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.
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.
Pre-Election Year (Year 3):
The third year of the cycle is typically the strongest. The environment is generally characterized by policy support, as administrations often encourage growth and stability ahead of the coming election. Markets tend to respond with steady, broad-based advances that can last through much of the year. Pullbacks do occur, but they are usually shallow and quickly reversed, as the dominant tone is constructive. Investor confidence tends to be high, liquidity conditions are often favorable, and risk appetite expands. This combination makes Year 3 the most consistent bull phase of the four-year pattern.
Election Year (Year 4):
The final year of the cycle carries a more complex personality. The bullish momentum from Year 3 often extends into the opening months, but as campaigning heats up and polls shift, the market can grow unsettled. Volatility becomes more pronounced, with swings tied to election headlines, policy promises, or unexpected political developments. Despite this choppiness, the underlying trend tends to remain positive. Once the outcome of the election becomes clearer, markets usually regain their footing and push higher into year-end. Though less robust than Year 3, Election Years still often deliver respectable gains.
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 EOQ.
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 & VALUA
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
OCTOBER
To be honest, I don’t have “real” DOIs for October beyond the 2nd. What I see is a rise stretching into the 23rd, where we could hit a digestion phase—basically sideways action as profits get taken till the 29th were another leg up may take place. Those ranges I’ve marked are what I’d call turbulence dates: spots where I expect 1–2 candles to move against the main trend before the uptrend resumes within 3–4 candles. Eventually, this strong run will need to correct downward and shed some profits, but I suspect that won’t show up until the first week of November. So for October, think of those dates as either digestion points or possible reversals—it’s your call which one plays out.
OCTOBER’s DOIs: 2nd, 7th–9th, 15th–17th, 23rd, 29th.
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.
The following guidelines outline how to interpret the various types of support and resistance levels:
Lime Lines: Based on open interest (OI) calculations, these levels are extrapolated and typically regarded as resistance zones. Conversely, the accompanying blue lines in this context are interpreted as support levels.
Dashed Lines: These represent fixed percentage retracements, typically measured from the visible highest high to the lowest low on the chart.
Sloped Lines: Derived from the primary trend, which is selected at the author’s discretion. These lines reflect the directional bias and momentum of the prevailing trend.
Red and Blue Lines: Red lines indicate trendlines that move at a percentage rate faster than the main trend, while blue lines represent those that are slower. These help visualize relative acceleration or deceleration in price movement.
Purple Lines: If present, these mark subjective or discretionary levels of potential support or resistance identified by the author.
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 broader outlook remains positive, though two key seasonal indicators — the Presidential Cycle and the January Barometer — are flashing potential for a sharper correction heading into autumn. While not predictive in isolation, both suggest Q4 may come with increased volatility and a possible inflection point.
Mid-Term View
Seasonality continues to suggest a period of weakness during the middle of the month. The Dow Jones Utilities (DJU) Index began its decline in early August, and we are now nearing the end of the typical three-month window—an interval that historically precedes broader market softness, adding further bearish sentiment to the current outlook.
Divergence between the S&P 500 Equal Weight Index (SPXEW) and the S&P 500 (SPX), previously noted in earlier commentary, has become less relevant given the recent price structure, and no longer contributes meaningfully to the broader picture. At present, the market has printed a lower high, with a lower low still pending. The September 26th level provided support into Thursday’s close. While not previously emphasized, if the index were to see a modest near-term rise, the current structure could begin to resemble the early stages of a diamond top formation.
Sector-wise, the top in the Broker-Dealer Index (XBD) remains intact from earlier this year, and Consumer Staples (XLP) appears to have also peaked—unless an unexpected upside move invalidates that view. These signals collectively point to proximity of further weakness.
The forecast set at the beginning of October anticipated a strong upward move through the month, with potential turbulence around the 7th–9th and 15th–17th ranges. A resumption of upside momentum was projected to begin around the 23rd; however, given the current conditions, there is now a growing possibility that the expected upward leg may instead be replaced by renewed downside pressure.
Short-Term View
The primary trend is currently acting as a dynamic resistance level, while the slower trend (represented by the thin blue line) continues to offer support. Price is approaching the 6707 level (marked by the purple line), which aligns with notable resistance just above the current close—also confirmed by the Open Interest (OI) Heat Map. The Heat Map reflects a broadening range, indicating that market participants are expecting increased daily volatility. Resistance is positioned immediately overhead, while support lies lower and would require the market to retrace some of the gains made earlier in the trend.
Additionally, the VIX closed higher on Thursday, entering what I refer to as the “Caution Rising” zone—an area that typically reflects elevated risk conditions. For reference, I’ve retained the orange-colored line that previously highlighted divergence, along with the downward-sloping trendline, which marked the point where that divergence concluded on October 10th and has since lost relevance.
What’s Ahead
This week unfolds within a relatively neutral macro calendar backdrop. It is earnings season, which remains the primary driver of market activity. There are no major holidays impacting trading hours, no significant options expirations scheduled, and no end-of-month flows to influence liquidity or direction. As a result, price action is likely to reflect pure corporate performance and positioning, with fewer external catalysts distorting market behavior.
EVENTS
- 23rd October 2025 12:30UTC Initial Jobless Claims
- 24th October 2025 12:30UTC Inflation Rate
- 24th October 2025 12:30UTC CPI
Outlook & Expectations
Yes, posting a day early, thanks to what’s shaping up to be a longer-than-usual weekend on my end. This update will cover tomorrow, Friday, and the outlook into next week.
Momentum may slow a bit here, as earnings season plays its usual game—keeping shareholders content… until it doesn’t. Did you catch the reaction to the big bank reports? Exactly—what reaction? The market barely blinked. At these price levels, who’s really buying? Certainly not me. I’ve already had to swallow a 30% increase in my music streaming subscription over the past two years—so no, I’m not chasing overpriced equities while inflation plays hide-and-seek in the official stats. If this is the so-called “buying season,” someone forgot to bring the discounts.
Maybe this reluctance is still hangover from that sharp decline earlier in the year? Possible. But frankly, I’m not convinced. I could be wrong—but my base case is a market correction sometime between the end of October and the first week of November, something deeper than a 200-point dip and with more staying power than a one-day, headline-driven move.
Looking to next week, I’ve flagged the 23rd as a potential day of interest (DOI). That doesn’t necessarily imply downside. In fact, we could see a bounce begin as early as tomorrow, with some downward pressure tied to options expiry. I’d expect choppiness to continue until around the 22nd, where we may see bullish momentum build. For the next potential leg down, I’m watching around the 27th.
As I’ve noted before, I don’t factor politics or macro headlines into this space—just the charts. If you’re looking for a post-mortem on why price moved up, down, or nowhere at all, there’s no shortage of pundits and free content for that. And yes, I took a hit on Monday too. You’re not alone. I insured my capital—same way I pay my car insurance each year.
To remind myself more than anyone else: technical weakness comes first. News can act as a catalyst, sure, but if the charts aren’t primed for a move, it’s not happening. It almost never works the other way around.
If this article sparked a brain cell or two, you can say ‘Thanks’—ideally while caffeinating and pretending you’ve got this whole Market thing figured out. Consider buying me a coffee. It keeps this site running and caffeine flowing!
