Long-Term
Decennial Pattern & Performance
The table averages market performance for each calendar year ending in the same digit and shows how often those years closed up or down. We’ve now in the year ending in 6, which historically has closed in positive territory over 70% of the time. However, the average gains in such years tend to be more modest—especially when compared to the typically stronger performance seen in years ending in 5.
Please note that the up/down counts in the table reflect only the direction of the yearly close and do not distinguish between small or large gains or losses. A year marked as “up” may include increases as minimal as 0.1%.
| 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | |
| Avg % | 1.34% | 1.38% | 0.64% | 16.27% | 7.97% | 21.44% | 9.41% | 1.49% | 10.07% | 10.37% |
| Up/Down | 5/5 | 5/5 | 6/4 | 8/2 | 7/3 | 9/1 | 7/2 | 6/3 | 7/3 | 7/3 |
Kitchin Cycle
The Kitchin Cycle is a short-term business cycle lasting approximately 40.68 months, or about 3.4 years. First identified by economist Joseph Kitchin in the 1920s, it reflects recurring fluctuations in production and inventories. These cycles are driven by delays in information flow and business decision-making — companies respond to market signals with a lag, often overcorrecting by overproducing or underproducing. The result is a rhythmic, short-term economic pulse, distinct from longer cycles like Juglar or Kondratiev waves. Source: Technical Analysis Explained – Martin J. Pring.
| Last Forecast Date | Type | Actual Date | Actual Direction | Next Peak | Next Valley |
| 09/04/2025 | Valley | 07/04/2025 | Up untill next peak | 23/04/2027 | 08/12/2028 |
Presidential Cycle
Midterm Year (Year 2):
The second year is historically the most difficult. The weakness from late in Year 1 can spill over, and the first half of the year is often dominated by hesitancy, uneven growth, or outright declines. Political uncertainty around midterm elections tends to weigh on sentiment, while policy adjustments or tighter monetary conditions can add to the pressure. The turning point usually comes in the latter part of the year. By autumn, markets often carve out an important low, setting the stage for a strong rebound in the final quarter, as election results bring clarity and forward-looking investors position for the next phase of the cycle.
January Barometer
The 2026 January Barometer will be available at the end of January 2026.
This is a modified interpretation of the classic January Barometer originally introduced by Yale Hirsch, which states: “As goes the S&P in January, so goes the year.” In this version, the focus shifts away from absolute direction and instead emphasizes potential inflection points, changes in trajectory, and the steepness of price movements. The directional bias of individual segments is intentionally disregarded, as historical reliability on that front remains questionable.
The core concept involves extrapolating January’s behavioral pattern across the entire calendar year — essentially “stretching” the market’s movements from January and projecting that rhythm through to December, as a framework for observing possible structural or psychological echoes in market behavior.
Annual S&P 500 Forecast Overview
This chart presents my yearly forecast for the S&P 500 Index. The blue vertical lines mark the end of each month, while the fuchsia lines indicate points that coincide with both month-end and quarter-end.
The percentage figures represent how often, in historically comparable years, the market printed its lowest low during a specific quarter. A key rule applies: Q1 lows are only included if they are lower than the lowest low recorded in Q4 of the preceding year, ensuring that only meaningful new lows are counted.
For example, a 50% reading in a given quarter indicates that, in half of the years studied, the annual lowest low occurred during that quarter. The red pointers further refine this analysis by highlighting the specific months within those quarters where the lowest lows most frequently materialized.
Together, these elements provide a time-based framework for identifying periods where downside risk has historically tended to concentrate, rather than predicting precise price levels.
Mid-Term
Seasonal Patterns
Source: The Research Driven Investor by Timothy Hayes
The chart below illustrates the stock market’s seasonal tendencies — its historical propensity to rise or fall during each calendar month. We’ll use this as the primary basis for establishing a mid-term directional bias.
Note: While the chart on the left is based on the Dow Jones Industrial Average, the accompanying monthly performance table reflects data from the S&P 500. Similar to the yearly performance table above, keep in mind the usual caveats — seasonal patterns can inform bias, but they’re far from guarantees.
| JAN | FEB | MAR | APR | MAY | JUN | JUL | AUG | SEP | OCT | NOV | DEC | |
| Avg. | 1.2% | -0.2% | +0.4% | +1.1% | 0.0% | +0.9% | +1.4% | +0.5% | -1.1% | +0.5% | +0.9% | +1.2% |
| % Up | 61% | 53% | 60% | 62% | 61% | 58% | 61% | 58% | 46% | 58% | 58% | 73% |
Sector Signals and Relative Strength
DJU
The Dow Jones Utilities Average (DJU) is used here as a leading indicator for potential weakness in the broader equity markets. While I can’t recall the original source of this idea, I’ll be sure to credit the author if and when it comes back to me. Through observation and analysis, I’ve found that the DJU often signals prolonged periods of market weakness approximately three months in advance of major indices like the S&P 500. This lead time is an average — typically around 55 trading days — with a buffer of roughly ±1 week to account for variability.
