Stocks wrapped up the month of July with a lethargic session of sideways action yesterday. Both the S&P 500 and Nasdaq Composite lost 0.1%, while the Dow Jones Industrial Average finished 0.3% lower. Small and mid-cap stocks showed relative strength for a change, albeit not by a wide margin. The Russell 2000 Index gained 0.1% and the S&P Midcap 400 advanced 0.2%. The Philadelphia Semiconductor Index ($SOX), the recent center of our attention, held on to last Friday's gains and tacked on another 0.1%. The $SOX remains at resistance of its primary downtrend line, a pivotal "make it or break it" level.

Turnover dropped again yesterday, although the effect of lighter volume is less significant on a day of consolidation. Total volume in the NYSE declined by 4%, while volume in the Nasdaq was 10% below the previous day's level. A sideways session on lighter volume is normally bullish if it follows a day of broad-based gains, as we experienced last Friday, but the problem is that the previous day's gains occurred on lighter volume as well. Until we begin to see the return of institutional buying interest on the "up" days, we continue to take all bullish sessions in stride. Market internals in both exchanges were nearly flat, indicating equilibrium between the buyers and sellers yesterday.

Over the past several days, the gold and silver stocks have been stealthily moving higher. Between the two, silver stocks have been showing slightly more relative strength, as has the ETF that tracks the price of spot silver. The iShares Silver Trust (SLV) broke out above its primary downtrend line on July 27 and has been consolidating near its high since then. The breakout above the downtrend line also put SLV back above its 50-day moving average. If SLV rallies above the July 27 high, it will likely trigger substantial upside momentum that results when a stock or ETF sets its first "higher high" when coming out of a downtrend. This is illustrated on the daily chart of SLV below:

As for the other sectors, Pharmaceuticals (PPH) and Utilities (UTH) continue to exhibit the most positive price action. Both sectors closed slightly lower yesterday, so we are now stalking the corresponding ETFs for potential entries on the pullback. On the downside, the transportation sector has been ignoring the recent strength in the broad market and may break support of its 200-day MA. The iShares DJ Transportation Average (ITY) closely mirrors the Dow Jones Transportation Average:

Our overall bias on the market remains the same. In the short-term, keep an eye on the S&P 500's pivotal area of resistance at the 1,280 level. We illustrated resistance of the prior high in yesterday's newsletter, and the S&P 500 has yet to break out above that level. The intermediate-term bias also remains bearish as long as the major indices remain in technical downtrends. A few stocks and ETFs have begun setting up for long positions, but we feel the overall odds still favor the short side of the market. However, if a higher volume "up" day occurs, it could easily change everything.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and Morpheus Trading Group, a trader education firm launched in 2001 that provides daily technical analysis of the leading ETFs and stocks.  For a free trial to the full version of The Wagner Daily or to learn about Wagner's other services, visit MorpheusTrading.com or send an e-mail to deron@morpheustrading.com.