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’re now in a year ending in 5, which has historically been the best-performing of the lot. Out of nine such years, the market closed higher eight times.
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% | 22.05% | 9.41% | 1.49% | 10.07% | 10.37% |
| Up/Down | 5/5 | 5/5 | 6/4 | 8/2 | 7/3 | 8/1 | 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
Post-Election Year (Year 1):
The first year after an election often begins on a shaky footing. Investors face uncertainty as the new or continuing administration rolls out its agenda, which can spark heightened volatility. Markets tend to struggle in the early months, moving in a sluggish, uneven fashion before finding a firmer footing into late spring and summer. That rally phase is usually short-lived, as the market frequently rolls over into a sharp correction in the autumn months. By the end of the year, however, stocks often stabilize and manage to recover a portion of the earlier decline, leaving the overall year mixed or modestly positive.
January Barometer
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.
My Yearly Market Blueprint
This represents my yearly forecast. As noted earlier, the projected turning points have shown a reasonable degree of reliability — though, regrettably, the same cannot be said for directional accuracy. The blue line reflects the original forecast published in December 2024, the green line marks the revised outlook, and the red line tracks actual market behavior. Updated at EOM.
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% | 60% | 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
DECEMBER
The December forecast suggests a relatively flat month overall, with a period of market indecision expected between the 16th and 18th. The projected directional bias is to the upside, with the month—and the year—anticipated to close with some mild weakness in the final trading days.
DECEMBER’s DOI: 16th-18th.
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
The Decennial Pattern and broader historical annual performance continue to support the outlook for a strong year overall, consistent with market behavior observed thus far. This structural bias aligns with prior cycles where the fifth year of each decade tends to outperform. Similarly, the Kitchin Cycle—a mid-range business cycle of approximately 40 months—suggests a broader upward trajectory is still in play, with the next cyclical peak anticipated around April 2027.
While the Presidential Cycle continues to indicate potential for weakness—particularly typical of the third year of a presidential term—there has yet to be a meaningful correction to validate that risk. As we approach year-end, markets may find some degree of stabilization in December, as is historically common.
The January Barometer, which offers a perspective on how January’s performance can influence the rest of the year, is currently suggesting a slightly negative month ahead. This is expected to play out as an early-month rally followed by a fade into month-end. Meanwhile, the Yearly Market Blueprint supports the idea of a sideways trading pattern through December, with a potential upside bias forming in the second half of the month.
Mid-Term View
Seasonality remains supportive. December ranks among the top-performing months, with a historical win rate of around 73% positive closes, and the trend bias continues to point upward. While seasonality does not guarantee outcomes, it does contribute to a broader context of optimism.
The Dow Jones Utility Average (DJU) appears to be signaling strength into early January, with underlying support holding firm. Aside from a brief and shallow pullback following a recent bottom, the structure suggests a constructive outlook until at least January 6th, 2026.
Turning to the SPX Equal Weight Index (SPXEW), there’s little new to highlight this week—though it’s worth noting that recent S&P 500 price action resembles a scallop pattern: a sharp initial rise followed by a gradual, rounded top. It’s a formation worth keeping an eye on, particularly given the number of variables that could influence its development.
On the sector front, both the Broker-Dealer Index (XBD) and Consumer Staples ETF (XLP) appear to have confirmed breakouts above their respective trendlines, further reinforcing the prevailing bullish bias.
Short-Term View
The old black trendline remains intact—months old and still relevant—with last week offering a few noteworthy developments. Price has been steadily tracking along the second, slower blue trendline, forming what appears to be a rounding top. This could represent the final leg of a scallop pattern; however, confirmation would require a close above the pattern’s highest high, which still leaves quite a bit of ground to cover.
The Open Interest (OI) Heat Map continues to show a narrowing in OI levels, a setup that typically precedes a week of limited net movement. That doesn’t rule out a 300-point drop followed by a 300-point rally—in trading terms, ideal intraday action but likely to resolve with little directional progress by week’s end. One important factor to keep in mind is Friday’s options expiration. Since these OI levels span various expiration dates, some of that open interest may begin to unwind as early as Wednesday.
As for volatility, the VIX isn’t offering much directional guidance, though we’ve seen sporadic spikes. As John Bollinger aptly put it, “High volatility begets low volatility, and low volatility begets high volatility.” These recent blips could very well be the sparks that light the anticipated one-to-three day volatility burst.
What’s Ahead
We are currently in the midst of earnings warning season, a period often marked by increased caution and reactive price action. This week also includes a notable options expiration on Friday, which may contribute to heightened volatility and positioning adjustments. As it is the third Wednesday of the month, I would hold off on making any decisions until after 18:00 UTC, allowing for potential late-session developments to play out. There are no end-of-month inflows or outflows to consider, and the calendar is clear of any holidays, keeping market participation relatively stable from a structural standpoint.
EVENTS
- 16th December 2025 13:30UTC Unemployment Rate
- 18th December 2025 13:30UTC Inflation Rate
- 18th December 2025 13:30UTC CPI
- 18th December 2025 13:30UTC Initial Jobless Claims
Outlook & Expectations
No forecasts for the past week were published.
There was no discernible market reaction on December 10th, suggesting that the developments were either already anticipated or effectively priced in. So, what comes next? While my overall bias remains bullish, the Friday close makes me think that we are approaching those 1-3 days of turbulence expected already in the past forecasts.
I may be wrong—especially in December, a month I personally find less favorable for trading. In fact, I likely said the same thing last year around this time, which at least shows a certain consistency. Historically, a red Friday tends to lead into a red Monday, and that’s the scenario I’m leaning toward. As for direction, I don’t expect a clean break below the $6,743 level. From there, we could see the upside resume, potentially ending the week higher, around the $6,936 mark. However, with the holiday mood setting in, there’s a chance market enthusiasm could push us through the $6,992 level. On the flip side, if there are no meaningful signs of a bounce by Tuesday or Wednesday, I’d expect further downside, possibly extending toward the $6,674 area.
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