No sooner do we crown Goldman Sachs our Bear Rally King than…THWUMP!…the stock gets socked with a $15 loss, its worst day in recent memory. There were some lurid stories on the Web to help turn yesterday’s selloff into a gang-bang, including one at SeekingAlpha.com that wondered aloud whether Goldman deserved to share in AIG’s bailout booty if, as is rumored, Goldman made a ton of money shorting AIG stock before the insurance firm collapsed.
While Goldman reported better-than-expected earnings of $1.8 billion for the first quarter, much of it attributed to trading in fixed-incomes, the firm threw cold water on revelers yesterday by calling the strong numbers unsustainable. A concurring opinion from Standard & Poor’s, whose guesswork in recent years has made the CIA look positively oracular in comparison, helped ratchet up the selling when the ratings firm wrote: “Coupled with persistent weak economic conditions and capital markets turmoil, we believe it would be premature to conclude that a sustained turnaround” in Goldman’s performance is under way.
Insanity Does a ‘180
Funny how investors couldn’t get enough Goldman stock just a day earlier. They goosed it up $7 in just a few hours, capping a $30 surge that had begun from $100 a week earlier. After Monday’s close we were expecting the stock to go even higher in the days ahead, to at least $143. Now, even under the best of circumstances, it’s going to take longer than we might have predicted.
So what might that portend for the broad averages? We think it will slow their ascent, although we doubt that the bear rally that has pushed the Dow up by more than 1,600 points since early March is ready to die. More likely is that stocks will recoup yesterday’s moderate losses by week’s end or earlier and then head higher, albeit at a sluggish pace until Goldman get back in gear. If we are wrong and the five-week-old short squeeze has indeed run its course, it will be signaled definitively by the breach of a key support in the Dow at 7437, nearly 500 points below yesterday’s settlement price. A far more subtle signal could come as early as Tuesday night with the penetration of a Hidden Pivot support at 832.50 in the E-Mini S&P. As of 5 p.m. EDT, the low was 834.25.
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How good is your prediction really?
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Better than lurkers who only read my “free” stuff will ever know. RA
You kept your reporting briefon GS activity during the first 2 days of the week. Other lo-lights include 1) changing reporting period and slipping a $1 billion loss into Dec 2) raising $5 billion in stock priced purportedly to repay TARP at $123 (others have documented GS ability to issue exec stock options on the day of the low price for the year, any chance they might have just issued stock at this years high?) 3) financial results inlude $4.7billion in bonus compensation and a 35 cent dividend (any chance the money raised by stock issue is to pay bonuses and dividend, and not to repay TARP?).
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Yes, the lies are growng pretty thick, aren’t they? Corporately Goldman has been demonstrating ethical behavior on a par with Bernie Madoff’s. And guess what? The stock has bounced back as much as $4 today — presumably with the blessings of a nearly-as-corrupt U.S. Government. RA
Aloha All
155 Point & Figure target for GS gave high pole warning yesterday before income taxes and may turn bearish below 115 where it briefly touched so far today. Some think Government with Treasury Secretaries from Rubin to Paulson IS Goldman, albeit with a paycut to $191,300 a year plus tax benefits and limited options.
If so, perhaps worth recalling Goldman went from 222.50 in 1929 to $1.75 in 1932.
Re Mr Market declining, perhaps we are looking beyond the minor economic recovery forecast by the current occupants of DC.
Historical mathemetician BB allowed as much yesterday at Morehouse when he said forecasting has become increasingly problematic.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493
Precise moment to short GS may be 35+ points higher at the dedication of their office edifice complex:
From today’s news: One block north, construction workers on the 43-story Goldman Sachs Group Inc. tower said they had a close-up view of the low-flying plane. “I saw that thing coming and ran down the stairs,” said Eddie Navedo, who was clearing construction debris on the 23rd floor of the new building when he spotted the plane flying low over the river, then banking sharply to the west. “Everybody was saying, it’s a terrorist attack.”
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