SPXEW
Historically, divergence between the S&P 500 and broader measures such as the S&P 500 Equal Weight Index (SPXEW) has often served as an early warning signal for upcoming corrections in the S&P 500. While the S&P 500 is weighted by market capitalization, giving more influence to the largest companies, the SPXEW treats all 500 constituents equally, offering a more balanced view of overall market participation. These divergences tend to be more reliable when signaling tops rather than bottoms. Tops usually form gradually, allowing time for divergences to emerge. Bottoms, however, are often sharp and “V”-shaped, giving little warning. As a result, while this method can help identify downside risk, it’s far less effective at spotting recoveries or timing market lows.
XBD/SPY & XLP/SPY Relative Strenght
Source: Technical Analysis Explained – Martin J. Pring
Relative Strength (RS) is a technical metric used to evaluate the performance relationship between two securities. In the chart, we compare XBD (Securities Brokers – blue line) and XLP (Consumer Staples – inverted, orange line), both measured relative to the SPY.
Starting with XLP/SPY: XLP represents the Consumer Staples Select Sector SPDR. The underlying premise is that during bear markets, investors often seek refuge in consumer staples due to their defensive nature. Conversely, in bull markets, these stocks tend to underperform as capital shifts toward higher-growth, more speculative sectors. For this reason, the XLP/SPY line has been plotted in an inverted format, allowing for easier identification of divergences that often signal shifts in investor sentiment.
Now, turning to XBD/SPY: XBD represents the NYSE Arca Securities Broker/Dealer Index. Historically, this index has shown a tendency to lead market tops and bottoms. When the relative strength line peaks and begins to decline or move sideways, it often precedes a change in market trend—though the timing can vary. This change may result in a downturn or simply a period of consolidation. The inverse also holds true, with the index providing useful signals near market bottoms as well.
Monthly Forecasts
JANUARY
The outlook for January suggests a sluggish start to the year, with a slightly bullish bias in the early days. A potential shift in direction is anticipated around January 14th, likely tilting to the downside. This pullback is expected to be short-lived, with a reversal to the upside projected around January 21st, potentially leading to a strong upward move into month-end.
JANUARY’s DOI: 14th, 21st.
DOIs: “DOI” refers to “Date of Interest” — a term used to highlight specific days when potential market reversals or periods of heightened volatility may occur. The methodology behind the identification of these dates has not been disclosed in previous publications and will remain confidential in future ones.
Short-Term
S&P500
This chart employs a simple yet effective methodology for identifying theoretical support and resistance zones. It calculates key levels based on fixed percentage moves from both the most recent significant high or low, as well as from the extreme points — either the lowest low or highest high — within the current trend structure. Additionally, it factors in speed deviations, both positive and negative, relative to the prevailing trend. These elements serve to identify potential zones where price action may stall, reverse, or accelerate, providing a structured framework for anticipating significant market reactions.
This chart displays a heat map of potential support and resistance levels derived from open interest in SPX options. The analysis takes into account various option characteristics, including expiration dates, moneyness, and strike distributions. The specific parameters and selection criteria have been determined at the author’s discretion and are not disclosed.
Darker areas on the heat map indicate a higher concentration of open interest, which may signal zones of market sensitivity. It’s worth noting that a significant portion of open interest—particularly in out-of-the-money puts below the current market price—is often used as part of hedging strategies by institutional participants and market makers. While these levels can act as potential areas of support or resistance, they should be interpreted as context rather than certainty, as not all open interest reflects directional intent.
VIX
For the VIX, I primarily focus on trendlines and channels, using closing or opening prices rather than highs or lows. I avoid indicators — the VIX tends to respect structure more than signals. The colored levels on my chart are straightforward: they serve as both support/resistance zones and trigger levels, depending on price behavior.
Summary
Long-Term View
Both the Decennial Pattern and long-term historical trends suggest 2026 is shaping up to be another positive year for equities—albeit with more tempered gains than the standout performance of 2025. While returns may moderate, the overall backdrop remains constructive for long-term investors, supported in part by a mild upside bias from the Kitchin Cycle, which continues to point toward gradual strength.
However, 2026 also marks a midterm year in the U.S. election cycle—a period that has historically introduced heightened uncertainty and episodic market weakness, particularly in the first half of the year. This seasonal tendency aligns with current forecasts calling for early January softness, a mid-month pullback, and a subsequent rebound that could extend through much of the first quarter.
