SPY continues to make new highs, and it is up 23% since September when In The Money was published. If you have SPY shares then you will be pleased.
But – if you have been following the ITM strategy you will be even more pleased. ITM is up 95%!
I have been asked a lot recently: can SPY continue to go up? To answer that I would have to be able to look into the future, which is not one of my talents! What I CAN do is look at the chart for clues about what is happening and what is likely to happen.
VIX (Volatility Index)
We have looked at the VIX index, which is a Volatility index – often called the ‘fear’ Index. The VIX is on the blue chart below. The VIX is not high, and has been trading below 20 for all April. Historically, the VIX can go for long periods of time below this level (the pink horizontal line). It spikes when there is a crisis, like the GFC (when it got up to 89.5) and Covid (when it got up to 85.5).
The VIX is not extremely low (below 10) which many traders think is a warning sign showing complacency in the market. However, it has only been extremely low twice in the last 20 years. Both times the market continued to rise so there is very little evidence that it predicts a downturn. The current VIX of 17.6 is neither historically high nor low.
SPY (The S&P 500 Index)
SPY, the index that the ITM strategy uses, is in the yellow chart below. SPY shot through 400 without a backward glance which I found quite surprising as it usually hesitates before ‘big’ numbers. Even more surprising is that it hasn’t faltered since or retested 400 as support. SPY continues to go up in a very measured way, with lots of small candlesticks and it has been in a period of consolidation since mid-April. Consolidation is usually a healthy sign.
So right now there are no warning signs from the charts – but I’ll keep watching closely and let you know if I see anything bad!
