Chart of the S&P 500 index below shows the twists and turns the market has been through since hitting the high in April. The questions surrounding the outlook for the economy have become the latest news items detracting from any definitive direction relative to the future outlook.

The turn lower at the April high started with the Greece debt problems which overlapped into the European debt crisis. The potential rally off the double bottom formation failed as the U.S. economy started reporting slowing economic data which brought a test of the 1040 support level. The break below this level brought forecasts of a drop back towards the 875 support mark. Then second quarter earnings gave an oversold market a lift and back to the 1120 resistance mark. The push above that level has not gained any momentum and the questions remain relative to the economy and a potential test of the low (1020) is back on the table.

The break above 1120 brought projections of a move to the January high near 1150 or 1180. The last week has brought more questionable economic data and stalled the efforts. The topping formation over the last six trading days lends itself to a test of the move prior to a follow through on the upside or a retest of lower support levels. The upside is therefore in question, set your stops accordingly if you want to hold any positions relative to the index or tighten them if you want to protect gains from the move higher. 

You can see on the chart that not all technical patterns work as forecast. This is why you have to define your entry points with the target and stop in mind. This allows you to control the risk of such trades. The chart also shows the lack of foresight the market has and how quickly it can change direction based on the inconsistent data.

It is important that you measure your risk and determine your strategy prior to putting you money to work in the market. Sometimes in markets like this the best course of action is to sit it out in a safe haven and wait for the next trend to develop with clarity and opportunity.