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.
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