New Highs & Euphoria

Heather Cullen

Heather Cullen

In The Money

Heather Cullen ITM Blog bew highs and euphoria

New Highs and Euphoria.

The market has been making new highs – but are we in euphoria? Bloomberg thinks so:

Heather Cullen Blog Highs and euphoria

The Bank of America thinks so:

Although they could be accused of hedging their bets. Only 2 months ago they were saying:

Heather Cullen Blog Highs and euphoria

One of them is going to be right – but which one? Lets take a long term perspective:

Heather Cullen Blog Highs and euphoria

We can see the euphoria in the late 1990s, and the two bear markets that followed that. But today? My reading of the chart is that the market has underperformed its long term trend since the GFC. What does that mean? Well, no-one knows but if our uneasiness about a bull market is based on recent outperformance then I think we may be worrying about nothing. I hope so anyway!

ITM Bull Strategy 2024 Update

The 2024 update for In The Money: Bull Market Strategy has been published. It is the same strategy but updated with data to the end of 2023. As we have been having some difficulty in getting long dated options at 50% strike (100% leverage) and less than 1% time value, I have backtested different parameters to see what works ccurrently. The new backtested parameters are:

  • 50% strike 1% time value, 6 – 12 months to expiry
  • 60% strike, 2% time value, 6 – 12 months to expiry

The results are the same as previously: both beat the market spectacularly. The 60% / 2% performed really well, beating SPY (with dividends reinvested) it by more than 10 times. The update looks at chains in January / February 2024 to find options that meet the requirements.

There are no major changes, so you don’t have to buy another book (unless you want to, of course. The print is slightly larger, and I have tightened some of the explanations, so it is easier to read.) If you have an eBook then I believe you can get a free update from Amazon – but please don’t ask me to help as I can’t. Authors have no special access and have to deal with customer service like everyone else. They wont let me intervene on someone else’s behalf.

ITM Bull Strategy 2024 Backtesting

The results were in line with the previous results. The backtesting system is documented, and this can be downloaded here: Backtesting – Heather Cullen : In The Money. If you want to duplicate it and make your own backtesting system feel free. I have also published spreadsheets in full in PDF – all 1,190 and 870 pages of them!

Now onto updating the Bear Strategy . . !

To the markets . . .

The big news on Friday was that the year-over-year inflation rate came in at 3.1%, which was over expectations of 2.9%, so the market dipped, which was a shame as the futures had looked very positive up until an hour or two before market open. Honestly, investors are a skittish lot!

SPY Chart

We have been oscillating around the 500 mark – not surprising as it is such a big milestone. We have closed over it 3 times, unfortunately Friday was cruelled by the inflation figures so we ended on a sour note, slightly less than last week and slightly under 500.

However, still trending upwards in a nice steady fashion with small body candlesticks which shows a relatively stable market. In perspective:

SPYG Chart

SPYG is showing the same pattern as SPY:

But still has not reached its previous highs:

QQQ Chart

Same pattern as SPY. Rather boring, really.

Heather Cullen Blog Highs and euphoria

Nope, I should try harder. QQQ reached its most recent high on Feb 9th, and has not matched it since. It is closing slightly below the 10 day SMA and looks like it may establish a support / resistance line around 430.   And in perspective.

Heather Cullen Blog Highs and euphoria

VIX Chart

Volatility is still very low.

Heather Cullen Blog Highs and euphoria


Heather Cullen Blog ITMeter

The week ahead

We are still in earnings season and NVDA (Nvidia) is due to report on Wednesday, which should be interesting. NVDA has had a stellar growth of over 200% in the last 12 months, is now the 6th largest stock in the S&P 500 and the 3rd largest in the Nasdaq. I thought you might like to see its stock chart for the last four years:

Heather Cullen Blog Highs and euphoria

Impressive, isn’t it? Helps to explain the Nasdaq’s outperformance.


As yet the futures haven’t opened and are still reflecting last Fridays figures:

Next week I will not be able to update the blog before market open on Monday (yes, off gallivanting again! Beautiful coastline.) but will do so by market open on Tuesday.

Heather Cullen Blog Highs and euphoria

 Of course, if there is any major changes I will do a special post, but we are a long way from any probably death cross.

So – fingers crossed for a good week!


Comments, Questions and Answers

16 thoughts on “New Highs & Euphoria”

  1. Hello Heather,

    Just two quick questions. After reading all your books except the Australian version and, In The Money Bull Market twice. I cannot seem to wrap my head around the first question below.

    I have enough discretionary funds set aside that I can either essentially buy 1 contract of SPY (If pricing is relatively the same as of this typing) or, 10 contacts of SPYG. Provided things go my direction of choice, which would provide the better positive return on investment, assuming all things are equal? I did read that the SPYG did a bit better than SPY in 2023.

    Question 2 – So, I hate to assume anything but with your background I’m sure you have ready Larry Hite’s book “The Rule”. His focus is much like yours. Follow the trend (Tide) and not the waves. However, he does drill down on using trailing stops even with options. While he speaks to 2% which I find kind of tight for this method of trading, have you done any back testing using a trailing stop? If not, what would you recommend experimenting with?