Mid-Term View
Seasonal patterns indicate that January tends to be a favorable month for equities, with the S&P 500 finishing higher approximately 61% of the time and averaging a gain of +1.2%. While this historical tendency supports a constructive bias, several other indicators are painting a more cautious picture in the near term.
The most notable concern remains the Dow Jones Utility Average (DJU), which continues to flash a warning signal. Based on its historical cycle—typically 55 trading candles, plus or minus 5—it suggests a potential market inflection point around January 6th, with the window for downside risk extending to roughly January 13th. Given the DJU’s remarkable track record over the past year, most recently anticipating the October 2025 decline with precision, it’s difficult to dismiss this signal outright. The specific catalyst remains unknown, but the pattern has earned enough credibility to warrant respect.
Elsewhere, the divergence between the S&P 500 Equal Weight Index (SPXEW) and the market-cap-weighted S&P 500 has resolved, with both notching fresh all-time highs on Friday. No distinct chart patterns emerged, leaving this development neutral in the broader outlook for now.
From a sector perspective, both the Broker-Dealer Index (XBD) and Consumer Staples (XLP) are trending higher—an encouraging sign for market strength. However, the character of these uptrends has shifted. Unlike prior steady climbs, current moves are marked by unusually wide swings, resembling more of a reactive scramble than a confident drive forward. If this were a road trip, the driver appears to be second-guessing every turn.
Looking ahead, monthly projections suggest sluggish price action through the first half of January, with a potential pullback developing around mid-month—specifically near January 14th. Notably, this lines up with the DJU’s projected timing window. While a broader recovery remains the base case for later in the quarter, the short-term setup calls for caution, patience, and tactical positioning amid early-year volatility.
Short-Term View
The primary trendline—along with its derived faster and slower variants—continues to show signs of diminished influence, as prices increasingly “leak” through levels that previously held more decisively. That said, the structure still offers some utility in identifying potential areas of interest, and for now, remains relevant until a more reliable framework presents itself.
Friday’s session saw a bounce off the third, slower-moving trendline to the upside, reinforcing its near-term relevance. Shifting focus to open interest (OI), there’s clear evidence of tightening ranges, alongside a notable surge in OI above the current closing price. Based on how these positions are typically built, it’s highly likely—call it 97.5%—that these levels are speculative in nature. Should price begin to test those upper strike zones, a swift unwinding of the concentrated OI at those levels could trigger sharp directional moves.
As for volatility, there’s little of note on the VIX front. The only visible structure is a very weak, and to emphasize—weak—upward-sloping trendline, offering little in the way of actionable information at this point.
What’s Ahead
Earnings season kicks off next week, led by the big banks, setting the tone for broader market sentiment. With options expirations slated for next Friday, positioning and volatility may start to build as traders align exposure. This week also marks the second Wednesday of the month—a calendar detail more relevant for recurring economic data than immediate catalysts. Notably, there are no scheduled holidays or significant end-of-month flows to distort price action, leaving the market to trade cleanly on fundamentals and positioning.
EVENTS
- 13th January 2026 13:30UTC Inflation Rate
- 13th January 2026 13:30UTC CPI
- 14th January 2026 13:30UTC PPI
- 15th January 2026 13:30UTC Initial Jobless Claims
Outlook & Expectations
With most indicators leaning decisively bearish, and considering the weekend news developments, I will refrain from setting specific short-term targets for now. However, based on historical behavior and technical structure, a move toward $6,697 is plausible. Should that level break—and it’s already below December 2025’s low—it may open the door to further downside, confirming a deeper corrective phase.
The forecasts did not include a specific target for the week, primarily due to the elevated and fast-moving weekend news flow—particularly the geopolitical developments involving U.S. actions in Venezuela, which reasonably pointed to a potential risk-off reaction. In practice, that negative follow-through did not materialize, and the market ultimately absorbed the headlines, with the index gaining roughly 100 points over the week.
Looking ahead, earnings season is likely to act as a near-term stabilizer, with the first meaningful releases beginning next week. For the second consecutive week, I will refrain from issuing a formal price target. With earnings catalysts ramping up, key macro events such as CPI and inflation data scheduled, and the DJU-derived timing signal (55 candles ± 5 trading days) remaining active—an indicator that has proven notably reliable over the past year—the risk of forcing a directional call is uncomfortably high. Instead, I am focused on the January 13–14 window, where multiple drivers cluster: the DJU timing band, January 14 as a DOI, early earnings results, and several high-impact macroeconomic releases. That convergence should provide clearer confirmation on whether the market is positioned for continuation or a more meaningful pullback.
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