By Bill Sarubbi, FSC Board Member
The U.S. stock market indices are likely headed higher into January. There are four reasons for this projection.
First, this is a year ending in a 5, the strongest year in the 10-year decennial pattern as developed by Edgar Laurence Smith at Ameritrust Bank. All questions in such "5" years are resolved on the upside. September has been the weakest month in any year, but this bearish month has closed on the upside 66% of the time in these "5" years. The weakest part of September has been the second half of the month, especially the last week. This period could present favorable buying opportunities.
DJIA Histogram of Expected Return in Years Ending in 5
Second, the combination of the 1-, 4- and, 10-year cycles is rising. The first cycle is the annual cycle in any year from 1885. The 4-year cycle has been called the election year cycle. Their summation is below.
1, 4, and 10-Year Cycles in 2025
Third, the dynamic cycle depicted below rises into January. This "catch all" approach accumulates the effect on the S&P of the strongest cycles. It detects cycles that may not be represented by the prior cycles.
S&P Monthly Cycle
And fourth, 60% of all S&P gains have been generated in Q4 of any year.
In order to project a price level, the height of the rectangle from which the S&P 500 broke out is projected up. This points to a price target of 7460.
S&P Daily
What stock should be considered for purchase for Q4? Below is a list of the S&P 100 stock sorted by a unique measure of relative strength. These shares are likely to extend their gains.
Bill Sarubbi Bio
cyclesresearch.com
Bill Sarubbi obtained his BS in 1971 and his MBA in 1972 from NYU, becoming a member of the Foundation for the Study of Cycles in the same year. He trained as a therapist under the direction of Dr. John Pierrakos in New York for nine years. From 1972 to 1990 he worked on the buy and sell sides of Wall Street as an analyst with the Value Line Investment Survey, as an institutional broker, and as a technical strategist with PaineWebber. From 1990 to 2004 Sarubbi was with the Abu Dhabi Investment Authority, where he was a technology fund manager, North American strategist, and member of the currency hedging committee. Since 2004 he has been operating his own money management and consulting service. In the course of his work, he developed unique market analysis software. Sarubbi is a Forbes contributor and is active in groups that focus on the future and on cycles, including the Kenos Circle, a Vienna-based group of futurists. Sarubbi is based in Vienna.
NOTE: Prepared by FSC Board Member Bill Sarubbi. The views expressed are his own and not investment advice. This article is intended exclusively to provide information and education to help individuals better understand cycles and the markets. However, this information is not to be construed as professional advice as to the buying and selling of securities or other investment instruments. In no event does the host express any opinion with respect to, or make recommendations regarding, the purchase or sale of any particular security or other investment instrument. There is a very high degree of risk involved in trading securities, and buying or selling decisions are solely within the personal discretion of each individual.
By Bill Sarubbi, FSC Board Member
The S&P and NASDAQ indices, both weighted and unweighted, have broken out of consolidations. The cycles for both indices point up, so higher quotes are likely. The prior resistance is now support, and price is sitting just above these support areas. This establishes an attractive reward/risk ratio in each market. Newsletter writers have gone from bullish to very bearish quickly. And now the AAII survey has more bears than any time in the last year.
In the summer of 2024, I noted that the stock market was likely to move higher. However, the big tech leaders were seen to be too extended and due for a correction. If the market was to move higher and the tech leaders were to correct, then other stocks would have to start outperforming, which has been the case. Let us analyze the prospects for these stocks through the use of cycles.
The relative strength of the equally weighted NASDAQ versus the S&P 500 turned up in late December and remains strong. This indicates that the average stock in the NDX 100 is stronger than the cap-weighted S&P 500. The big-cap tech stocks have been lagging while the smaller weights in the index have been rising. The result: Many more stocks are rising, but the equities that have the greatest influence on the indices have lagged. This is in sharp contrast to the situation in 2024 in which only 25% of the stocks outperformed the S&P 500.
The relative strength screen shows that within the NASDAQ 100, the big 8 tech stocks are ranked from number 6 (Netflix) to number 75 (Microsoft). Here are the stocks in relative strength order with the cycles' recommendations in parentheses:
- Netflix (hold)
- Meta Platforms (sell)
- Tesla (buy)
- NVIDIA (sell)
- Amazon (sell)
- Apple (hold)
- Google (sell)
- Microsoft (cycle low in March)
This monthly cycle explains the buy signal on Tesla:
Tesla Monthly Cycle
Here is another picture that explains the sell opinion on NVIDIA:
NVIDIA Monthly Cycle
The top 5 NASDAQ current relative performers are:
- Palantir
- Super Micro Computer
- Axon
- Atlassian
- DoorDash
From these new leaders, here are the stocks that can be added to portfolios now.
Super Micro came down hard, bottomed, and is now giving longer-term buy signals, supported by rising cycles.
Super Micro Daily, Weekly, and Monthly
Atlassian features technical strength and a rising monthly cycle.
Atlassian Monthly Cycle
Bill Sarubbi Bio
cyclesresearch.com
Bill Sarubbi obtained his BS in 1971 and his MBA in 1972 from NYU, becoming a member of the Foundation for the Study of Cycles in the same year. He trained as a therapist under the direction of Dr. John Pierrakos in New York for nine years. From 1972 to 1990 he worked on the buy and sell sides of Wall Street as an analyst with the Value Line Investment Survey, as an institutional broker, and as a technical strategist with PaineWebber. From 1990 to 2004 Sarubbi was with the Abu Dhabi Investment Authority, where he was a technology fund manager, North American strategist, and member of the currency hedging committee. Since 2004 he has been operating his own money management and consulting service. In the course of his work, he developed unique market analysis software. Sarubbi is a Forbes contributor and is active in groups that focus on the future and on cycles, including the Kenos Circle, a Vienna-based group of futurists. Sarubbi is based in Vienna.
NOTE: This article is intended exclusively to provide information and education to help individuals better understand cycles and the markets. However, this information is not to be construed as professional advice as to the buying and selling of securities or other investment instruments. In no event does the host express any opinion with respect to, or make recommendations regarding, the purchase or sale of any particular security or other investment instrument. There is a very high degree of risk involved in trading securities, and buying or selling decisions are solely within the personal discretion of each individual.
By Bill Sarubbi, FSC Board Member
May 28-30 is likely a low. The period of May-June, EOM strength will begin on May 31 and run to June 12. This period has been up 64.4% of the time. The expected return is the sixth highest of the 12 months. June is likely to be a positive month. This period of strong seasonality is supported by dynamic cycles. Below, are both the daily and the weekly S&P cycles. The buy signals have been accurate 92% of the time (10 of 12) in the last year. All 6 weekly buy signals have been profitable. The combination of this trio of rhythms will likely propel the S&P to 4250 and higher.
