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 broader long-term historical trends suggest that 2026 may remain a positive year for equities, although gains may be more moderate than the exceptional performance recorded in 2025. While return expectations may normalize, the broader backdrop remains constructive for long-term investors, supported in part by the Kitchin Cycle, which continues to indicate a mild upside bias and gradual underlying strength.
At the same time, 2026 is a U.S. midterm election year, a period that has historically been associated with elevated uncertainty and intermittent market weakness, particularly during the first half of the year. This tendency is consistent 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 is indicating some weakness into the final days of February, followed by a stabilization phase heading into March, with a largely sideways pattern potentially persisting until the last days of the month.
Shorter-term forecasts also point to some weakness during the first part of the final week of February, followed by a recovery into the end of the week and month-end close.
Mid-Term View
Seasonal patterns indicate a measure of strength in the final days of February and into March, which contrasts with the weaker signals outlined above.
On the DJU chart, the setup appears to be approaching another potentially significant down leg. The January down leg did not fully transmit to the S&P 500, which instead produced a largely sideways month. The next several sessions should provide clearer evidence as to whether the current setup develops differently.
There is no meaningful divergence to highlight in the S&P 500 vs. SPXEW relationship. The primary feature remains the trading range that has persisted for roughly the past two months. If drawn more precisely, that range can be characterized as a rectangle with a slight downward tilt, which is a relevant structural detail.
In the XBD vs. XLP Relative Strength chart, the primary trend remains down, as reflected by the highlighted yellow trendlines. However, this week showed a pause in that trend, which may indicate the early stages of a potential trend change.
The monthly forecasts identify the 24th as a DOI and continue to suggest a choppy corrective decline into month-end.
Short-Term View
On the S/R Heatmap, resistance remains elevated near 6,910, while support is also clearly present, with several levels positioned just below current price. In this configuration, an upside breakout would likely have a cleaner path higher, whereas a downside breakout could face a choppier move due to the layered support beneath.
A similar structure appears on the OI Heatmap, although the resistance levels are positioned somewhat higher than on the S/R Heatmap. The first resistance area is visible near 6,950, followed by a stronger wall (or potential magnet) around 7,010. Support is less concentrated immediately below price, with the first meaningful OI cluster appearing near 6,750.
On volatility, price action once again tested the boundary of the “Caution Rising” zone this week before retreating lower. The current move suggests a renewed pullback phase that may persist until the next test of the uptrend line.
What’s Ahead
With earnings season now largely behind the market and March approaching, attention is shifting toward the early phase of earnings-warning season, which can begin to influence sentiment and forward expectations. This week’s calendar is relatively clean, with no market holidays and no options expiration to drive event-related positioning flows. However, end-of-month inflows and outflows may begin to have a greater impact on price action in the final days of the week.
EVENTS
- 26th February 2026 13:30UTC Initial Jobless Claims
- 27th February 2026 13:30UTC PPI
Outlook & Expectations
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.
The Tuesday session attempted to start the week on a weaker footing but found support at 6,775 (versus the expected 6,710 level). From there, price rebounded and then transitioned into three sessions of sideways trading, remaining below the resistance level at 6,920. The weekly high reached 6,915, reinforcing that resistance zone.
From a long-term perspective, the expectation had been for a decline, based on both the broader chart structure and prevailing sentiment. Instead, the extended sideways phase has produced what can be described as a form of reverse divergence—or, in this framework, a market that is “re-loading.” In practical terms, this refers to sideways price action occurring while indicators continue to rise or decline gradually in the background. The implication is a continuation of mostly sideways trading with a slight upward tilt into May, after which a more meaningful decline for longer-term holdings may begin to develop. Current forecasts suggest a bottom around mid-May, while the chart-based read points more toward mid-June. For now, however, the dominant feature remains a lack of direction, with price still confined to a range.
For the week ahead, the bias remains bullish, with the primary target still near the 7,010 level. However, if directional confirmation does not emerge, a test of that level would more likely be followed by a pullback rather than a sustained breakout.
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