Will Q1 2026 Finally Break This S&P 500 Bull Market?

The S&P 500 $S&P 500(.SPX)$ dropped about 2% this week and everyone’s already throwing around “top is in” and “Q1 crash.”

I’m not worried. Not yet. ❌

In this article I’ll lay out:

• Why I’m still bullish right now

• What a normal pullback looks like inside a bull cycle

• The exact conditions that would make me flip and expect a real correction in 2026

• How I plan to react if those conditions hit

Quick context so you know where this is coming from:

I don’t trade news, elections, tariffs, or whatever the headline of the week is. I trade:

• A clear reason to enter

• A clear reason to exit

• Strict position sizing and risk tolerance

I can’t control what politicians or central banks do. I can control how I respond.

For the S&P, that starts on the monthly chart.

Step 1: Are we in a bull or a bear?

At the bottom of my chart I use the Monthly BX histogram.

It does one job: show macro buying vs selling pressure.

• When BX is increasing or green, buyers are in control → bull cycle.

• When BX is dark red and making lower lows below zero, sellers dominate → bear cycle.

I only want to be long when that Monthly BX is telling me we’re in a bull cycle. I don’t short bull markets. You might nail one call and look like a genius on Twitter. Over 10 years, that game kills most people.

Look at the last couple decades on the S&P:

• Bull cycle from mid‑2020 to early 2022 → BX green, ride the trend.

• 2022 bear market → BX rolled over; my system would have sat out instead of eating a ~30% drawdown.

  

• Same thing around 2008 and the dot‑com crash: we would’ve taken a couple of small losses trying to bottom-tick, then stepped aside while the index dropped ~50%.

  

Backtested over the last 26 years on the S&P 500, this simple BX-based approach would have:

• Returned about 595% vs just buying and holding

• About 42% win rate

• Max drawdown ~23%

• And a risk/reward around 8.7

It still loses. It still has drawdowns. But it keeps us out of the catastrophic stuff and in the big uptrends.

Right now, BX is green. We’re in the middle of a bull cycle.

Step 2: Where we “should” be right now

On my chart there’s also a purple line: my Price Behavior Explorer.

That line takes all the historical BX data and projects an “expected” forward path if this cycle behaves like prior ones.

For this bull cycle, the model had:

• A target around January 2026 of roughly 652 on SPY

• We’re actually above that path right now

• On averages, these bull runs last about 8.7 months

• We’re only about 6 months into the current one

• Average win per cycle is roughly 26%; we’re only up about 15% so far

So even if we pulled back a few percent here, we’d just be snapping back toward the expected path, not falling off a cliff.

Purely on stats, it would be totally normal for this bull cycle to:

• Survive a pullback in Q1

• Then push for another 3–6 months

• And potentially push SPY toward the 750 area by late summer / early fall 2026

That’s the base case. Not a prediction. A probability map.

Step 3: What a “normal” correction looks like in a bull cycle

Zoom into the weekly chart and look at the last bull run from 2023 into 2024.

Even while Monthly BX was green the whole time, we still had:

• 10% pullbacks

• 5% pullbacks

• 8% pullbacks

Each one felt scary in the moment. Each one got bought because the macro buying pressure was still there.

That’s key: 🔑

A bull cycle includes corrections. A correction by itself does not mean the bull is over.

For this current move:

• Best case, we bounce and hold somewhere around 675–680 on SPY.

• “Normal” pullback, we could dip down toward the 660–655 zone and still be fine.

As long as:

1. That area roughly holds, and

2. Monthly BX stays green on the close,

I treat it as a standard bull market dip, not the start of a new bear.

So to answer the Q1 question:

• A 5–10% pullback in Q1 2026? Totally possible. Honestly, kind of healthy.

• A full reset 15–20%+ correction? Different story. That’s where my triggers come in.

Step 4: What would actually make me worry

There are two things that would flip me from “bull in a dip” to “we might be in trouble.”

1. Monthly BX closes dark redThat means the macro buying pressure has flipped to selling. Last time that happened was the tariff drama back in 2024. When that hit, the market dropped hard, fast.

2. We lose 660–655 and price drives into the “insane discount” band

I use a Monthly Fair Value Band indicator (also free in my course library) that shows when the S&P is trading at what I’d call a generational discount.

Every major panic in recent history bounced there:

• 2018 reset correction

• 2020 COVID crash

• 2022 bear market

• 2024 tariff panic

If BX rolls dark red and we start heading toward that same band again, my worst case expectation would be:

• Roughly a 14–17% drop from current levels

• Down into that deep discount zone

• Where, historically, big long-term buyers step back in

I do not think that is the most likely outcome right now. But that is the scenario I’m prepared for months in advance so I don’t get blindsided.

If we get there, I won’t be shocked. I’ll just treat it like the 2018, 2020, 2022 opportunities: temporary fire sale inside a much longer structural uptrend.

Where this leaves us for Q1 2026

• Monthly BX is still green → bull cycle intact

• We’re only 6 months into an average 8.7‑month bull run

• We’re up about 15% vs a typical 26% per cycle

• The model path actually has us a bit above where we “should” be right now

So:

• Am I expecting some kind of pullback in Q1? Very possible.

• Am I calling for a new bear market or multi‑year top right now? No. The data doesn’t support that yet.

• What will I do if BX closes dark red and we break those key levels? Flip the switch, get defensive, and prepare for that 14–17% reset down into the deep discount band.

Until those two triggers hit, I’m staying bullish on the S&P 500.

If I’m wrong, I’m wrong. It won’t be the first time. But I’ll be wrong following a tested system, not a feeling or a headline.

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