Last week provided the start of another leg down in what has been an unpredictable stock market, and the market now appears to be in the midst of forming another bear flag. Since rolling over and selling off strongly in late April, the market has demonstrated all sorts of conflicting formations that have confounded trend traders and investors.

As I pointed out back in June, cash on hand among S&P 500 companies has been at record levels, and up 25% over the same time last year. One would presume that such cash levels would eventually be used for share buybacks, M&A, or dividend increases – all of which would impact the market favorably.

The market found pleasure in manure today. When Australian miner BHP Billiton (BHP) proposed to acquire Canadian fertilizer maker Potash (POT), the market saw this as an opportunity to soar. Perhaps traders took it as a sign that corporate cash is ready to be deployed…or perhaps it was simply a low-volume oversold bounce on the flimsiest of catalysts.

We have all heard the experts recommend "hedging" your stock portfolio. You may have meticulously researched and selected all of your portfolio longs as your core holdings for long-term appreciation.

The SPY sold off early today in advance of the FOMC decision, but bounced strongly from the support line of the bearish rising wedge formation, which also is quite close to its 200-day moving average. Just as I said last week, all market indexes appear a bit extended and ready to pullback, but the bulls are game. Put/call ratio and volume is low.

The SPY finished the month of July up a robust +7%, and then started the first day of August by tacking on another +2% gain. All market indexes appeared a bit stretched from the mean and ready to pullback today, but the bulls fought on mightily to keep the day’s loss minor.

The market continues to look strong and resilient. Whether the news, economic reports, and earnings announcements are bad or good, the market has been absorbing the blows or chasing the momentum like a champion. Now it is struggling with various resistance levels from moving averages and chart formations, but continuing to hold up in this low-trading-volume environment.

It is surely understandable if an investor is afraid to participate in this choppy stock market. Bounces from support are met with selloffs from resistance. In 2008, we got a strong downtrend, and in 2009, we got a strong uptrend, but this year has been difficult to gauge.

Amazingly, the market has given us four major trend changes in the past month alone, which apparently hasn't happened with such frequency in over 10 years. Last week, the market was staring into the proverbial abyss as the S&P 500 incurred the dreaded “death cross,” in which the 50-day moving average of price crossed down through the longer-term 200-day moving average.

Last week, the S&P 500 came perilously close to the dreaded 50-day moving average cross down through the 200-day moving average. This is usually considered by technicians to be an extremely bearish development. The S&P 500 came closer last week than the other major indexes, and actually set new lows for the year.