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
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 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 highlighted months 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 | 62% | 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.
Shaded background is on test – DO NOT USE.
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) and XLP (Consumer Staples – plotted inverted), 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
FEBRUARY
The choppy, range-bound behavior observed in the final days of January may persist into around February 12, where a potential upside phase could begin to develop. If that advance materializes, it may extend toward February 24, after which the market could transition into a choppy, corrective decline, characterized more by uneven pullbacks and consolidation than a clean directional sell-off.
FEBRUARY’s DOI: 12th, 24th.
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 applies the same methodology as the previous one, using retracement levels from significant highs and extension levels from prior significant lows, alongside my own reference support and resistance areas. The key difference is presentation: rather than plotting individual lines, these levels are aggregated into a heat map. Where multiple support or resistance levels cluster, the band becomes thicker and more intensely colored, highlighting zones of higher technical relevance.
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.
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 that 2026 may prove positive for equities, although likely with more moderate gains than the exceptional performance seen in 2025. While returns may temper, the broader backdrop remains constructive for long-term investors, supported in part by the Kitchin Cycle, which continues to imply a mild upside bias and a gradual underlying strength.
That said, 2026 is also a U.S. midterm election year—historically a period associated with elevated uncertainty and episodic market weakness, particularly during the first half of the year. This tendency aligns with the current outlook, which anticipated early-January softness, a mid-month pullback, and a recovery phase that could extend through much of the first quarter.
The January Barometer signal for 2026 is now in place, and the current read points to a largely sideways market through July, followed by a potentially significant decline, and then a meaningful recovery into year-end. If this sideways phase develops as expected, opportunities may still emerge between February and July; however, the January Barometer will be used primarily as a “thermometer” in conjunction with other indicators, rather than as a standalone directional tool.
Mid-Term View
Seasonal and monthly performance results in the referenced dataset indicate that February has historically been a less supportive period for equities. In this sample, February produced only marginal performance, closing higher slightly more than half the time (approximately 53%) and averaging near -0.2%. The same seasonality work also points to a firmer tone early in the month, followed by a higher probability of softness into mid-February—consistent with a pattern in which early-month positioning gives way to profit-taking, rotation, and a more selective tape.
Turning to the DJU, the chart is approaching a time-based window tied to the major decline that began on December 1, 2025. Projecting that move forward by 55 candles places the next timing marker around February 20, 2026 (± one week, or roughly five candles). Whether it materializes remains to be seen, but at present it stands out as the only clear bearish signal among the indicators referenced on this page. It is also notable that the right edge of the chart reflects a pronounced upside acceleration in DJU.
On the SPXEW versus SPX relationship, there is no divergence to highlight at this stage. The primary development is a visible compression in the S&P 500’s swings, suggesting a tightening range and a more controlled volatility profile relative to prior weeks. If sustained, that contraction can act as a precondition for a larger directional move, making subsequent breaks of key levels more informative.
Finally, in the relative-strength work for XLP and XBD, both lines remain in a broader downtrend punctuated by intermittent pauses. The dominant structure continues to be lower lows and lower highs across both series, reinforcing a risk posture that has not yet fully reset. The main exception is the isolated, sharp one-day surge in XBD, which stands out as a brief countertrend impulse rather than a confirmed change in trend.
On the S/R heatmap, support at—or very near—the latest close appears well-defined. A lighter resistance band sits immediately overhead, with a more prominent resistance zone positioned slightly higher. The OI heatmap continues to highlight a strong resistance region between 6,900 and 7,000. Notably, the nearest support concentrations for the week are positioned materially below the last close, indicating that the range has widened with a clearer skew to the downside.
On volatility, the VIX continues to respect its rising trendline support and rebounded from that level again this week. Trendlines on the VIX are drawn using a consistent internal rule: the downtrend line is anchored on the closes of green candles, and the uptrend line is anchored on the closes of red candles.
What’s Ahead
With earnings season approaching its conclusion, near-term price action is increasingly likely to be shaped by positioning and macro catalysts rather than incremental earnings updates. Calendar effects also become more relevant: it is the third Wednesday of the month, monthly options expiration falls next Friday, and the week is shortened with U.S. markets closed on Monday, February 16 for Washington’s Birthday. At the same time, the absence of end-of-month inflows and outflows reduces the likelihood of month-end rebalancing effects, keeping the focus on event-driven volatility and options-related positioning into expiration.
EVENTS
- 18th February 2026 19:00UTC FOMC Minutes
- 19th February 2026 13:30UTC Initial Jobless Claims
- 20th February 2026 13:30UTC GDP
Outlook & Expectations
Among the monitored indicators, DJU is the only one currently pointing lower, while the remainder continue to lean higher. Near term, the setup allows for a firmer start to the week that retests the lower edge of the overhead resistance cluster on the OI/S&R work near 7,000.
The next potential inflection window is February 12 (DOI), followed by the CPI/inflation release on February 13. The market’s reaction to that data is inherently uncertain; operationally, a close above the resistance cluster on the S/R heatmap would be a constructive confirmation for long exposure. If momentum rebuilds, the move could extend into the next DOI window around February 24.
The week opened in line with the forecast, with price action initially moving toward the identified resistance cluster. After several sessions of consolidation, the market rolled over on Thursday the 12th—an identified DOI—posting a -1.57% decline. On the 13th, futures were trading lower into the macroeconomic release at 13:30 UTC, after which the data-driven reaction lifted futures back toward flat but the rise lost its steam during the session.
If you use daily indicators that can flag divergence, you may have noticed repeated bearish divergences that have not translated into sustained downside. A common way to contextualize this is to review the same indicator on the weekly timeframe, with particular attention to its broader positioning and trend structure. Divergences tend to be conditional: when they fail to play out, the higher-timeframe context often explains why.
Looking ahead, with earnings season largely in the rear-view and the market moving beyond its historically stronger stretch, the extended sideways phase elevates the risk of a corrective move. While timing is uncertain, the next key window to monitor falls between Friday, February 20 (DJU date) and Tuesday, February 24 (DOI). IF downside momentum emerges ALONGSIDE A MEANINGFUL CATALYST, a deeper retracement remains plausible, including a move toward the 6,100 area. The broader setup continues to reflect downside risk, BUT directional confirmation remains the critical missing component. A lack of decisive direction can, at times, indicate positioning ahead of another push higher, whereas a clear break typically determines which outcome carries higher probability.
For the week ahead, the near-term tilt remains negative. Despite a shortened four-day schedule, market conditions could support more sustained selling pressure. The 6,710 area stands out as an important support zone and may help contain downside for a period. If the bearish scenario fails to develop, upside durability still appears limited, with 6,920 remaining a key level that may be difficult for price to hold above for an extended time.
Notes
- Cryptocurrency coverage is not part of this work and is not expected to be included going forward.
- Blog posts are shared on LinkedIn. Private messages are welcome, but there is no management of third-party capital, and there is no intent to do so in the foreseeable future.
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