2026 Market Forecast: Cycles, Risks, and Opportunities | Larry Williams

Professional bears and purveyors of pessimism often emerge at this time of year with gloom-and-doom narratives. While there are indeed periods to adopt a bearish stance, currently such warnings should be approached with caution. 

  

The standout stock of 2025 has been Nvidia. My forecast for the first few months of 2026 suggests a decline into mid-February, followed by a strong rally into April. On a longer-term basis, indicated by the blue line representing the extended cycle, Nvidia has historically rallied approximately 75% of the time during similar periods. This pattern is expected from mid-February into May, presenting a favorable opportunity for Nvidia investors.

 

Edgar Lawrence Smith's research in the 1930s profoundly influenced Warren Buffett. Smith demonstrated that stocks outperform bonds over long periods, particularly through compounding via retained earnings in growing companies. Buffett emphasized firms with disciplined reinvestment of profits. Smith also identified a dominant 3.5-year cycle in stock prices. Out-of-sample testing from 1930 onward reveals cycle lows that marked excellent buying opportunities in 1995, 1998, 2002, 2005, 2008, 2012, 2016, 2019, and 2023. This cycle points to another potential buying opportunity in 2026. 

 

Historical data on years ending in "6," dating back to 1806, show that 85% closed higher, with only four instances of declines. Additionally, after three consecutive up years, the fourth year has been positive eight out of eleven times. These patterns suggest high odds for continued upward momentum, provided supportive fundamentals persist.

 

The M2 money supply exhibits a cycle of approximately six to seven years. Lows in this cycle have historically aligned with bull market advances, as seen from 1960 onward. The next upswing is projected for 2026, introducing a bullish bias, though not guaranteeing a straight-line rally. 

In summary, 2026 is likely to feature higher stock prices, declining interest rates, and rising inflation. In Q3 I expect an historic buy point for US stocks. For detailed forecasts, visit iReallyTrade.com starting January 1.

Reference:
Larry Williams (December 23, 2025) - 2026 Market Forecast: Cycles, Risks, and Opportunities. (video)
Larry Williams (January 1, 2026) - Forecast 2026.

 

 

 

 

Analyses of the S&P 500—integrating decennial, presidential, and seasonal cycles—project an annual return of up to 12% for 2026.

 

■ Strong rally in Q1, peaking around late February to mid April.
■ Pullback in April, followed by increased choppiness through June to August.
■ Weakness in late summer-early fall, and significant trough in October.
■ Robust year-end recovery from the October low.

Beginning in July 2026, the S&P 500 enters its strongest 24-month window of the four-year presidential cycle. Since 1942, every 24-month period starting in July of a midterm year has posted positive returns—a perfect 21-for-21 streak—with an average S&P 500 gain of 36.5%.

See also:

David Hickson (December 15, 2025) - Hurst Cycles Market Update and Outlook into Early 2026. 

TPR (December 18, 2025) - Upcoming 40-Day Hurst Cycle Troughs: SPX, NDX, Crude Oil, Gold, Bitcoin.

Larry Williams (December 24, 2024) - 2025 US Stock Market Outlook: The Good, the Bad, and the Ugly.
Larry Williams (September 25, 2025) - US Stock Market Outlook for Q4 2025.

Wayne Whaley ( August 2, 2025) - 17-0 Turn-of-Year S&P 500 Setup with 7.1% Average Gain.

US Stock Market Outlook for Q4 2025 | Larry Williams

Current market cycles suggest near-term weakness across the NASDAQ, S&P 500, and Dow Jones. The same pattern that accurately forecasted last April’s rally now points to a pullback. 

 

» Expect weakness in Bitcoin, gold, and stocks in the near term. Not a bear market yet, 

but caution is warranted. Cycles and fundamentals together suggest a pullback is ahead. «

 

The 255-day S&P cycle, which has consistently identified past buy and sell points, indicates we are in a weak phase lasting into spring 2026, with the next major buying opportunity around the turn of the year.

 

 » The S&P has a 255-day cycle. Historically, it has nailed buy and sell points 

remarkably well. Right now, we are in the weak part of that cycle. «

This weakness is not expected to trigger a crash, but rather a corrective phase after a strong run, followed by a probable year-end rally. The 2025 forecast of a bullish trend and March buying opportunity proved accurate; the 2026 outlook projects early weakness, then a recovery.

Fundamentally, stocks are overvalued relative to bonds and gold, historically a precursor to declines. This reinforces caution, even without technical confirmation. 

 

» Yes, maybe some weakness—but nothing like 1929 or 1970. 

So, I wouldn’t jump to Dalio’s conclusions. «

Ray Dalio has warned of an 80-year cycle implying severe turmoil. However, analysis of past instances (1863, 1946) shows mostly sideways markets rather than major collapses. The cycle may suggest weakness but not systemic crisis.

