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.
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