind you what happened thereafter...


At this time the Dow Jones has some support at 10000 and 9900, but another sharp move down that causes the Dow Jones to close below these levels could send the Dow Jones back to 2008 and early 2009 levels. Obviously, this would be catastrophic but is now a feasible reality. The Dow Jones is also now trending below its 20 day daily MA and only when the Dow Jones will manage to move back up this MA can we expect a possible reversal in the trend. Right now we are standing near critical levels which could dictate where we might be heading for the rest of the year. If the Dow Jones manages to bounce back up 9900 and 10000 to eventually break back up above the 20 day MA, this could be just a simple correction. However, I do have to admit that the way the market is acting right now and with the volatility we are seeing, this is looking like the beginning of 2008 all over again. There is still hope for a reversal, but things are obviously looking very bearish. The 10000 support level at the 200 day daily MA coincides with the 50 day weekly MA, which means that a closing below this level would be even more significant and perhaps even more reliable.

Right now, I wouldn't jump in at taking short positions, given the fact that we have already moved so low in such a short time and also because we are now standing near critical support levels which a bounce back up from could be our last hope of seeing the market reverse back up. Keep in mind that until the Dow Jones moves back up over its daily 20 day MA, that the major down trend will remain intact. At this time and especially if the 9900-10000 level is broken, you should take short positions for the long term and only short term long positions (max 1-2 weeks holds) on throwbacks. I do expect the market to bounce back up sooner rather than later, but again seeing the trend reverse back up is not very likely, as I expect the major trend to stay down for a while.

MGM & Dow Jones - Wait & See

MGM - WAIT



After breaking below its 20 day MA last week, MGM broke its major up trend and started a minor down trend. MGM finally managed to bounce back up its 50 day MA after trading below it and has since rebounded. At this time MGM is both trending up above its 50 day MA again but also trending down below its 20 day MA which gives us somewhat of a sideways trend despite the recent move up. The Stochastic is about to give us a BUY SIGNAL, however I wouldn't jump back in MGM before it breaks back above its 20 day MA (currently around $15.13). MGM's chart sort of portrays the market's current situation. At this point, after going through a big sell off last week, we don't know if the market will continue higher from here or fail to hit higher highs and trend back lower. What makes everything more risky is that the last peaks now represent significant resistance and we will only know if we reach again these levels if we are heading higher or back down. Despite the presence of short term opportunities on the long side, the market seems much risky and volatile than it was a couple weeks ago. I personally took a few long positions since Friday after seeing a little rebound, however I don't expect I'll be able to hold on to them for very long. What seems apparent now is that we are in a volatile environment which could make you win or lose a lot of money very quickly, and that is why setting stop losses are very important. My gut feeling is that the major trend for most stocks will be down while after every big sell offs there will be short term opportunities on the long side. At this time MGM seems riskier than some other stocks that offer a better risk/return opportunity. I do believe that one of the safest stocks to be in right now is Gold stocks, since whether the market moves up or down it should be some of the most outperforming stocks in the market on the long side. What leads me to believe the market will continue lower in the long run, is the fact that despite seeing the market moving back up right now, Gold continues to hit new all time highs which indicates that fear is still present in the market. I personally feel that we could see much more trading sessions in the triple digits both on the up and down side, with a stronger down pressure though. At this time, you want to be investing very carefully and you should be prepared to be more active as I think we will continue to see a lot of volatility.

Dow Jones - SELL

Looking at the Dow Jones' chart we can see that despite the big rebound yesterday, that the major down trend is still down and a long term SELL. However, as I am writing this the Dow Jones is sitting below a critical level, just below its 50 day MA around 10850. Another gap down tomorrow will reaffirm the fact that we are in a major down trend as the 50 day MA now represents resistance. If that happens, you should consider as I will exiting your long positions and move back towards taking short positions. As I said before, we are in a very volatile environment right now which is looking like 2008.

Dow Jones - Down After All...

DOW JONES - STRONG SELL SIGNAL (Updated May 6th)


After getting a SELL SIGNAL from the Dow Jones last week, the market bounced back up with a BUY SIGNAL to only fall even lower again this week and thus giving us conflicting signals. What is clear now is that the market has gotten very volatile again, and the Dow Jones has now finally broken sharply down its 20 day MA and thus breaking its trend that had been intact since mid-February. However, one important thing to note right now is that after hitting its 50 day MA today around 10800 the Dow Jones bounced back up and potentially could move a little higher in the upcoming days. However, we are now clearly in a down trend and even if the Dow Jones trades back up in the upcoming sessions I think we will continue to experience a lot of volatility, and I don't think we'll see the Dow Jones hit a new high any time soon. We are not in a correction yet, but if the Dow Jones breaks down below its 50 day MA we will most likely be in a correction. With that being said, I don't think you even have to look at the charts to come to this conclusion. The truth of the matter is that fear is back and increasing, due to many factors one being the Greece crisis. However, there are also other events that have already had an impact on the market that could get worse in the near future. The Iceland volcano has re-erupted a couple days ago affecting some flights in the U.K. and Ireland and no one knows or can predict what another eruption could do. Also there is no way to predict what the Oil spill from the Gulf will continue to have on the economy. To conclude, it is clear that there are many risk factors in the economy that could send the market even lower than it already is and that is why I am now choosing to stay on the sidelines. Right now the market is good place for day traders to make a lot of money with the current volatility, but this is not an environment where swing traders and investors would want to be in. In the very short term, I think we could see a little bounce back up towards the Dow Jones' 20 day MA but in the long term things are looking down. At this time I am staying on the sidelines and issuing a WAIT signal for the short term and a SELL for the long term. Basically I think if you wait to see the market bounce a little back up, this could be a better opportunity to take short positions.