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

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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

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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.

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Mid-Term

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%

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Sector Signals and Relative Strength

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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.

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.

As reflected in the Annual S&P 500 Forecast Overview, the timing component of the forecasts proved to be quite accurate. A separate question, however, is whether those moves were consistently tradable—something that depends largely on individual style and risk tolerance. In my case, opportunities were present, but given the elevated volatility and the market’s sensitivity to headlines, I’ve generally preferred to stay selective and, at times, remain on the sidelines observing rather than forcing exposure.

Short-Term

S&P500

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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 data suggest February has historically been a less supportive month, often delivering only marginal returns and closing higher only slightly more than half the time (roughly 53%, with an average near -0.2% in the dataset referenced). More broadly, seasonality tends to indicate a firmer start to the month, followed by an increased probability of weakness around mid-February, which fits the typical pattern of early-month optimism giving way to profit-taking and rotation.

From the cycle perspective, since entering the DJU “declining” segment in early January, price action has increasingly expressed itself through sideways movement and repeated sell attempts that were quickly bought, rather than a clean directional decline. As we transition into February, the DJU profile appears more sideways than decisively bearish, which could support either continued consolidation or short-lived upside swings—but still within a market that lacks sustained trend conditions.

There is little to highlight on the SPXEW versus S&P 500 relationship: no meaningful divergence and no distinct pattern that materially changes the broader read. Meanwhile, the relative-strength picture between XBD and XLP remains mixed, with the lines diverging in a way that suggests rotation rather than leadership—i.e., an environment where signals are less cohesive and directional conviction is harder to extract.

Finally, forecasts continue to point to a choppy start to February into roughly mid-month (around the 12th). In practical terms, this implies that opportunities may appear, but they are more likely to be tactical and selective rather than trend-driven—requiring patience, tighter risk controls, and confirmation rather than anticipation.

Short-Term View

What stands out is that price is currently trading against a major cluster of overhead resistance. In my view, a clean breakout through this zone is unlikely without a meaningful catalyst, and this aligns with the monthly forecast framework, which continues to suggest a sideways and choppy start to the month rather than an immediate directional expansion.

The narrow banding in the OI heat map reinforces that interpretation. Positioning remains concentrated within a tight range, which typically supports continued consolidation until a catalyst or positioning shift forces a break. At this stage, the timing of that resolution is not yet clear.

On volatility, the VIX trendline continues to hold, reflecting a gradual increase in investor caution as the market remains range-bound. I have also drawn a descending trendline across the two recent volatility peaks. A decisive break of these trendlines—paired with clearer, confirmatory signals from price action and broader market internals—could provide a more actionable entry framework. That said, any setup emerging from such a break would still be better viewed as a tactical opportunity rather than something that can be characterized as a longer-term, investment-grade positioning at this point.

What’s Ahead

Earnings season remains the dominant catalyst, with results and guidance likely to drive day-to-day sentiment and sector rotation. Structurally, the week is relatively “clean,” with no options expirations and no market holidays expected to distort liquidity or trading rhythms. That said, end-of-month inflows and outflows may still influence price action, particularly early in the week, as portfolios rebalance and residual positioning adjustments work through the tape.

EVENTS

• 03rd February 2026 15:00UTC JOLTs Job Openings
• 05th February 2026 13:30UTC Initial Jobless Claims
• 06th February 2026 13:30UTC Unemployment Rate

Outlook & Expectations

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.

We did in fact spend the week rotating between two previously identified OI levels, with no sustained trend developing. What stood out, however, was the market’s behavior on Thursday and Friday: both sell-off attempts were absorbed quickly, and the more meaningful buying appeared later in the session, particularly after the midday lull. There are several plausible explanations for this type of intraday pattern— What’s your interpretation of the late-day bid?

Heading into next week, the message remains unchanged: no clear directional edge, but a more defined “playground” is forming. I would start paying closer attention if we see tangible confirmation through one of the following: XLP and XBD aligning more consistently in the same direction, a clean break above the overhead resistance cluster, a decisive move through an OI-defined support/resistance band, or a breakout from the two VIX trendlines. Until one of those conditions is met, I’m comfortable staying on the sidelines and treating moves as range behavior rather than the start of something durable.

Forecasts continue to suggest back-and-forth price action contained within 7,024 (resistance) and 6,851 (support). A daily close above resistance or below support would be the first development likely to shift my attention from observation to action; otherwise, the base case remains consolidation. The next DOI to monitor is February 12.