Using a logarithmic scale, and depending on your software, etc. you can insert a trend line on the S&P500 chart running from 1929 to 2025. In this chart shown below a 17.53 degree line was inserted following peaks in 1929, 2000, and 2025. A similar trend line was drawn between 1937 and 1987. The lower trend line runs across the top of 1968. If you look closely the chart developed between January 1962 through May 1968 is similar to the January 2020 through August 2025 chart. This would indicate additional volatility over the near term. It also indicates a peak is expected later this year.
Note: It is interesting in the response below that AI believes this is a classic example of Elliott Wave theory.
AI noted the following: “Therefore, a reasonable estimate for the probability of the 2025 S&P500 chart structure following the 1968 chart structure is 60-80%.”
Question to Ollama regarding this assumption.
Open Large Language Model running gemma3 (Source: ollama.com)
Since January 2020 the S&P500 index (SPX) has developed a chart structure similar to its chart structure developed between January 1962 and May 1968. What is the probability that the 2025 S&P500 chart structure will continue to follow the 1968 chart structure?
Okay, this is a fascinating question that dives into technical analysis and historical patterns. Let’s break down the analysis and then discuss the probability.
Understanding the Argument
The observation being made is that the current S&P 500 chart structure, starting from January 2020, is mirroring the chart structure that existed between January 1962 and May 1968. This is a classic example of a repeat pattern or Elliott Wave theory being applied to stock charts.
Here’s the basic logic:
Elliott Wave Theory: This theory posits that stock prices move in predictable patterns called “waves.” These waves tend to be fractal – meaning smaller waves are scaled-down versions of larger waves.
Repeat Patterns: Certain chart patterns, like the one being identified, can reappear over extended periods. This doesn’t guarantee a continuation but suggests a higher probability of a similar movement.
Analyzing the 1962-1968 Period
The 1962-1968 period was a significant one for the S&P 500. It involved:
A Major Bull Market: The market surged dramatically.
A Correction: The market subsequently experienced a major correction (the 1969-1970 decline)
A subsequent bull run until 1968
Extrapolating to 2025
Now, let’s try to estimate the probability. This is where things become highly speculative:
Time frame: We’re looking at approximately 5 ½ years (from January 2020 to December 2025).
Historical Context: The 1962-1968 period was roughly 6 years. The current period has been 6.5 years.
The Correction: The critical element is the 1969-1970 correction. The question is whether the current market is nearing a similar correction.
Uncertainty: The market is extremely different now than it was in the 1960s. Interest rates, globalization, technology, and government policy are vastly different, so predicting the exact mirror image is impossible.
Estimating the Probability
Given all of this, assigning a precise probability is impossible. However, we can offer a reasonable, nuanced estimate:
Low Probability of Exact Replication (10-20%): The chances of a perfect replication – a precisely timed and magnitude identical correction – are incredibly low. The environment is too different.
Moderate Probability of a Similar Wave Structure (60-80%): There’s a reasonable chance that the S&P 500 will develop a similar wave structure to the 1962-1968 period. This would likely involve a significant correction followed by a new bull market. However, the timing and magnitude will likely be different.
Significant Risk of Deviation (20-40%): The market could break out of this pattern entirely, influenced by unforeseen events (e.g., geopolitical shocks, technological disruptions, or changes in monetary policy).
Therefore, a reasonable estimate for the probability of the 2025 S&P500 chart structure following the 1968 chart structure is 60-80%.
Important Disclaimer: I am an AI Chatbot and not a financial advisor. This analysis is based on technical analysis and historical patterns, but it is not a guarantee of future performance. Investing in the stock market involves risk, and you could lose money. Do your own thorough research and consult with a qualified financial advisor before making any investment decisions.
Note that this information is for educational purposes only and not a recommendation.
Stock charts courtesy of StockCharts.com.
Disclaimer