    Thank you in advance, and I thoroughly enjoy your books! JB

    1. Hi John
      SPYG is more volatile than SPY so I would always recommend buying SPY options if at all possible. Plus there’s no reason you cant have a mix of both SPY and SPYG. If you have any funds left over after buying your DITM SPY then I suggest that you buy a DITM SPYG, and then keep buying them until you can afford another SPY option. Hope this makes sense.
      Re Larry Hite – no, I haven’t read him but have just bought his book so I will read it – and will, no doubt, pontificate on it in the blog! But re trailing stops – I think they are absolutely necessary if you are trading something fast moving and volatile – like currency or even stocks – but for the SPY index I don’t think they are necessary. It just whips you out of the market when it is normal variability – certainly 2% is WAY to tight I would have thought. I have backtested stops – getting out is the easy bit, getting back in is the problem. What do you use as a get in signal?
      I will read the book, thank you for bringing it to my attention.

  2. Hi Heather, I have really enjoyed your books! One question that I did have was which software/website you use to obtain your SPY data from. Thanks!

  3. Hi Heather! A couple of weeks ago you recommended the book “The Psychology of Money” by Morgan Housl, and I’m so glad you did. It’s been a great read so far (about 2/3 through it). In Chapter 12 (Surprise!) he talks about how some ideas and tools that may have been helpful many years ago do not work in today’s markets. I looked at the ITM back testing results and compared the 3-year rolling average returns during the last 20 years with the results for the entire 20 years and found the ITM results were better in the first 10 years than the second 10. Obviously, part of that (and maybe all of it) is due to the path the market took and how the ITM “in” and “out” signals were triggered, but do you have any thoughts on how the ITM strategy might stand up in the future? I will concede of course that the future is unknowable and unpredictable!! I love your books, your strategy and your thought process, so I am definitely not being critical; just curious. Thank you Heather.

    1. Yes, glad you enjoyed the book – I particularly liked the post script about the rise of the American consumer – it brought together bits and pieces I keow, but put them in perspective.
      Re how will ITM stand up to the future? – of course, ITM works best in a bull market, so we are hoping for that. Sideways markets don’t suit it, and we’re out of bear markets anyway.
      The best outcome for us is a nice steady bull – but whether we get it or not I don’t know.
      I just trust to human nature never changing: ‘History never repeats itself. Man always does’ (Voltaire) – and luckily through the charts we have a perfect record of what they have done!

  4. Dear Heather,

    Thank you so much for another wonderful weekly and timely post. The year 2024 will be special due to the Bitcoin halving every four years and the US Presidential election every four years. It keeps raining and raining and raining like a monsoon in Los Angeles. Cheers to the ITM method and cheers to life.

    George Halongton

  5. I recently came across CBOE’s SPX, XSP options. How’s that different from SPY? Since the underlying asset is S&P500, can I still use SPX, XSP to trade using your Bull and Bear market strategy?

    1. XSP is a ‘mini’ based on SPX (S&P 500) but one tenth the size. So one SPX share will cost you $5k but one XSP will cost you $500k, or exactly the same as SPY, the ETF. Which means that the options will be the same level as for SPY so it will not be any cheaper. However, the main problem is that it is a European option – in other words it can only be exercised at expiration. Of course, you can sell your options as you can sell American options but they behave quite differently. I have used European options on Eurostoxx and AEX, and know that the pricing seems illogical if you are used to American options.
      However, I have not backtested ITM on them so can’t tell you if it works or not. I think using SPYG would be a better option.
      Hope this helps

      1. I really enjoyed your ITM BMS book! Related question (my known ignorance intact) I cannot discover why SPLG would not be a viable alternative to SPYG in the ITMS strategy. It does not seem to have the same issues as XPS, it’s history looks to match SPY (organically using all of your SPY backtesting), and there are options available for 10+ months.

        Is the issue here volume/interest? Or there are so many that could be used but the outcome would be negligibly different?

        Thanks for incorporating an actual philosophy into your book, not just directives!


        1. Hi Kevin – thank you!
          Re SPLG – yes, it shadows the S&P 500 so that is good, it has history back to 2005 and that is good also. My problem with using it for options is simply the spread – if, for example, you look at the DEC 2024 30 strike (50% of current price) the bid / ask is 28.1 / 32.5 – which is a spread of 16%.
          If we compare it with a comparable SPY options (Dec 24, 250 (50%) strike) the bid / ask is 262.08 / 264.01, so it has a spread of 0.7%.
          The spread affects how much we pay for options and I think we would be paying too much for SPLG. A Black – Scholes calculator show we should be paying $30.75 for this option, but as the OI (Open Interest) is so low (only 10 options for all strikes), so we would probably get filled at the ask of $32.5 which is 6% above fair value. In other words, probably too much!
          Hope this makes sense – please get back to me if not.

  6. After reading both your books, I wanted to figure out if I can trade options on SPYG using both Bull market and Bear market strategy in a small account. My current account is small and I’m hoping to build it up using SPYG but I’m not sure if I can use the Bear market strategy with SPYG along with Bull market strategy outlined in your books. I intend to use SPYG till my account grows to afford SPY options.

    1. Hi Danny, I haven’t tested the bear market on SPYG only the bull market, and it works well on that.
      The bear market strategy is one that I will check when I am updating the Bear book – it is next, should probably be around 4 weeks, and I don’t think we’ll be entering a bear market before then so just hang in there!

Comments are closed.

Heather Cullen Blog Highs and euphoria

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!