With the Dow up another 190 points yesterday, investors are not exactly in capitulation mode. Far from it. So let us take a moment, amidst a veritable August ‘29 of complacency, to spell it out for Wall Street and the punditry:  Get REAL, you blithering imbeciles! The bloody tide is about to be unleashed – so stop with the bullish hubris already, okay!? And what, you might ask, do we mean when we speak of “the bloody tide”?  Just this: We are all going to wake up one day soon, the largest banks in the world will be history, and the stockmarket will be shutting down for a month.  Think of it as Bear Stearns writ large, with taxpayers as the blitzed shareholder. Are you prepared?

We warned readers a while back not to be fooled by the stock market’s inability to collapse. It is so shot up with steroids at the moment that it could run 80 yards on a punt return without noticing its legs had been amputated. We also advised you to keep your eyes on the shares of Citigroup in particular, since they are more or less inured to the kind of rabid giddiness that has infected the broad averages. Getting Citi to do the old bounce-and-soar is like trying to get a patient with pancreatic cancer to see the bright side of life. In fact, there is no bright side for Citi, and that might explain why the banking zombie’s shares could muster only a 22-cent rally yesterday when the Dow was up by nearly 200 points.

Watch Goldman Shares…

Even more telling was the performance of Goldman Sachs, whose shares fell $7.49, to $91, for a 13% loss in just a few hours.  It’s going to get worse, too. Based on Hidden Pivot analysis, we are projecting a plunge to at least 57.35, and thence to 29.42.  It’ll be interesting to see how complacent Wall Street – or at least, what’s left of Wall Street -- is at that time.  Meanwhile, there is a mushroom cloud billing over the world’s stock exchanges right now, and even our most optimistic projection calls for a further fall of 30-40%.  If you’re hoping we’re going to be wrong about this, note immediately below the price forecasts we sent out to subscribers in early June. Here is the e-mail message in its entirety:

Greetings and thank you for your inquiry. The attached charts when taken together suggest that U.S. financial stocks are verging on a selling panic. The picture becomes even more compelling when you consider the recent plunge in base metals and the bullish stirring in junior golds. 

June Bombshell

Below are price targets to go with the charts -- "Hidden Pivots" that I use to determine trend strength. We should expect the lower targets to be reached if the higher numbers are exceeded on a closing basis or by more than a few cents intraday (as most already have been).  If you are skeptical that things could get this ugly, I'd suggest saving this list so that you can refer to it in 12-15 months. I would rate all of the lower targets as odds-on bets. Here are the numbers:

Wells Fargo  (WFC; now 27.57):  27.86 / 21.16

Bank of America  (BAC; 34.01):   35.16 /  25.24

Citigroup  (C; 21.86) :  18.70 / 10.05 (!)

General Electric (GE; 30.65):  33.73 / 28.95

Bear Stearns  (BSC; 9.34):  Oblivion

Lehman Brothers  (LEH: 36.72):  26.34 / 3.19 (!)  

Goldman Sachs (GS; 175.95):   156.41 / 109.49

Merrill Lynch (MER; 43.86):     30.25 / 6.50

Wachovia (WB: 23.77):     27.87 / 15.53

UBS  (23.61):   18.68 / 1.62

Deutsche Bank  (DB; 106.55):     106.41 / 89.85

Fannie Mae  (FNM; 26.95):     10.32 / Oblivion

Federal Home Loan  (FRE; 25.39):    15.69 / Oblivion

Note: When all of these targets had been achieved later in the summer, we sent out new targets, most of which have also been reached.

***

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com 

-- Posted Friday, 31 October 2008 | Digg This Article