In summary: expect a corrective phase in equities, with parallel declines in gold and Bitcoin, but no imminent bear market. Year-end rally potential remains, and cycles continue to provide reliable foresight.

Reference:
Larry Williams (September 24, 2025)  - Old Dogs, New Tricks: Bitcoin and Gold, and what's next for stocks. (video)

 17:19 - NASDAQ, S&P 500, Dow Jones  

20:33 - Stocks Overvalued and 80 Year Cycle?

 

The 13-Week Cycle in Stocks.
 

See also:

Larry Williams (December 24, 2024) - 2025 US Stock Market Outlook: The Good, the Bad, and the Ugly.

 Ray Dalio (April 7, 2025) - Don't Make the Mistake of Thinking That What's Now Happening is Mostly About Tariffs.

How Markets Move: The Natural Cycle of Range Change │ Larry Williams

Markets typically shift from small ranges to larger trend moves. When the market is in a large trend move, wait for it to settle into smaller ranges before getting involved. This gives more reliable setups when the market trends again. Market tops generally occur when the price closes well off its low, while market bottoms happen when the price closes near its low. Most traders get emotional during these times, buying at tops and selling at bottoms. Once you understand this, it becomes easier to make smarter trades.

Small Ranges Beget Large Ranges. Large Ranges Beget Small Ranges.

Markets move from congestion to creation (expansion), transitioning from small ranges to larger, more defined trend moves. A small range signals buildup, and a large range signals an impending trend. If I see a small net change from open to close, I know a large trend move is likely coming and am prepared to act on it. Here’s an example using the NASDAQ: Notice how volume fluctuates throughout the day: heavy volume in the morning, a dip in the middle, and a surge towards the end. 

"U" shaped intraday: Heavy volume in the morning, a dip in the middle, a surge at the end.

This pattern is consistent across markets. It’s like a freeway: traffic is heavy in the morning, dies down in the middle of the day, and picks up in the afternoon. Understanding this helps day traders identify opportunities in the morning and towards the end of the day, while avoiding the midday lull. Volume drives range, and large ranges happen at the start and end of the day. This is when short-term traders make money. We need volatility and large ranges to profit.

 There are three key cycles in market behavior: 

(1) small range/large range, (2) moving closes within ranges, and (3) closes opposite openings. 

All three cycles work equally well in any timeframe and market.

"Do yourself a big favor: Mark off all the large-range days [in the chart above], and then study the size of the ranges just

prior to explosive up-and-down days. See what I see? We are given ample warning of virtually every large-range day 

by the shrinkage of ranges a few days earlier."

The key takeaway for short-term traders is that not every day offers a high-probability trade. You need to identify days with potential for explosive moves and not expect large profits daily. It’s about finding that opportunity.

As for market tops, they usually occur when prices close near their highs, and bottoms happen when prices close near their lows. Focus on these closing patterns to determine when to buy and sell.

Trend is a function of time. The more time in a trade, the more opportunity for trend.

The most important insight in trading is that trends are the basis of all profits. Without a trend, there are no profits. But what causes trends? Trends are fundamentally a function of time—the more time you hold a trade, the more opportunity for a trend to develop. The challenge with day trading is that trends occur only about 15% of the time. Most of the time, prices are consolidating, making it difficult to catch a big trend move. Limiting yourself to a few hours of trading only targets that small window when trends are likely to occur.

 My Day Trade Secret: HTTC - Hold To The Close.

The day trader dilemma is that they have limited time to catch trends. Holding positions overnight allows you to capture longer trends and larger profits. A small bet with the potential for a big move is the key advantage of holding positions over time. 

 

 » How you know a large trend move is coming. «

 

Many day traders are afraid to hold positions overnight. However, if you do the math, you'll see that most market moves happen between the close of one day and the open of the next. Moves within the day are often smaller and less reliable. For short-term traders, the key to success is recognizing large range days and holding positions to the close. This is how you catch a big move during the day.

 

Reference:
Larry Williams (2022) - Trading Tactics and Indicators I Still Use. (video)

 

 » Hold To The Close. « 

S&P 500 E-mini Futures (daily bars).

 Narrow Range 4 & 7 Days and Inside Bar Narrow Range 4 & 7 Days.

 

» There are only two ways a short-term high or low is broken. «

NVIDIA (daily bars).

 Narrow Range 4 & 7 Days and Inside Bar Narrow Range 4 & 7 Days.

See also:

Larry Williams (2011) - Long-Term Secrets to Short-Term Trading (2nd edition).

  Larry Williams (1999) - Long-Term Secrets to Short-Term Trading (1st edition).

