The U.S. Stock Market as measured by the S&P 500 index is at 1429 (Monday, September 10, 2012), just 10% below the all time closing high of around 1565 on October 2007.
The S&P 500 is nearing very strong overhead resistance, and it couldn't surpass it in 2000 (top #1) and then again in 2007 (top #2) when it could not surpass the all time high of 1565.
What if S&P 500 Can't Break Resistance: Target: S&P Level of 600, a drop of 58% from here.
There is a very bearish technical pattern called the "Triple Top Reversal"
The pattern is more than establishing three peaks (and the stock market price not exceeding the last peak). It also requires the stock pattern to reach the Confirmation Line (currently around S&P 700), which marks the previous valleys in the Triple Top pattern. Some websites and books say the average decline from a triple top reversal pattern is around 15-20% below the Confirmation Line.
But since the time between Major peaks is more than 6 months (many years in the diagram above), the average drop is less reliable, but the pattern does mark a Major Market top.
It is possible if this scenario takes place, this could mean that the market could suffer many more years of difficulty (with stock market crashes and violent rallies).
The Fundamentals and Demographics support this theory:
All around the world, there is a global debt crisis, with countries planning to default on their debt. The United States now has $16 Trillion in National Debt, which is more than 100% of GDP (Gross Domestic Product), and currently, there is no sign that the U.S. can control their finances, spending, and revenue. This number also does not include $62 Trillion in Unfunded Liabilities or Promises to pay (which includes Social Security and Medicare).
The large Baby Boomer demographic is retiring and they will be selling their assets, and also, they will be claiming benefits such as Social Security, Medicaid and Medicare. The younger generations are supposed to help pick up the slack, but there is not enough to do that, and there is high unemployment among the young adults, and many people are riddled with high debt, underwater mortgages, and ever increasing college tuition.
The Bond rating Agencies, in 2011, for the first time ever, downgraded the U.S. Creditworthiness.
Based on all this (and more), the U.S. Market might be headed towards another lost decade (2000 to 2020)?