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When the Generals march on without the Soldiers - Thomas Ng 18 Jul 2021

Updated: Jul 25, 2021

Dear Friends & Followers, this writeup for the S&P500 Index outlook is the last I will post in full here, other than some for advertorial purposes.

For future posts, Clients will receive via email as per normal. For non-clients, please subscribe to my PATREON channel by clicking the button below!

Thank you very much for your past support! Hope my Applied Technical Analysis can continue to help you navigate what I believe is the final laps of this decade long US bull market. See you at the Top!


On Sunday 18 Jul 2021 10.29pm, I emailed Clients my latest post titled 'When the Generals march on without the Soldiers - Thomas Ng 18 Jul 2021':

'Dear Clients


In the blink of an eye, we are now in Q3 2021! Again hope all is well for you and your family!


Now one month has past since my last post and I'm elated to note that the S&P500 Index (SPX) has been tracking my bullish script thus far and appears to be on track to my 4420 target.

A quick recap on what I said in my last writeup on 16 Jun:

'..Currently a bullish Cup & Handle pattern has manifested itself & an authoritative breakout will likely see SPX targeting 4420+/-..'.

SPX closed last Wednesday 14/7 at an all time high of 4394, 26 points from my target (see Chart 1).

Chart 1 - SPX (Daily) bullish Cup & Handle Target at 4420

I also mentioned that:

'..For the uninitiated, Negative Seasonality doesn't necessarily mean the market will crash. It just infer gains are harder to come by or there is heightened potential whipsaws in the market..'


Truth be told, all is not that well beneath the surface. Take a look at the SPY ETF vs RSP ETF chart. Both ETFs track the S&P500 Index but SPY is a market-cap weighted ETF while RSP is an equal-cap weighted ETF (see Chart 2).

*you can understand the difference here under RSP Factset Analytics Insight -


You can see that SPY has already broken out to all time highs while RSP was unable to break out. What this means to say is that this current major up move in SPX appears to be led only by the mega cap stocks such as FANMAG stocks while the rest of the other smaller S&P500 Index component stocks are lagging behind.


You see, an army cannot win the battle when only the generals (FANMAG & other mega cap stocks) are charging ahead while the soldiers (mid to big cap stocks) are lagging behind.

Chart 2 - RSP lagging behind SPY

Another example of telling you the undercurrents is not well is that the Bullish Percent Index (BPI) currently shows that only ~64% of the 500+ stocks in SPX are exhibiting a P&F (Point & Figure) buy signal. The remaining 36% are thus on sell signal. For SPX that is hitting new highs every other day, I'd prefer to see BPI around the 80-85% level. Again, this signals the current rally is not robust (see Chart 3).


Of course, things can change (fast) if the soldiers decide to 'wake up' and follow through positively with the generals and that is something to KIV for in the next few weeks.

Chart 3 - SPX Bullish Percent Index only at 63.80

Now, one more observation to lean towards the dark (bearish) side, the VIX (Fear Index) recently is making higher lows while SPX is inching towards new highs (see Chart 4). You see, usually the two moves in negative correlation to each other, i.e. as SPX hits new high, VIX should see lower readings. When both move up at the same time, red flags are raised.

Chart 4 - SPX & VIX rose together (blue arrows), not pretty

Finally, to give a more rounded picture to everyone and also the broader market's only saving grace is that the current investor sentiment is actually rather dull or bearish - CNNMoney Fear & Greed Index is now -23, exhibiting 'Extreme Fear' among investors (see attached image).

The Contrarian blood in me would like to remind you that asset markets generally crash from extreme exuberance, not from extreme fear.

Image source: CNNmoney

So in the broad scheme of things, my bias is more towards the bearish case and in conjunction with the Negative Seasonality which lasts til October, I'm of the view that we are more likely to see a garden-variety pullback or correction in SPX within the next 1-3 months.


As for longer term investors (1-2 years), I'm still net bullish on the SPX due to unprecedented liquidity working thru the US economy and the potential of a post pandemic boom:

Mr Howard Marks of Oaktree fame also had this to say on 4 March 2021:

'..Over the course of my career, there have been a handful of times when I felt the logic for calling a top (or bottom) was compelling and the probability of success was high. This isn’t one of them. There’s increasing mention of a possible bubble based on concerns about valuations, federal government spending, inflation and interest rates, but I see too many positives for the answer to be black-or-white..'

Read in detail what he has to say in his March memo. He gave very rounded arguments & has a positive tinge to his outlook:


Thus in conclusion, I'm gonna sign off by repeating what I said in my 16 Jun post:

'..Moreover, due to negative seasonality effects I'm concerned that this bullish set up may turn out to be more volatile than usual. Given such a backdrop, traders should reduce position sizing while longer term investors can consider to only add positions on weakness..'


Live Long & Trade Well!'

Remember, do subscribe to my PATREON Channel for my unparalleled insights to the World's most important index, the S&P500 Index!

Thank you & regards

Thomas Ng, CMT Principal Trading Representative 首席股票经纪 #plsreaddisclaimer #chartforillustrationonly #spx16jul21 #negativeseasonality #whipsaws #befluid #wytant #livelongandtradewell Chart source: tradingview / stockcharts'

Image source: edited from

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