Larry Williams (2000) - Swing Points as Trend Change Indication.

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure.

 Toby Crabel (1990) - The Principle of Contraction/Expansion.

 Toby Crabel (1990) - Definition of Price Patterns.

Linda Bradford Raschke (1995) - Capturing Trend Days. 

2025 US Stock Market Outlook: The Good, the Bad & the Ugly │Larry Williams

My outlook on the US stock market in 2025 uses the metaphor "Clint Eastwood Market," representing a mix of good, bad, and ugly factors:

• On the positive side, there are no immediate signs of a US recession, with strong employment figures and a labor market expected to improve in early 2025. Business conditions remain stable, and historically, stock markets tend to perform well in the first year of a presidential term. 
• However, there are risks, including potential profit-taking after a strong 2024 market, the uncertainty surrounding trade policies and tariffs, and the unpredictable actions of the Fed, Congress, and business leaders like Elon Musk. 
• On the negative side, market valuations, such as high price-to-earnings and Shiller CAPE ratios, suggest that the market is overvalued, which increases the risk of a correction. Additionally, industrial production is underperforming, which could hinder economic growth, and inflationary pressures from the excessive money supply expansion since the COVID-19 pandemic may contribute to market volatility.

 

Very Long-Term Market Wave in the DJIA and US-stocks down into 2038.

 

 Shorter Long-Term view on the DJIA with major lows in 2025 and 2028.

 

2025 will be a trading range market with a bullish bias.

 

 Selling pressure in Q1 of 2025. Second half of the year strong. Overall gains.

Given the current very high valuation ratios, the 2025 forecast indicates slower growth and market underperformance compared to historical averages. Therefore I don’t foresee a runaway bull market in US stock indices in 2025, and volatility is likely to be a key characteristic, with short-term rallies and corrections. Very long-term market cycles suggest we are at the beginning of a prolonged period of sideways movement, with the next major bull market not expected to begin until around 2038. 

Regarding a major crash that some are constantly talking about, I don't see it occurring in 2025 either. While the market will be challenging, the overall bias will lean toward the upside.

Reference:
Larry Williams ( December 20, 2024) - 2025 Market Outlook: The Good, Bad, and Ugly. (video)

2025 Bitcoin forecast.

See also:

Larry Williams (December 31, 2024) - Forecast 2025.

Larry Williams (December 18, 2023) - 2024 US Stock Market Outlook.

Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change.  

The S&P has traded above its 200-DMA all year. This has happened 11 other times since 1952, and the next-year move has been about half the average. Last time this happened was in 2021, and before that, 2017  — Bespoke, December 24, 2024.

Structural Characteristics of Bullish and Bearish Months | D'onte Goodridge

Traders want to find trending markets but often fail to see and understand the structural characteristics of bullish and bearish months. Both move in a similar fashion but inverse to one another. Here are the characteristics for the formation of a bullish month:

 

 

The first example is a daily chart of US Dollar versus Japanese Yen (USDJPY) during February 2023. The market was trending up. It was a bullish month. Let's identify the five key factors to a bullish month:

1. Price moves below the monthly opening price.
2. A swing low forms below the month's open.
3. Price purges a previous daily low (PDL) and reverses back to a previous daily high (PDH).
4. The market creates a market structure shift (MSS) to the upside and an Imbalance or Fair Value Gap (FVG).
5. Higher swing highs and higher swing lows form.

 

Looking at the daily candles in the USDJPY chart, we see the methodical sequence of a Bullish Month developing:
 

1. Price was movesg below the monthly opening price. Price stops below it, runs up, drops below it, runs up and continues the bullish trend.
2. A swing low below the month's open forms. This is a swing low because the candle on the left has a higher low and the candle on the right has a higher low, hence the low in the middle is the lowest point. To form a swing low  only takes three bars.
3. Price purges a previous low and works back to a previous high. The following day price reverses back to the previous daily high, all happening within a three bar setup, creating a swing low, which is a purge on the previous daily low and a reversal back to a previous daily high.
4. Next the market creates a shift to the upside with speed through a previous swing high and a FVG.
5. And price created a new swing high and a higher swing low.

The next example is a daily chart of Apple during January 2023. The same five criteria for a Bullish Month were met:

 

Now let's look at the five key factors to a Bearish Month:

1. Price moves above the monthly opening price.
2. A swing high forms above the month's open.
3. Price purges a previous daily high and reverses back to a previous daily low.
4. The market creates a shift to the downside and a FVG.
5. Lower swing highs and lower swing lows form.

