ITM Special Update: SPY and SPYG

Heather Cullen

Heather Cullen

In The Money

Heather Cullen Blog Bear Market Surfacing

ITM Update: SPY and SPYG

Well, a very disappointing week, although not unexpected. Last week we saw that both SPY and SPYG, were in a consolidation phase, and we were watching for a range breakout. Well, we got a breakout – just not in the direction we would have liked. So what does that mean for the ITM and ITMS strategies?

ITM Bull Strategy

Although SPY has broken out of its trading range we are still about 15 points clear of a dead cross, so no action at this point. ITM rules say to stay in your bull trade until we see a confirmed dead cross, so keep a watching brief.

Note that the last candle low point is on both the trend line and the 200 day SMA. What does this mean? Well, if it bounces off it was important, if it goes straight through then it wasn’t.

OK, bit of a cynicism there: just illustrating how many stock market authors and gurus operate. If something works then they remember it, if it doesn’t then they ignore it. Remember: some indicators work some of the time!  

Heather Cullen Blog SPY 25 Feb resistance

ITMS Bull Strategy (smaller accounts)

In last weekend’s blog I wrote:

 . . about the SPYG golden cross. Yes, it has happened and yes there is white space between the SMAs. However, it doesn’t look all that convincing at the moment so if you want to wait a couple of days that may be wise.

In hindsight that was wise (but then we’re all brilliant traders in hindsight!). I do hope that you hesitated before buying. I should have explained my reasons for being unconvinced that this was the start of a real uptrend but I often worry that I am making things too long.

If you look at the chart below you will see that SPYG was pushing against a  well-established line of resistance, and 4 times before it had bounced off it. Of course, eventually it will burst through it – but we don’t know when.

Heather Cullen Blog SPY resistance

On the other hand, it has pierced the downtrend for the first time in a year, so this current situation may just be a hesitation.

Heather Cullen Blog SPY resistance and downtrend

So, recommendations:

  • If you are not in a trade then hold off until the situation resolves and we have a definitive golden cross.
  • If you are already in the market then note that there has been an OUT signal. I would suggest waiting until Monday trading and make a decision then. In a twitchy market traders hesitate to hold over the weekend and tend to dump stocks late Friday so it is possible this is just an overshoot and we have seen the end of the downturn. If Monday is not a positive day, then sell and wait for a new IN signal.

Where to from here?

Watching and waiting. If you want to have an in depth discussion of the stock market and the economy then I recommend the Calafia Beach Pundit. He just updated his blog on Friday with an article on inflation and it is worth a read. Here’s the link: 

Terrible Joke

Q; Why was the stock trader electrocuted?

A, He shorted Tesla.

Blog Comments

And apologies for forgetting to put the comments widget on last week – particularly silly as I had asked for feedback about the blog! Not smart. Sorry!

I have had quite a lot of emails anyway, most saying that they are happy with the length and content of the blog, although there have been suggestions I should move to weekly instead of fortnightly.

Here is the comment widget if you would like to let me know about this or to ask questions. Reader Q&A will be back next week.  


6 thoughts on “ITM Special Update: SPY and SPYG”

  1. Heather, I ran a comparison of SPY and SPLG and they overlay nearly exactly. I suggest that SPLG would be better than SPYG for ITMS. It still has the disadvantage of not providing the LEAPS, but the correlation is much better to SPY.

    1. HI Vern – I have had quite a few suggestions about alternatives to SPYG – I need to get my head around them all – but great that you let us know, others may want to check them out right away.

  2. Hi Heather
    I do feel that to ride the swings of the market the need to have a buffer like when the 5EMA crosses below the 8EMA is to buy a put ATM for 30-60 days as long the 5 is below the 8,because we are leveraged this will help with our emotions
    there is a cost but like the insurance it gives a peace of mind
    with all my respect
    Raymond Limansky,M.D.

Comments are closed.

Heather Cullen

Stay up to date

Get notified when there is an ITM Update

Thank you – your message has been sent. Please note that  as of July 2022 Heather will answer all questions in the ITM Blog, not individually. You will be notified when there is a new blog post. Happy trading!