Markets grind sideways setting up for possible move higher--then lower

The S&P 500 continued to grind sideways today, closing positive by just .09%.  This is in line with my expectations as outlined in yesterday's post.

As long as this market trades sideways, the odds increase that we see a push higher in the coming days or early next week.

Note the bear wedge pattern outlined in green arrows

Please note that we are still trading within a macro bear wedge pattern signalling that the markets will ultimately trade lower whether or not we trade higher first. This means that we are looking at two trade setups within a single pattern: (1) bullish consolidation to push us higher into resistance and (2) a pullback from that resistance triggering the bear wedge.

Tomorrow, I will be looking for an additional day of consolidation before I am convinced of a move higher in the short term. If we break lower first, the bullish pattern will be negated and will trigger the bear wedge.  And if we trade higher, as I suspect we might, I'll look for resistance at the fib levels in the chart above.

Trade idea: TXN short

Texas Instruments (TXN) gapped down on July 11 and has since recovered, trading up significantly over the past week. If the stock fills this gap at 32.44, it should meet significant resistance.

In addition to a gap fill, this level also corresponds closely to a 61.8% fibonacci retracement and a previous pivot/area of congestion.

I'll look to enter this short trade on a break of the 32.44 gap fill area and will stop out on a daily close above the 50 moving average.

Trade idea: MS short

MS has had a strong up-move over the past 4 trading days and is short term extended on the daily chart.

Should this stock continue to push up over the next few days, it will have good resistance between 25.50 and the 200 moving average. This level also corresponds to a 50% Fibonacci retracement.

I will look to take this trade on a break of 25.50 with a stop at a confirmed daily close above the 200 moving average.