 

The first example is a daily chart of British Pound versus US Dollar during August 2022. The market was trending down. Identify the above listed five criteria for the formation of a Bearish Month:

 

 

The last example is a daily chart of Gold during February 2023. Gold was in a down trend. Identify the structural criteria for the formation of a Bearish Month:

 

Reference:
D'onte Goodridge a.k.a. Forensic Forex (2023) - Characteristics of Bullish & Bearish Months. (video)  

 

 

 

See also:
Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

 Michael J. Huddleston (2017) - ICT Weekly Range Profiles.

Daye (2023) - The Quarterly Theory.

 

The Oops! Reversal Setup | Larry Williams

One of Larry Williams’ best-known setups is called Oops!: We are waiting for the market to open. We take as a reference the daily bar of yesterday, with its open, evolution and close. When the market opens, suppose a gap up occurs. A gap up takes place when the open is higher than the highest point that was reached on the previous day; a gap down occurs when the open is lower than the lowest traded point of the previous day.

When a market opens at a very high level and there is a gap up, it is very strong. So, we obviously suppose that it goes up. It will probably do it but, if for some reason it starts to fall and then reaches the highest level of yesterday, it is as if it said: "Oops!, I was wrong. I’m not strong, but weak." In this case, we open a short position at this level. We enter short because we imagine that the market (and the players in the market) realizes it isn’t that strong. Actually, the market is weak, so it will go down. 

To use this setup, we obviously need a stop-loss whose size depends on the market we are trading. How do we close this position? Larry Williams proposed a bailout exit he called "first profitable open". This consists in staying in the position until, on the following day or days, the market opens somewhere below the entry level (because we are short). When that happens, we close the trade. So, we keep the position until we get the profit or, obviously, when we are stopped out. We can also close the position at the end of the same day. The one suggested by Larry Williams is however the best one, although it sounds quite weird. Believe me, the first profitable open is a very effective close of the position.
 

This is the basic version of the Oops! Anyway, I know Larry Williams made some tweaks to it. The Oops! works, but today this specific setup is quite rare. The reason is that many markets trade for 23 hours a day now. So, it’s quite hard to have a heavy gap in just one hour. Maybe, you can have one after the weekend, but normally it’s not there.

Quoted from:
Andrea Unger (2017) - How to Trade Larry Williams’ Oops!

See also:
Larry Williams (1998/2011) - Long-Term Secrets to Short-Term Trading, 2nd Edition.

Jarrod Goodwin (2023) - Trading Forex Gaps: Maximising Profits with Proven Techniques (Larry Williams “Oops!”). (video)

Buy and Sell Signals | Larry Williams

If I observe prices in a strong downtrend, followed by a period of sideways movement before another decline, only to immediately return to the previous trading range, that's a buy signal.

 

Buy Signal: Dump, dump, (dump), go sideways and pump a bit, one more small dump, then the pump.

Sell Signal: Pump, pump, (pump), go sideways and drop a bit, one more small pump, then the dump.

 

Why? Because, during the sideways range, accumulation was taking place. The breakdown likely liquidated many long positions, and professional money will often buy in that area.

 

 

If the price quickly returns to the range, it confirms that they’ve been buying, and that's when I want to enter a long position in the market.

Quoted from:
Larry Williams (2016) - Buy Signal. (video)

 

See also:

Larry Williams (2011) - Long-Term Secrets to Short-Term Trading.

Swing Points as Trend Change Indication | Larry Williams

A trend change from up to down occurs when a short-term high is exceeded on the upside, a short-term trend change from down to up is identified by price going below the most recent short-term low. The first chart depicts such trend changes in a classic manner, study it well because reality comes next! Here are a couple of pointers on this technique. Although the penetration of one of these short-term highs, in a declining market, indicates a trend reversal to the upside, some penetrations are better than others.

» There are only two ways a short-term high or low is broken. «

There are only two ways a short-term high or low is broken. In an up trending market, the low that is violated or fallen below will be either a low prior to making a new rally high, as shown at (A) in the second figure, or a low that occurs after decline of a high that then rallies making a lower short-term high; it then declines below the low prior to the rally that failed to make a new high, as shown at (B). The better indication of a real trend change is the violation of the low shown at (A). 

 

Best Trading Patterns.

 

By the same token, a trend reversal to the upside will occur in one of the two following patterns: In (A), the rally peak prior to a new low is violated to the upside, or in (B), the market makes a higher low, then rallies above the short-term high between those two lows. In this case, again, the (A) pattern is the better indication of a real trend reversal.

Quoted from:
Larry Williams (2000) - Day Trade Futures Online. 

 

See also:

Larry Williams (2022) - How Markets Move: The Natural Cycle of Range Change. 

Larry Williams (1999) - Three Bar Patterns: The Smallest Fractals of Market Structure.  

 

Arthur A. Merrill (1980) - M and W Wave Patterns.