Pretty well exactly two years ago (see beige annotations) we expected the stock to go into a dive. At the time it was about $200 and seemed to have completed a counter-trend a-b-c, itself the B in a larger A-B-C. Despite a , give or take, 30 % drop initially this prediction did not pan out ( see blog of Dec. 10 2014, the last time we commented on GS).
This bank, which in reality never was a bank but simple became one along the same lines that Henry IV with his alleged “Paris vaut bien une messe”, chose pragmatism over religion, has always been reviled and hated as some sort of unscrupulous money making machine. Its power is undeniable. Many of the world’s central bankers hail from GS. Together with Harvard, Yale and Morgan Stanley they constitute the rolodex of America’s Who is Who. It is not surprising therefore that the stock went up $50 or more in the initial euphoria of Trump’s election win and even more once it became clear that some of the key people in his cabinet are alumni of this bank.
Morgan Stanley is the other powerhouse. Like GS it was formally formed as a consequence of Glass-Steagall (1933). It has done just as well recently, ironically as Trump promises to do away with Dodd-Frank, but has a completely different longer term chart and is nowhere near a top. See below, together with GE;
As you can see, both these stocks started their drops years before GS, AND both have uniquely clear - at least for the most part - A-B-C corrective structures. Unlike GS we have been bullish on both, in fact you would have quadrupled your money with MS.
Getting back to GS, the only clear possibility that I can see is that the stock never peaked in a 5th wave and is only doing so now. The best count would be for a diagonal, that is a wedge, rising all the way from the lows of 2008. Alternatively we may have a triangle followed by a 5th wave (not shown). Much less likely (but quite possible in MS’s case) is a 1-2, 1-2 situation. That would imply that GS is presently in a third wave and is ultimately on its way to $400 to $500. For this to happen every single bank regulation would have to be scrapped and GS would have to almost become the de facto administrator of the US.
We think GS is a sell here or a few dollars higher.