It’s beginning to look a lot like Christmas on Wall Street, with stocks acting nutty enough to suggest that my 13045 target for the Dow isn’t so nutty after all. At Monday’s highs, our surreal target lay a little more than 700 points above. That’s about two weeks’ worth of upside in a blow-off scenario, which is what I’ve been looking for all along. Putting aside this almost unfathomably bullish target, we’ll continue to look for signs that the stock market is starting to crack.  In practice, that would mean the creation of a bearish “impulse leg” of daily-chart magnitude. For your information, the Dow did not even come close to doing this last Monday, when it dropped 180 points. In fact, according to the Hidden Pivot method, it would have taken a 315-point plunge to turn the intermediate-term outlook bearish. Instead, the blue chip average at yesterday’s close had recouped nearly the entire loss and looked to be staging for a run-up to new all-time highs. If it happens, playing out in the headlines in the next week or so, the bull is likely to be unstoppable for the remainder of 2006. We should keep in mind, though, that it wouldn’t be the first time that a major top was achieved in the closing days of a calendar year.

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Below, as promised, is a field report from Erich Simon, our peripatetic bird-flu correspondent. Erich has come up with a rationale for $2,500 Gold, and although I am not so confident myself that prices will go that high, I proffer his analysis nonetheless because his forecasts have generally been on-target. For the record, Erich is also somewhat less bearish on the bird-flu pandemic, having lowered the odds that it will occur this season. Here’s the report:

Pandemic Odds at 55%

“A quick foray. High Path H5 was broadcast out of South Korea for the first time ever in my knowledge this past week. Hundreds of thousands of birds were culled. In addition, 577 dogs were culled and unspecified numbers of unspecified mammal species over a broad terrain. HP H5 has also re-emerged in the past days on the Ivory Coast.

“Aside from these outbursts of conflagration, I have reduced my probability for a pandemic to 55% this season (from 65%) and 80-100% for the next for reasons that I won't get into at the moment. Suffice it to say that the fire has been scattered and when it reunifies, and reunify it will, absolutely and unequivocally, sadly enough, it will explode. That has been the history of this thing all along. It comes back stronger and the scope of the next outburst is set to engulf us all. And that would be established opinion.

“Gold and the dollar. I panic-purchased some Krugs and a handful of rounds a couple of weeks ago. I'm waist deep in cash in anticipation of a deflationary collapse and real estate opportunities to come, made all the more compelling by a panic run into the dollar in anticipation of the coming pandemic and flight to safety. But then something dawned on me.

Too Many Trillionaires

“In 2001 my fair price for gold was 643, the exact price I just paid after all costs. But that was taking into account monetary events going back from that date to the credit boom of 1995. I have failed to discount the past five years. That failure was brought to light in the phenomenon of the Trillionaire, the latest in socio-demographic, monetary profligacy. I realized I now have to move the decimal place over to the right. So while in 2001 POG was 251 and fair value at that time was 643, I now believe that that original number should be multiplied by ten, for a new appraisal of $2,500 to the ounce.

“There's a great deal more to say. But I had pegged 2008-2012 for the panic out of the dollar (the Baby Boomer Default) and now feel more than a little uneasy quibbling over hundreds of dollars in savings when thousands lie in the balance. Money has a mind of its own after all and while it is in no country's best interest for a dollar run, that event is inevitable and long overdue.

Bernanke Asleep

“I'm usually a year early in my forecasts but I have been getting the feeling that I may be a year late on this one. I have been predicting an emergency interest rate increase as you know for nearly a year now to preclude a dollar catastrophe, but Bernanke appears to be asleep at the wheel. I had been hoping for an opportunity to buy back into the metals at lower levels but with every passing day, that strategy is becoming more suspect.

“Oh yeah, I was going to title this email All Hell Is Going To Break Loose but that is all too evident. When? Unfortunately, soon. Take care. Erich.”