Special SKI Report #181
Gold Stock Update: Short-term Bearish, Otherwise Bullish

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday Jan 22, 2017
Published Jan 23, 2017

Current USERX price = 7.89, Up 85 cents (12.1%) since the last report 3 weeks ago.

Introduction (repeated from prior Reports):

The SKI indices contain short-term (16-20 trading days), intermediate-term (35-39 trading days), and long-term (92-96 trading days) indices. A more comprehensive description of these mathematical indices and their history is found here. Basically, the indices compare today's price to prices from a specified prior time period. The name of the index specifies the time period (e.g., 92-96 index = compare today's price to prices from 96, 95, 94, 93, and 92 trading days earlier). Although I use the oldest gold mutual fund, USERX, for analyses, the predictions are applicable to the broad precious metals' market. I do not recommend or analyze specific stocks, but my subscribers from around the world regularly discuss individual issues on our Forum. In addition to the truly unique SKI indices, I also use "run patterns" to guesstimate turning points in the precious metals' market. A "run" refers to a pattern of daily up and down market closing prices. If the market has 3 consecutive days of higher closing prices, the run is "3 up". If prices then decline for 2 consecutive days, the run becomes "3 up and 2 down". If prices then close higher the next day, the run changes to "2 down and 1 up". Some people have referred to run patterns as "worms". A run pattern is only completed after the direction of closing prices has changed. I have compiled a listing of every run pattern that has ever occurred and generated probabilities that the end of the run marks a high or a low, moderated by the indices themselves.

New Material

The last SKI Report, written on Sunday 1/01/17, was blatantly bullish. It described how the gold stocks (USERX) had fallen into the December low and that the correction was over, the bottom was in, and that Jeff was back to major bullishness after having last turned so bullish in January 2016 and then wary/bearish in the Summer of 2016.

I almost forgot that 3 weeks had expired and that another public SKI Report was due! The gold stocks have simply risen since that last Report. The rise went over the 16-20 index on 1/10/17 at USERX 7.71 and the next day it went over the 35-39 index at USERX 7.81. Those are the red and blue line, respectively on the SKI chart linked in the last SKI Report. Hence, the SKI indices provided a 16-20 index sell signal (it’s a contrarian index that sells as prices rise and vice versa) and a 35-39 index buy signal.

Such an index pattern, where multiple indices generate almost simultaneous signals, is common. It actually demonstrates (in my biased view) that the indices continue to be valid since they were developed 31 years ago. Such an index pattern is supposed to be short-term bearish (a 16-20 index sell signal), but intermediate-term bullish (a 35-39 index buy signal). The 35-39 index buy signal was supposed to mark the short-term high with a mean of zero trading days (an exact top) and a standard deviation of 2 trading days.

The gold stocks did decline on the day after the 35-39 index’s buy signal (on 1/12/17), so the index signal looked like it may have marked the exact short-term high, but then the gold stocks (and gold) gapped higher on this past Tuesday (1/17/17). Such daily open up-gaps usually get filled quickly via a decline. That’s what occurred on the following day (1/18/17) AND that daily decline caused USERX to complete a 1 Down and 2 Up run pattern.

Such 1 Down and 2 Up run patterns are usually short-term bearish (about an 80% historical probability). The last such run pattern occurred on 12/08/16 and yielded the immediate crash over 6 trading days into the final corrective December low. This one isn’t supposed to be so bearish because the corrective bottom completed in December, but it still is likely (80%) to yield a short-term decline. Yes, the 35-39 index signal apparently missed marking the short-term top by an unusual 3 trading days, and that was disconcerting for any short-term bearish case, but that cannot change the index pattern.

Conclusion

The combination of the two index signals and the bearish run pattern suggest that a wave 1 top occurred on 1/17/17 off of the major intermediate-term low in December 2016. Jeff’s looking for a short-term decline into SKI-index support (a wave 2 down) for the beginning of another strong rise (a wave 3 rise). Multiple indices are rising to provide such support, including the long-term 663 index (comparing today’s price to the prices from 660-664 trading days ago) whose buy signal marked the December 2016 low and the 16-20 index.

I have three reasons for not specifying the expected duration and size of a possible short-term decline. First, playing such short-term patterns runs the risk of missing the further intermediate-term rise (so Jeff remains partially long, but I’m looking to buy more soon). Second, if a short-term decline does occur, I can try to predict when to buy, but the exact timing awaits the index signal(s) and/or the USERX run pattern. And third, some information needs to be retained for the folks who support SKI by subscribing. I certainly expect that the next buying point should occur prior to the next SKI Report in three weeks.

Best Wishes, Jeff

If you are interested in following and learning more about the SKI indices, I'll write another Report in three weeks or you can shell out the big bucks for a SKI subscription. Weekly Updates are available by subscribing for a month (or longer if you're wise and cheap enough to want to save money) at my website www.skigoldstocks.com for the princely sum of $25 (for a one month subscription) or more ($200 for an annual subscription). I also provide more frequent intra-week daily messages/alerts at a slightly higher price along with access to our informative Forum.

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email: jeff@skigoldstocks.com

Jeffrey M. Kern,Ph.D., is an academic psychologist with a specialty in the measurement and prediction of human behavior. The communications provided are for informational purposes only and are not intended to be investment advice or recommendations for specific investment decisions. Dr. Kern is not a registered investment advisor, but is registered as a commodity trading advisor (CTA). The information provided is considered accurate, but cannot be guaranteed. Investments/trading in narrow market segments or gold futures is for individuals willing to accept a higher level of risk for the opportunity of greater returns. Past performance is no guarantee of future performance. His website is www.skigoldstocks.com.

Communications should be sent to: jeff@skigoldstocks.com.

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