When Will the S&P 500 Reach 1,500?

Investors want to know when they will recover their losses from the 2007 - 2009 collapse and the following graphical technique might give a clue about how long that recovery might take. The chart below shows the S&P 500 closing monthly prices from January 1902 through last month's close. Note: The chart is updated once each month.

The two green trendlines define the long-term upside price channel of the S&P 500. Prices routinely fluctuate between the upper and lower boundaries of the channel and occasionally they move above the upper boundary to form a price bubble. Because price bubbles always burst, prices stay at bubble levels only temporarily before they correct and head to the downside, as they did after prices peaked in 2000 and 2007.

When will prices recovery to the 1,500 level? No one really knows, but an objective analysis of past price patterns helps to speculate about future patterns. See the horizontal line labeled 1,500 that connects the 2000 and 2007 peaks. I (RAH) have extended the line to the right so that it intersects the upper boundary of the price channel. This intersection occurs around year 2020, which would be the earliest date that the S&P 500 would reach 1,500 given that it stays within the price channel from now on.

If prices jumped above the channel, 1,500 could be achieved in fewer years. Or, if prices meandered in the channel, the 1,500 target could take longer than 2020.

Realize that this graphical technique has some limitations. For example, the year of the intersection (recovery to 1,500) depends on the the position of the upper and lower boundary of the price channel. Because their position on the chart is subject to interpretation by the chartist, in this case me, the year 2020 should not be thought of as exact. If I had placed the upper boundary a little higher, the intersection would have occurred a few years before 2020. Nevertheless, the technique produces legitimate estimates of recovery dates.

Click chart to enlarge it.

For additional updated charts of the S&P 500 Follow the S&P 500 - PDI Analysis of the S&P 500 from Its Peak to Now and Stock Market Follows Multiyear Cycles.

See When Will the Stock Market Recover? - Updated Each Day for more stock market estimates.

Posted October 15, 2009.