Long Term Charting suggests fair value S&P 500

Long term markets should be judged by fundamental analysis is the dogma, but what about long term charts? Are there “reliable” charting techniques looking at very long trends, and what are those suggesting? Below is some interesting research based on long term charts. According, purely statistically, the below model suggests S&P should go down to around 500, give or take a few points. Guest post by Carlucci via D Short.

Based on that data, one could make a reasonable statistical assumption that the slope for the current secular bear market beginning in 2000 would also follow the same 34 degree angle as the previous three bears. Overlaying that slope on the 2000 bull top would suggest that we are not yet half way through the present bear cycle.

But how much more “bear”is left?

To answer that question, we add an additional green line to the S&P chart corresponding to -50% variance from the trend (Figure 3). All three bears in 1920, 1949 and 1982 have touched that line before rebounding. In fact, all three have actually exceeded -50%: 1920 at -59%, 1949 at -57%, 1982 at -55%.

If we follow the 34 degree bear slope line to the -50% green variance line, we arrive at a very conservative end point for the current bear in 2022 – 2023 with the S&P at approximately 540. That, I wish to emphasize, is the conservative scenario.

A more mathematically realistic scenario is illustrated in Figure 4. Here, a blue variance line has been added at the -65% level, below the green -50% line. This would take the end of the secular bear out to 2025 – 2026 at S&P 450.

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