For last 2 weeks market has been churning near its range low. The range low was established during the Japanese earthquake and nuclear panic.
All three scenarios are possible at this stage. Unless there is a catalyst the more likely scenario might be range bound sideways market.
The next possible catalyst is earnings season . It is fast approaching. If the earnings surprise to upside you may find stocks breaking out of this range.
The European debt crisis has the potential to lead to downside. But the market has discounted most of it and held up well so far.
In the short run the end of the month and 4th July holiday weekend might be catalyst for strength to the upside.
At this stage not many upside moves are working. Most moves last 1 to 2 days and many breakouts quickly drop back in to range. As of now this is not a market conducive to breakout type swing trades. Churning action can lead to death by thousand cuts. But for many traders there need to trade is overwhelming even if good setups are not there. That can lead to frustration.
At some stage in few weeks this market will make a big move in either direction , but many may not have patience to wait for that. A correction like this can lead to leading stocks forming nice sideways bases and once the weight of the market is lifted, they breakout and make big moves. Many stocks are setting up like that currently. But unless there is a significant buy thrust the breakouts in them get faded. If you are swing trader picking your time to trade is key to survival. For day traders it does not matter. For them everyday is opportunity day.