Where is the Market Heading

The performance of the market last month almost made us forget about the big sell-off in May. In just one month, Dow Jones average rose 700 points from 9732 on July 1 to 10465 on July 30. During the same period, S&P 500 surged almost 10% from 1027 to 1101.

Just when people are ready for the welcome back party of the bull market with another 200 points surge in Dow in the first week of August, this week's 400 points drop again reminded people how fragile the market and the investor's confidence are.

The technical chart shows the Dow is close to 50 day moving average of 10266 points and should have support at that level. S&P 500 however has dropped below 50 day moving average although there is support at 1064 and 1069.

Based on the chart the market should stabilize next week and may even see bounce back. If the market continue to drop sharply though, it's probably better to stay on the side line.