The Surprise Summer Rally
Premium Section: How to use Cumulative Volume Delta to find Setups
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The summer rally showed up early and out of nowhere—just as World War III headlines were flooding the news. Here’s the lesson: if you want to make money, watch price, not panic. What traders do with their money matters more than what you feel reading the headlines.
Looking at the Seasonal Cycle of the S&P 500 (SPY), the Summer Rally typically kicks off around June 26th or 27th. This year, it started early—on June 23rd—right when fear was peaking.
Smart Money stepped in and bought the dip as headlines about missile attacks in the Middle East dragged futures lower overnight. While fear gripped the crowd, institutions did the heavy lifting to defend the uptrend. Now that sentiment has shifted and retail is chasing strength, the next leg higher can be fueled by Dumb Money.
Looking at the Fear & Greed Model, we’re in what we call a “Greed Grind”— where greed persists at elevated levels as the uptrend stretches higher. Eventually, fear will return to the market—but not yet.
The VIX term structure isn’t currently pricing in any exogenous shocks that could rattle the market. However, a slight uptick in abnormal fear could emerge between November and December.
So how high can this Summer Rally take us? The SPY’s June pullback was very mild as it retraced only 38% of the May 23rd to June 11th uptrend.
Using the Elliott Wave Fibonacci Pinball technique, we can project price targets at $616 (1.618 extension), $626 (1.764 extension), and $642 (2.0 extension). If the $642 target is reached, that would represent a gain of roughly 4.8%. The shallow retracement in June increases the odds of the $626 or $642 levels being hit.
The Nasdaq 100 similarly hit the 38.2% Fibonacci Retracement of the May 23rd to June 11th uptrend.
Using the Elliott Wave Fibonacci Pinball technique, we project a price target of $559 (2.0 extension), which is 2.34% above today’s close. Of course, price can always exceed this target if there is enough buying power.
The Russell 2000 (IWM) showed relative weakness in June, pulling back about 50% of its prior uptrend.
Using the Elliott Wave Fibonacci Pinball technique, we project a price target of $221 (2.0 extension), which is 2.78% above today’s close. Of course, price can always exceed this target if the buyers have fuel.
In the Premium Section, we’ll cover a technique that can act as confirmation and boost your confidence in a trade setup—Cumulative Volume Delta. We’ll also go over current stock setups using this technique.
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