For nearly three decades, stock market guru Elaine Garzarelli has wowed Wall Street with a series of stunning market calls. Her last major forecast came in October 2002, just after the dot-com bubble burst. With the Dow Jones Industrial Average at 7,740 and the markets fearful, she boldly issued a buy signal, and she has remained essentially bullish ever since. Anyone who heeded her words made a bundle, as the Dow topped 14,000 last year.

Like every other guru, though, she’s had her goofs along the way, most recently in a December 7 interview in this column, which prompted some sharp reader criticism.

With the Dow at around 13,620, she described herself as “extremely bullish,” predicting that the market correction was over and that stocks would rise 20% over the next 12 months. The Dow then tumbled more than 1,000 points in speedy fashion.

The December market forecast was clearly not one of her finer moments of crystal ball gazing.

Over the past two weeks, I received nine critical e-mail messages about Ms. Garzarelli, including missives from Dallas and San Francisco. Among them was this biting message from Edgar Quinn: “Has Ms. Garzarelli fled the country? If she has, you ought to really join her after that dumb column you did quoting her wildly bullish market views at the worst possible time. I would love you to ask her why she was so cockeyed wrong and what she thinks now.”

Actually, our guru is getting a bum rap, as she tempered her market enthusiasm early last month in a report she fired off to her 103 institutional clients, who manage combined assets of more than $1 trillion.

Citing a rapidly weakening American economy, a 55% chance of a recession, and slowing economies around the globe, such as China, India, Russia, Europe, and Japan, the CEO of investment adviser Garzarelli Capital warned clients of a possible 10% correction from the S&P 500’s October high of 1,565.

Her timing was right on: the correction reached 20%-plus. So the obvious question now is: Where does she see the market headed following the recent tailspin in equity prices around the world?

Basically, an updated look at her crystal ball suggests we’re in for a Dr. Jekyll and Mr. Hyde market, which means, as she sees it, a very choppy four to five months, with stock prices moving either down or sideways before bottoming around June.

After that, our guru looks for the good Dr. Jekyll to take over via a rising market, with stock prices, as reflected by the S&P 500, turning in a nifty 25% gain from current levels during the ensuing 12 months.

As for the recent selling panic, Ms. Garzarelli figures investors need not concern themselves with that Mr. Hyde phase of the market, because she believes “most of the panic is over.”

Here’s how she comes up with her split personality scenario. As of now, Ms. Garzarelli points out, Wall Street analysts, based on their estimates, are projecting a 15% increase in this year’s S&P 500 earnings. She, on the other hand, is forecasting a 3% to 5% earnings decline. That gap, she says, has to close through downward earnings revisions, which is a key reason for her projected shaky first half. Yet another is her belief that a recession started in December and won’t end until late summer.

She’s not expecting a bad recession period, though, given the Federal Reserve easing and the government’s $150 billion fiscal stimulus package, a combination of which she expects will drive stock prices higher. She looks for the Fed to continue to push short-term rates lower, probably down to 2.5% by June or July from their current 3%.

Ms. Garzarelli’s outlook for the gross domestic product calls for modest growth of 1.5% for all of 2008, followed by 3% growth in 2009.

Another key reason prompting her to maintain a bullish stance looking 12 months out is her contention that the S&P 500, even factoring in an expected 2008 earnings decline, is about 15% undervalued.

Wrapping it up, our guru recommends dollar cost averaging in favored stocks because she believes the S&P 500 may be in the early process of forming a bottom. As such, she says she thinks some areas worthy of consideration for an upturn are consumer discretionary, retailing, financials, and transportation (what with price of oil dropping).

What about her worrisome comment that we may already have entered a recession? “History has taught us time and time again,” she says, “that recessions are the best times in which to buy stocks.”

dandordan@aol.com