Summary: The logarithmic chart of the S&P 500 is warning investors of a major market collapse in the coming years. A trend line touching the exact high of the stock market in 1929 connects through the exact high of 2000. The all-time high on the S&P 500 touched this line in early 2025. Considering the Great Depression followed the 1929 high and the Dot-Com bubble collapsed after the peak in 2000, investors should be very concerned that a similar drop could be in store for the S&P in the coming year or two.

S&P 500's Century-Long Trendline Signals Potential Historic Market Collapse

The monthly logarithmic chart of the S&P 500 reveals a century-spanning pattern that should have every investor's attention. Let's break down what this powerful technical setup is telling us about what may be the most significant market turning point of our lifetimes.

The Golden Trendline of Doom: A 100-Year Warning Signal

When you look at this monthly logarithmic chart of the S&P 500, what immediately jumps out is that golden ascending trendline connecting three pivotal moments in market history. This isn't just any trendline—it's arguably the most significant resistance level in American financial history, marking the exact peaks before catastrophic market collapses.

The power of looking at markets through a logarithmic lens can't be overstated here. Unlike linear charts that can visually distort percentage moves at different price levels, this logarithmic view gives us the true picture of relative market moves across a century of data. And what a picture it paints.

The first touch point came at the 1929 peak, right before markets plummeted 85% in the Great Depression. The second touch arrived at the 2000 tech bubble peak, preceding a 55% market collapse. And now, in 2025, we're witnessing the third contact with this ominous trendline. History doesn't just rhyme here—it's practically shouting at us.

The Roaring Twenties and the Great Depression: Lessons from the First Peak

What led up to that first devastating market crash? The 1920s, much like today, was a period of extraordinary technological advancement and economic optimism. The proliferation of automobiles, radios, and household appliances transformed American life. Sound familiar? Today's AI revolution, space commercialization, and biotechnology breakthroughs echo this pattern of transformative innovation.

But beneath the Roaring Twenties' glittering surface lurked dangerous financial excesses. Rampant speculation, margin trading with as little as 10% down, and a widespread belief that stocks could only go up created the perfect storm. Banks were recklessly involved in both commercial and investment banking, creating systemic risk.

The Federal Reserve, still relatively new at the time, made critical policy errors—first keeping money too loose, then tightening aggressively just as structural weaknesses were appearing. When the market finally broke in October 1929, the cascade was relentless. The ensuing 85% collapse wasn't just a correction—it was a wholesale destruction of wealth that contributed to a global depression.

The Dot-Com Bubble: When Innovation Meets Irrational Exuberance

Fast forward to the late 1990s. Again, we saw revolutionary technology—the internet—captivating investors' imagination. Companies with no earnings and questionable business models commanded astronomical valuations simply by adding ".com" to their names. The NASDAQ soared from 500 to over 5,000 in just five years.

The Fed, under Alan Greenspan, recognized the "irrational exuberance" but did little to rein it in until late in the cycle. Low interest rates and abundant liquidity fueled the speculative fever. When reality finally caught up in 2000, the S&P 500 touched our golden trendline and then plummeted 55%, while the tech-heavy NASDAQ collapsed nearly 80%.

Today's Market: AI, Crypto, and Easy Money – The Perfect Storm

So here we are in 2025, with the S&P 500 once again kissing that century-long resistance line. But the parallels to previous peaks run far deeper than just the chart pattern.

Just as the 1920s had radio and automobiles, and the 1990s had the internet, today we have artificial intelligence—a genuinely transformative technology that has captured the market's imagination. But much like the dot-com era, the market has stopped distinguishing between companies with real AI capabilities and those simply riding the hype train.

We've watched stocks double or triple overnight merely by adding "AI" to press releases or company descriptions—reminiscent of how companies in the late '90s could spike 500% just by announcing a website. Companies with minimal revenue but AI-adjacent business models have achieved multi-billion-dollar valuations that would have been unthinkable just a few years ago.

The cryptocurrency market represents another facet of today's speculative excess. While blockchain technology itself has legitimate applications, the proliferation of thousands of cryptocurrencies—many with no genuine utility—mirrors the explosion of dubious internet stocks in the late '90s. We've seen digital tokens with literally no purpose beyond speculation reach billion-dollar market caps, only to collapse when sentiment shifted.

Perhaps most concerning is how closely today's monetary policy environment has mirrored previous pre-crash periods. Following the pandemic, central banks unleashed unprecedented stimulus—zero interest rates, massive quantitative easing, and direct fiscal support. This tsunami of liquidity found its way into risk assets, inflating everything from tech stocks to real estate to cryptocurrencies.

Just as in the late 1920s and late 1990s, this easy money created a "wealth effect" that fueled consumption and speculation while masking underlying economic vulnerabilities. And just like those previous periods, we've now seen central banks pivot to aggressive tightening to combat the resulting inflation—setting up the classic conditions for a market breaking point.

The statistics tell the story: margin debt recently hit all-time highs as a percentage of GDP. The market capitalization-to-GDP ratio—Warren Buffett's favorite valuation metric—has exceeded even the 2000 bubble levels. Meanwhile, the concentration of market gains in a handful of tech giants has created dangerous narrow market breadth, just as we saw before previous major tops.

What This Pattern Suggests for the Coming Years

The implications of our chart analysis are profound. If this pattern holds true, we could be looking at a market decline between 55% (like the Dot-Com crash) and 85% (like the Great Depression). This isn't mere speculation—it's what the historical precedent suggests when markets tag this specific trendline.

But here's what makes this third instance potentially more dangerous: Unlike in 1929 or 2000, today's market sits atop unprecedented levels of government, corporate, and household debt. The global financial system is more interconnected than ever, creating the conditions for contagion effects that could amplify downside moves.

Additionally, central banks have far less ammunition to combat a downturn than in previous cycles. Interest rates, while higher than their pandemic lows, still offer limited room for stimulative cuts. And balance sheets remain bloated from previous rounds of quantitative easing, constraining the scope for new asset purchases.

What Should Investors Do?

If you're considering how to position yourself, history offers some guidance. During both previous crashes, certain assets provided relative safety—cash, short-term government bonds, gold, and select defensive stocks in sectors like consumer staples and utilities.

Diversification takes on renewed importance in this environment. The coming downturn, if it materializes as our analysis suggests, won't be uniform across all sectors and asset classes. Having exposure to uncorrelated assets could significantly mitigate portfolio damage.

For the more tactically inclined, our technical analysis suggests establishing stop-loss levels 5-7% below current market prices. This approach acknowledges the possibility that markets could make one final push higher before reversing, while still protecting capital from the potential devastation of a 55-85% decline.

Conclusion: Respect What the Chart Is Telling Us

Markets don't exist in a vacuum—they reflect human psychology, which has changed remarkably little over centuries. The cycle of greed and fear, boom and bust, plays out in rhyming patterns across market history. What makes technical analysis so powerful is its ability to capture these behavioral cycles in visual form.

This golden trendline, connecting three peaks across almost 100 years of market history, deserves our utmost respect. The price action we're seeing now—the hesitation at resistance, the waning momentum, the narrowing market breadth—all suggest that this third touch may soon follow its predecessors into a significant decline.

Remember, acknowledging market risk isn't pessimism—it's prudence. The same technical approach that warns us of this potential collapse will also help identify the eventual bottom, which could present the buying opportunity of a generation.

For now, though, as the S&P 500 kisses this century-long trendline of peaks, caution should be your watchword. History doesn't always repeat, but in this case, it looks ready to rhyme in spectacular fashion.

Written by Chief Market Strategist Gareth Soloway of VerifiedInvesting.com (May 10th, 2025)