Check out the chart at bottom, which is complete through Friday. Is this an internet-stock-on-steroids – Google, perhaps? An oil company that just hit a gusher? A drug stock with a promising new treatment for cancer? Guess again. The chart shows price action in the world’s largest bank, Citigroup. Even in the context of two years’ worth of ups and downs, Friday’s thrust looked pretty impressive. The shares reportedly were goosed by rumors that a management shakeup is coming, along with the possible sale of one or more businesses. How bullish is that? is a question that probably never occurred to those who bid up Citigroup shares by 2.3% in just a few short hours, adding about $18 billion to the firm's capitalization.

The fact that the rumors were not bearish on their face was probably enough to set shorts scrambling for cover. And Citi wasn’t the only banking behemoth that attracted speculative attention. Shares of Barclays PLC went nuts on the revived conjecture of a Merrill Lynch analyst that the British bank would soon get a takeover bid from Bank of America.

Citi #1 in Smoke-and-Mirrors

All of which bodes well for my prediction of a blowoff to 13045 in the Dow Industrials. The bank stocks have always stood to be standout performers in a global economy that has been powered far more by financial speculation than by manufacturing. The smoke-and-mirrors business is where the big money is nowadays, and Citi leads its fellow prestidigitators in that game by a mile. Ranked by profit and capitalization, no bank is bigger.  And no businesses have benefited more than banks from the global monetary stimulus fomented by central banks in recent years.

The only puzzling feature of the bank stocks’ strength is that Citi, presumably a bellwether among bellwethers, has lagged the bunch. But with Friday’s big move, Citigroup shares appear to be making up for lost time. To the extent that corporate mergers, buybacks and acquisitions have, more than any other factor, fueled the stock market rally in recent years, imagine what a boost we’ll get now that this shell-game has seized the fancy of companies with assets ranging up to a trillion dollars or more. For those who have waited and waited for the stock market to make a top commensurate with the spectacular bull that has gone before it, there could not be a clearer sign that the blowoff has commenced in earnest. The Fat Lady, finally, is about to sing.

(Click on chart to enlarge)

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London & Melbourne Seminars

I’ve had some requests to give a Hidden Pivot seminar in London, but not quite enough yet to make the trip worthwhile. If you’d be interested in attending a two-day class there, probably sometime in the spring of 2007, please let me know via e-mail, including your contact information. Also, the recent seminar in Sydney was so successful that I would like to repeat it in Melbourne provided there is sufficient demand. Click here if you think you might like to attend.