Alessio Rastani analyzes a decade-long seasonal stock market pattern and its implications for 2026
Alessio Rastani presents a chart analysis and seasonal data suggesting the stock market's most favorable period may be ending.
Summary
Alessio Rastani reviews a wave count he published in April 2025 predicting the S&P 500 would reach above 7,000, a target that has since been met. He then introduces seasonal data from Jay Keell of Sentiment Trader showing a recurring "mid-decade bulge" pattern — a historically strong four-year period for stocks occurring every decade between year two and year six — which ended on March 31st, 2026. While Rastani does not expect an immediate market top or crash, he argues that the end of this seasonal tailwind means traders should be on alert for any bearish reversal signals in the coming months. He expects a near-term pullback given overbought conditions, but remains broadly bullish for the rest of 2026.
Key Takeaways
FULL TRANSCRIPT
Introduction and Elliott Wave Review
Alessio Rastani: I haven't talked about the stock market for a while, so in this video I want to take a look at the charts of the major stock markets and discuss what potentially could be happening. I want to discuss some really interesting data, explain its meaning and significance, and go through some interesting charts. I want to explain why we could be coming to a very important, critical point in the major stock markets.
So it's good to do a fresh update on the major markets. We'll have a look at a particular chart and some data in just a few minutes. But first, I want to begin with this important chart, which is a screenshot from my video from almost a year ago, in April of 2025.
In my members video last year, I put out this particular chart — this wave count on the stock markets. At the time, by the way, the S&P in April of last year was at approximately this level, just under 5,600, as you can see here. Now, obviously, we're way above that. But here's what I said in that video, my members video on April 27th of last year:
"This particular wave count has now gained a much higher probability based on the data we just looked at. This has significantly increased the likelihood that the market could make new highs in the next several months. And indeed, I've actually plotted — I've actually pointed out the levels quite clearly on this chart. I'm now looking for the market in the next several months, and likely potentially by the end of this year, to move to the first target. So we could see this wave five extend much higher to over the 7,000 level. That's for the 12-month period, which could take us eventually to 7,278."
So that's one of the important things about Elliott Waves — they have this predictive potential. And obviously, as you can see, the S&P has now exceeded that level I mentioned last year.
I want to make it very clear that I'm not saying that wave five has topped or completed. No — I don't think there's any indication as yet that wave five has topped. There's still potential for this wave five to extend higher this year, despite any pullbacks or corrections we might get.
The Mid-Decade Bulge: A 100-Year Seasonal Pattern
Now let me take a look at this particular data I want to show you. Let me first explain where I got this data from — courtesy of Jay Keell of Sentiment Trader. In a video of his that I watched, Jay Keell mentioned that there's a seasonal pattern that occurs every decade. So every 10 years, you get this seasonal pattern called a mid-decade bulge. In other words, every 10 years, between year two and year six of that decade, we see what's called a very strong period — a mid-decade bulge. During that particular period, we see a big bulge, or in other words, a lot of strength and positivity in the major stock markets.
We can see that that period started in September 2022, but it ends March 31st — which, by the way, we just finished recently.
Let me show you some examples. Here's 2022 — September 2022 all the way to March of 2026. Again, the mid-decade bulge. We can see a very strong period. Despite the volatility we had in that period, it still managed to extend higher. And obviously I realize we're above those levels now from March, but I'll explain in a few minutes what that potentially could mean.
Here's another example — from 2012, from September of that year to March 2016. And here's another example from 2002. Again, you can see September 2002 was very close to the bottom, and all the way to 2006 — you can see again a very strong period, again the mid-decade bulge.
As you can see from this data from Jay Keell, looking at the mid-decade bulge going back all the way to the 1920s, notice that the four-year period from the second year to the sixth year of that decade has, for the last 100 years, typically been positive. The percentage positive — the win rate — is very high. In fact, the only period when this was not positive was in the 1970s. In other words, that's almost a 90% win rate for the markets during this mid-decade bulge. The majority of the time — 90% of the time — it's positive. And we can see the average return has been about 65%, with a median return of approximately 59%. That's very good.
What the End of the Mid-Decade Bulge Means
Now let me explain that Jay Keell is not saying that once this period comes to an end on March 31st, the market suddenly tops and then crashes. He's not saying that, and that's not how we should interpret the data.
What it does mean, however, is that perhaps the easy period for the markets could be coming to an end. This particular seasonal pattern — which happens every 10 years, every decade — seems to indicate that during this period, from the second year to the sixth year of that decade, it happens to be a favorable, positive seasonal period where the easy money — in quotation marks — where the easy money can be made in the stock market. However, once that seasonal period comes to an end, it becomes perhaps much more complicated and less easy for the uptrend in the market to continue.
Again, it does not mean the market has to top immediately. But it does mean we should be very cautious. Because if, for any reason, in the next several months — let's say in the next three to six months — if for any reason the stock market were to trigger a bearish reversal signal, any kind of a reversal signal that's bearish or negative, if that happens — and I'm not saying it's going to happen — but if that occurs, that means we should be extremely cautious and on our guard that perhaps the market could be reaching a top.
Near-Term Outlook: Pullback Expected, But Still Broadly Bullish
Now, let me just say this. I personally don't think it's likely for the market to top this year. So I'm not expecting a crash or a major bearish scenario. Although I do think, given the conditions in the market right now being extremely overstretched and overbought as it is, I think a pullback is quite probable. So I am expecting a sizable pullback, or some kind of a retracement or minor correction, in the next several weeks. I think a pullback or retracement after such a strong rally is probable.
Overall, I think once we get this pullback and retracement or correction out of the way, I'm still remaining bullish for the remainder of this year — despite the fact that perhaps the easy period for the market seasonally has come to an end.
And by the way, you have to remember that from a seasonal perspective, we're coming across some headwinds, some major obstacles for the market, because usually the period from May to June is typically negative — not a great period for the market.