Today the SPDR S&P 500 ETF Is a Certain Buy

SPY stock - Today the SPDR S&P 500 ETF Is a Certain Buy

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  • SPDR S&P 500 ETF Trust (NYSEARCA:SPY) stock rallied strongly last week with more upside to come.
  • Bearish uncertainty and fear are losing their grip on Wall Street.
  • Investors should be ready to buy SPY stock.

The SPY ETF has been a bear of an investment in 2022. The bellwether exchange-traded fund (ETF) is off roughly 6.50% entering the trading week.

That’s not nearly the worst of it either. Through Friday’s close SPY stock is at a one-month high after being down nearly 12.5% just one week ago. To be sure, the volatile losses and mostly bearish headlines make taking to the sidelines appear like a wise investing strategy. But is it?

Over its history SPY has built great stock market returns for investors. Today, following developments this past week, this ETF looks increasingly suitable for those interested in gaining market exposure at an attractive discount.

Ticker Fund Current Price
SPY SPDR S&P 500 ETF Trust $445.07

SPY Stock Bounces Back

Some may call this past week’s rally in the S&P 500 ETF an overdue dead cat bounce give that we’re in a market that has been in a corrective cycle since January. The broad-based, large-cap SPY gained 5.82% for the five-day period. It’s a hefty weekly performance by most any measure. In fact, it’s the largest single week gain in more than 15 months.

It might seem even more reasonable to question the rally’s sustainability now given that just one week ago SPY was about 1% away from taking out its corrective low of 14.50%. (It set this marker back in February).

Furthermore, the S&P 500 gained ground in the face of the Federal Open Market Committee’s first rate hike in more than three years, a Covid-19 outbreak with lockdowns in China and the ongoing conflict in Ukraine still far from resolved.

Obviously, there’s little reason to trust the price action in SPY as anything other than a dead cat bounce, right? Actually, far from it.

Why This Matters to SPY Stock

A week ago, market conditions were much different and it was much more difficult to justifying buying SPY stock. However, today, that’s simply not the case.

For one, there’s less certainty surrounding Federal Reserve policy today. For weeks the looming March FOMC meeting had investors on edge and pressured SPY in response. But Wall Street’s voting machine has voted in favor of owning SPY stock after the central bank’s “nimble” approach to fighting inflation.

What about the China headwind? Chip supply shortages and Covid-19 itself are sure enough evidence of inevitable challenges ahead. But two full years into Covid, we’re also in much better shape to combat the virus on a global level.

What about the Ukraine conflict? Despite the tragic loss to human life, geopolitical events like war, which weigh on SPY, are typically longer-term opportunities to gain market exposure at a discount.

Should You Buy SPY Stock Today?

SPDR S&P 500 ETF Trust (SPY) bullish confirmation out of market correction

Source: Charts by TradingView

So is SPY stock buy worthy? The short answer is yes.

Through buying shares of the SPY ETF, investors have access to topflight companies such as Apple (NASDAQ:AAPL), Home Depot (NYSE:HD) and Tesla (NASDAQ:TSLA) at compelling discounts.

Consider that it’s not just headline and macro developments that favor SPY either.

Historically, fearful readings in the CBOE Volatility Index (INDEXCBOE:VIX) offer good entry points for equities. (The VIX has been showing these readings for the past few weeks now).

What’s more, the past five sessions ushered in weekly candlestick confirmation of a low in SPY stock with stochastics supporting the buy decision.

Volume and price action this past Wednesday also confirmed a bullish follow-through day. Critically, this technical event has preceded every modern bull market according to Investor’s Business Daily.

Are there risks? Absolutely. Not every follow-through day is successful, neither will every weekly bottoming pattern work.

Also, while the SPY ETF is in fair value territory, visually the current market valuation model from currentmarketvaluation.com is a tad close to the centerline, dividing bearish and bullish traffic. Having said that, buying a fully hedged collar strategy on SPY stock to mitigate downside risk may be worth considering.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


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