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
Regarding the DJU signal, I do not believe it has “failed.” What we have observed instead is a market condition that often emerges when bullish momentum coexists with underlying weakness: choppy, sideways price action rather than a clean directional move. In my view, the signal may be muted or delayed rather than invalidated, with earnings-related strength helping to mask the softer internal tone. In a quieter environment—with fewer headline shocks and less event-driven positioning—the market may have expressed that weakness more visibly, but the underlying message still warrants attention.
On the SPXEW versus S&P 500 chart, there is no material divergence to emphasize at this stage, aside from a slightly weaker tone in the cap-weighted index, which has registered a lower low relative to the prior structure. For now, this remains a secondary observation rather than a primary driver.
The more notable development is within the XBD and XLP relationship, where the two have begun to diverge. XBD is rising while XLP is falling; with XLP viewed through an inverted lens, this suggests a shift toward defensive positioning and “safer” equities, particularly as this move has broken below October levels. Whether this is immediately meaningful is not yet clear, but it is a configuration worth monitoring. The last time a similar dynamic appeared—XLP weakening while XBD was still firm—was in late January 2025, and the subsequent market behavior underscored that these rotations can matter when they persist.
Finally, monthly forecasts are calling for a stronger upward move into month-end. As a reminder, the Dates of Interest (DOIs) have historically proven more reliable for timing than for direction. As a result, the most practical takeaway is to respect the timing window while allowing price action and breadth to confirm whether the move resolves higher as projected or takes a different path.
Short-Term View
Price action has moved back to the fourth, slower-moving blue trendline, a level that has acted as an important reference in the past. The last interaction with this trendline occurred in late November 2025 and was followed by a rebound that ultimately carried the index back toward a prior peak. Whether this level produces a similar response this time remains uncertain, but the repeated respect of the same structure reinforces its relevance as a near-term inflection area.
The OI heat map shows a noticeable reduction in open interest on lower strike prices, suggesting that the “pull” from below has weakened—either due to positions being reduced/rolled or because protective demand has eased at those levels. At the same time, the overall OI-defined range remains relatively tight and continues to align with the same trading band that contained price action last week, supporting the view that the market is still operating in a compressed positioning environment.
On volatility, the VIX remains anchored to the trendline drawn three weeks ago. While the slope and follow-through are still modest, the fact that this trendline continues to hold makes it increasingly relevant as a monitoring tool. A sustained break or acceleration away from that level would be notable and could offer early confirmation of a shift in market regime or directional bias.
What’s Ahead
Earnings season remains the primary driver for market direction and volatility, with corporate results and forward guidance likely to dominate sentiment. Structurally, the week is relatively “clean,” with no options expiration and no market holidays expected to distort liquidity or trading rhythms. However, toward the end of the week, end-of-month inflows and outflows may begin to influence price action, potentially amplifying late-week moves as portfolios rebalance and positioning adjusts.
EVENTS
- 28th January 2026 19:00UTC FED Interest Rate Decision
- 28th January 2026 19:30UTC FED Press Conference
- 29th January 2026 13:30UTC Initial Jobless Claims
- 30th January 2026 15:00UTC PPI
Outlook & Expectations
Looking to the upcoming week—which is shortened by the holiday—there is a reasonable case for a renewed bid once markets reopen, potentially delivering an early green close on Tuesday as liquidity normalizes. However, my base case remains cautiously bearish in the near term. I am focused on the next lower OI reference level near 6,805 as the downside objective if weakness resumes. If that scenario does not develop and we instead see the first meaningful confirmation around the January 21 window, then the bias would likely shift back toward the upper range, with 6,996 acting as the primary upside reference.
We did not get the “green Tuesday” scenario—my mistake, and a reminder that headline-driven moves are not something I can forecast. That said, the weekly bias toward weakness was directionally correct. The downside objective at 6,805 was reached quickly on Tuesday, with the index closing $9 lower at 6,796. Moves of this type, when not reinforced by higher-timeframe technical support, typically have a short life—often one to three sessions—as I have noted in prior updates. The index attempted to stabilize and recover later in the week, but ultimately finished slightly lower on a weekly closing basis.
With the new format leaving less room for personal observations, I will keep this brief and highlight one important point on risk management. I regularly hedge my longer-term holdings using SPY put options, sizing the position with a structured allocation method that estimates how many contracts are needed to protect a defined percentage of the portfolio. When appropriate, I also use sector ETFs for more targeted exposure, or single-name puts when a specific risk is identified. On January 15, I hedged approximately 50% of my equity exposure. This is best viewed as insurance rather than speculation: I do not buy insurance expecting an accident, and I accept that the premium may expire worthless if the adverse event never occurs. That is not a failure of the hedge—it is simply the cost of protection.
The key is to separate investing, trading, and hedging into distinct activities with different objectives. A hedge should not be closed impulsively because the market drops 2% in one day, nor removed immediately because it rebounds the next. The plan must be defined before entering the position: how long you want protection, what risk you are hedging, and what you are willing to pay for that protection. In markets—as in life—nothing is free, and risk management has a cost.
Talking about next week: if you rely on oscillators, the message is broadly the same across most timeframes. On shorter horizons, signals have been swinging between the mid-range and upper band; on higher timeframes, they look flat, choppy, and largely stuck around the midpoint. ATR and directional-movement style indicators tell a similar story—lines tangled together, repeatedly crossing, and at times compressing in a way that resembles a “formation flight.” The interpretation is straightforward: there is no clear trend.
In environments like this, the highest-probability decision is often not to force trades. When major indexes are diverging (for example, Nasdaq strength alongside Dow weakness) and broader measures such as the FTW5000 fail to provide a consistent directional signal, it usually reflects rotation and uncertainty rather than a durable market impulse. This is the time to reduce the urge to hunt for setups that aren’t there, stay patient, and wait for clearer conditions—when an opportunity actually presents itself.
Unfortunately, this article is being published later than planned due to time constraints. In the meantime, I did have the opportunity to scan a number of news headlines—which may have influenced my near-term framing—so I want to be transparent about that context.
From a market-structure perspective, the preference remains a clean breakout from the current range. However, on intraday charts a downtrend is now established, and an important implication is that the market has not yet shown the typical signal needed to transition out of it. In practical terms, that would usually require a clear higher low to confirm that selling pressure is fading and that a reversal structure is developing. Until that higher low is in place, the path of least resistance remains vulnerable to additional weakness, particularly early in the week.
With that said, I will be watching the January 27 window as a potential timing area for stabilization and an attempted rebound. Any recovery, however, may prove short-lived unless higher-timeframe participation returns and price breaks convincingly out of the broader range-bound regime.
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!
