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
We’ve officially entered 2026 with both the Decennial Pattern and historical performance trends pointing toward another positive year for equities—though likely more moderate compared to 2025. While the gains may not match last year’s strength, the backdrop remains broadly supportive for long-term investors. The Kitchin Cycle also lends a mild upside bias, reinforcing the potential for continued upward movement.
That said, 2026 is a midterm year in the U.S. election cycle, which has historically been associated with uncertainty and market weakness—particularly in the first half of the year, often extending into the autumn months. This aligns with the current forecast, which anticipates some early weakness in January, followed by a brief pullback around mid-month, and then a strong recovery that could carry through much of the first quarter.
Mid-Term View
Seasonal patterns suggest that January is historically one of the better-performing months, with the S&P 500 closing in positive territory approximately 61% of the time, and delivering an average gain of +1.2%. While seasonality supports a constructive bias, several other indicators are currently pointing to a more cautious outlook.
The most concerning signal at the moment comes from the Dow Jones Utility Index (DJU), which remains the most bearish indicator in my current framework. The index has experienced a prolonged and pronounced decline, suggesting persistent underlying weakness that may extend until around early March 2026. As highlighted in my year-end article, DJU proved to be a surprisingly reliable leading indicator throughout 2025, often anticipating broader market softness ahead of time. While I don’t expect this relationship to hold perfectly every time, the depth and duration of the current drop in DJU merits attention. If past patterns persist, the broader market may soon reflect similar pressure.
Adding to the cautious tone is the emerging divergence between the S&P 500 and the S&P 500 Equal Weight Index (SPXEW). While the divergence is not yet extreme, it does point to narrowing market breadth, a condition that often signals underlying weakness beneath the surface of index-level strength.
Turning to sector-based indicators, the picture remains somewhat ambiguous. The Broker-Dealer Index (XBD) continues to trend higher, which historically aligns with broader market upside. However, Consumer Staples (XLP) appears to be trading within a broadening formation, showing no clear directional conviction at this stage. This mixed signal across key sectors reflects an environment where short-term caution may be warranted despite longer-term support.
Looking ahead, monthly forecasts point to sluggish price action through the first two weeks of January, followed by a potential decline around mid-month, particularly near January 14th. While a recovery is still expected later in the quarter, the near-term setup suggests a need for patience and tactical positioning as the market navigates early-year volatility.
Short-Term View
Since November 20, 2025, the market has notably changed pace, with price action closely respecting both the derived slower and faster trendlines plotted during this period. While these trendlines may eventually need refinement as the price structure evolves, they continue to offer useful context for now and remain relevant in tracking short-term dynamics.
Overlaying this with the blue trendline and key Open Interest (OI) resistance zones, it’s clear that the market is encountering overhead resistance. When viewed through the lens of the OI Heat Map, there’s a visible magnetic pull toward upper resistance levels, suggesting stronger positioning and liquidity pockets above current price—relative to what’s below.
On the chart, I’ve also marked December’s low, a level worth monitoring closely. A close below this threshold typically signals a shift toward weakness, and historically, such breakdowns tend to linger as bearish signals on the chart.
Turning to volatility, the VIX has re-entered its “Normal” range, after briefly dipping into the “Very Calm” zone. It has been rising modestly over the past week, though it’s worth noting that the broader trend over the past month has remained generally downward. This shift may reflect early-stage uncertainty as we move into the first stretch of the new year.
What’s Ahead
As we enter the first full trading weeks of the year, market attention will gradually begin shifting toward the upcoming earnings season. While early reports may trickle in, the more notable earnings releases are expected to begin toward the end of the second week. There are no major options expirations or market holidays on the immediate calendar, allowing price action to be driven primarily by fundamentals and positioning. Additionally, end-of-month flows may continue to influence market behavior, particularly as investors rebalance portfolios and allocate capital at the start of a new year—a period often marked by strategic shifts and fresh positioning.
EVENTS
- 07th January 2026 15:00UTC JOLTs Job Openings
- 08th January 2026 13:30UTC Initial Jobless Claims
- 09th January 2026 13:30UTC Unemployment Rate
Outlook & Expectations
Technically speaking, I wouldn’t be surprised to see the week start with a continuation higher, potentially testing the faster-rising blue trendline or even reaching the Open Interest resistance level around $6,974. If price stalls or rejects at that level, a pullback scenario becomes plausible. In a more extended downside move, support doesn’t come in immediately—$6,797 could be a potential downside magnet if selling accelerates. If bearish momentum doesn’t materialize, a stall below $6,974 remains the more probable outcome for now.
The recent shift in bias from bullish to bearish was directionally correct, though the magnitude of the move fell short of expectations. The market closed at $6,858, notably above the forecasted target of $6,797, leaving room for further adjustment as conditions evolve.
Looking ahead, the combination of medium- and short-term indicators continues to suggest a period of sustained weakness—potentially extending over the coming weeks or even months. The technical structure, while not in breakdown territory yet, appears vulnerable, and the risk of further downside remains elevated.
News flow may act as a catalyst, potentially accelerating or amplifying existing pressures. It’s important to recall that sharp VIX spikes, like we saw in April 2025, have historically created long-term buying opportunities—but only once the immediate volatility has settled.
Among key signals:
- The DJU continues to indicate underlying weakness.
- A mild divergence has emerged between the S&P 500 and the Equal Weight Index (SPXEW).
- Sector relative strength remains unclear and mixed, offering little directional conviction.
- The VIX, having recently bounced out of the “Very Calm” zone, is now back in its Normal range, suggesting that market complacency is fading.
With most indicators leaning decisively bearish, and considering the weekend news developments, I will refrain from setting specific short-term targets for now. However, based on historical behavior and technical structure, a move toward $6,697 is plausible. Should that level break—and it’s already below December 2025’s low—it may open the door to further downside, confirming a deeper corrective phase.
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