Nov. 12 (Bloomberg) -- U.S. stocks are ``almost certain'' to revisit the five-year low reached Oct. 10, according to an analysis of historical trading patterns by JPMorgan Chase & Co.

The Standard & Poor's 500 Index fell at least 20 percent on 21 occasions since 1900, and ``retested'' the level, or fell back after a rally, all but three of those times, JPMorgan U.S. equity strategists led by Thomas J. Lee wrote in a report.

More than $700 billion of mortgage-related bank losses and signs the U.S. economy is in a recession sent the benchmark index for American equities down as much as 46 percent from its October 2007 peak. JPMorgan's research suggests the nearly 12 percent advance by the S&P 500 on Oct. 13 didn't herald a bull market.

``If Oct. 10 indeed proves to be the low, a retest is almost a certainty,'' the report said. ``Retests are the norm, occurring 86 percent of the time.''

The S&P 500 will probably retreat to the 839.80 it reached during trading on Oct. 10 by Nov. 23, based on past intervals, the report said. Just 25 percent took longer than 44 days to decline back to the lows, the report said. The longest interval between a trough and a retest was 104 days following the October 2002 slump.

Other factors that argue against a retest before mid- November include still-elevated volatility, a condition that ``sidelines major institutional investors,'' and the Nov. 15 deadline for hedge funds redemptions, the report said.

Deteriorating Economy

``The economic situation has deteriorated very rapidly in the last four to six weeks,'' said Jonathan Armitage, head of U.S. large-cap equities at the American unit of Schroders, the U.K. manager of $259 billion. ``Given that sort of macro backdrop and what we're seeing from corporate announcements, I'm not surprised we're seeing the market as weak as it's been.''

The S&P 500 fell 5.2 percent today to 852.3, its third straight drop. Best Buy Co., the largest electronics retailer, fell as much as 13 percent after warning of a ``seismic'' slowdown in consumer spending.

Lee maintained his forecast that the S&P 500 will end the year at 1,125, representing a 31 percent advance.

``A 42 percent decline in equities since their 2007 peak means a substantial recession has been discounted,'' he wrote.

The average Wall Street forecast calls for the S&P 500 to gain 30 percent to 1,118 by Dec. 31 -- more than twice as much as the biggest-ever advance to close out a year, according to year-end predictions compiled by Bloomberg. Strategists were even more bullish at the beginning of the year, predicting that the S&P 500 would end 2008 at a record 1,632.

A separate report by Westport, Connecticut-based Birinyi Associates Inc. last week observed that market lows since 1962 don't share any characteristic by which investors can recognize one as it's occurring.

JPMorgan's list of S&P 500 bottoms and retest intervals in days since 1900 follows:

12/19/1917      0
04/28/1942      0
06/13/1949      0
10/15/1903     16
03/27/1980     16
08/31/1998     22
02/28/1978     23
08/29/1966     28
05/26/1970     29
10/19/1987     33
10/22/1957     38
06/18/1982     38
12/24/1914     40
03/31/1938     41
10/04/1974     44
06/20/1921     47
10/11/1990     61
11/15/1907     63
06/16/1953     63
06/26/1962     83
10/09/2002    104

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: November 12, 2008 17:08 EST