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Special SKI Report #33
Seven Index Signals in Seven Days!

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com

USERX | historicals
Written Feb 17, 2008
Published Feb 18, 2008

Current USERX price = 17.46, Down 2% since the last report 3 weeks ago.

Introduction (repeated from prior Reports):

I have been using my unique SKI indices to predict price changes in the precious metals' market for more than two decades. And my indices continue to mark the critical points. I have initiated a subscription website since 1/13/06 (yes, Friday the 13th) after having posted free updates for years at the most informative gold site, 321gold, since its inception approximately six years ago. SKI is a timing service; although almost everyone seems to believe that market timing is impossible, that IS what the SKI indices have done for 32 years.

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 at http://www.skigoldstocks.com/about.php. 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:

In the last gold stock SKI Report on 1/27/08, I described how the gold stocks were due to fall (at least short-term) off of the 1/14/08 high marked by a bearish run pattern and a SKI short-term index sell signal. The long-term (multiple months to years) is more important to profits than the short-term (a few weeks). And SKI was still waiting to turn long-term bullish since being on a true bull 92-96 index buy signal from mid-2005 into early September 2006. SKI HAS been on a master 92-96 index buy signal since 9/12/07 at USERX 16.15 that was NOT supposed to be a true bull market (defined as a rise that lasts more than a year amidst prices that at least double). That 92-96 index buy signal was predicted (based on a pattern of preceding SKI index signals) to sell out at some loss or some small profit, but it wasn't time for the gold stocks to just keep going higher and higher like they did in 2005-2006. Specifically, the last SKI Report on www.321gold.com predicted that, "The gold stocks are supposed to sell off again and sell that 92-96 index over the next 1-2 weeks. IF THAT HAPPENS OVER THE NEXT 1-2 WEEKS, SKI WILL BE PREPARED FOR THE BIG BUY SIGNAL".

That is exactly what happened. Prices declined into 2/05/08 and the 92-96 index sold a few days later at a small profit. The nice thing about mathematical indices is that they can't be fudged; I can't say that an index bought or sold when it didn't because the mathematical formulas are public knowledge and are displayed each day on the website.

How could I make such a prediction? It was based upon time and the SKI indices. When I wrote that Special Report, 93 trading days had passed since the 9/12/07 92-96 index buy signal. The name of the index is based upon the number of trading days in the cycle. A 92-96 index compares the current price to prices from 92, 93, 94, 95, and 96 trading days earlier. If the 92-96 index was going to sell at some loss or some small profit, time was up and prices HAD to decline to sell that index out.

I don't know if other gold analysts have described the current juncture as "hyper-critical". I haven't seen public reports stating such, but for SKI this is quite the moment in Time X Price. SKI has generated seven index signals in the past 7 trading days. That is a record for the past 34 years. I realize that many readers won't want to be bothered with the details, but this was amazing (at least to me). The signals have been:

1. A 16-20 index buy signal generated on 2/06/08 indicating short-term support.

2. The all-important 92-96 index sell signal generated on 2/07/08. That ended the possibility that the prior buy signal had marked a major bull market rise and it opened SKI up to the next set of index signals. Jeff (that's me) was most relieved. Despite gold bullion's major rise, the gold stocks had languished on a relative basis and many gold stocks (ala Steve Saville's excellent article: http://www.321gold.com/editorials/saville/saville020508.html) still had not risen over their May 2006 SKI "death run" high. Death runs portend very long-term declines.

3. An index that I rarely mention, the 439-443 index, also generated its sell signal on the same day as the 92-96 index, 2/07/08. Cycles and index signals usually occur in bunches that are of particular significance. That index is part of a very long-term set of indices, the 218-222, the 439-443, and the 660-664 indices. I had expected that the long-term indices would come back into play since the May 2006 death run. February 7th 2008 was exactly 439 trading days from the May 2006 high in USERX at 17.96. Since current prices were lower than prices in that week in May 2006, the 443 index sold!

4. The gold stocks rose off of the above index signals, not unexpectedly. A new master 92-96 index buy signal was generated on 2/12/08. That was an amazing day for the index: A 3% decline in the broad gold stock measure (USERX) would have avoided that buy signal. Gold fell about $17. Major (but too narrow, in my opinion) gold stock indices like the XAU, HUI, and GDX fell much more than 3%. And yet most broader precious metals mutual funds like USERX, fell much less than 3%. THE SIGNAL WAS GENERATED.

5. The next day the gold stocks rose a little and the next major SKI index generated its buy signal. The 35-39 index generated a buy signal on 2/13/08. Can you see that now we have two consecutive cycle buy signals?

6. And then the next day, 2/14/08, the 439-443 generated its first new buy signal in years.

7. And that same day, 2/14/08, the short-term 16-20 index generated its short-term sell signal. On 2/14/08, gold closed down, the general stock market closed down, and USERX closed up 2 little pennies. A decline on that day of 1.5% would have generated even more index signals, but it did not happen despite gold's $20 intra-day swing and partial collapse.

That's seven signals in seven days into a 3-day weekend. It just worked out that this Special report for 321gold was due at this very moment. I tend to write with a little hyperbole from time to time, but folks, 7 in 7 spells HYPERCRITICAL.

I was talking to my wife, Lisa, about how to write this article. The issue was the degree to which I state a specific prediction (as I often do) regarding the meaning of all of those signals. I would clearly state the predictive meaning if this was a week or more after they occurred, but if I do it right now, I am afraid of offending (understandably) my subscribers. And yet, I hate to write advertising articles that don't inform. People who have been reading SKI for years will probably be able to discern the meaning of the above index signals. And if you read "About SKI" (http://www.skigoldstocks.com/about.php) with some time and diligence, I think that you can guess what I'll be saying publicly in 3 weeks. My discussions with Lisa made me decide to solve my dilemma with simple honesty: Provide the index data and frankly disclose that I can't state the clear conclusion. Does that make sense? I've publicly stated this SKI index amazing "voodoo" for years and would love to do so here and now, but I am constrained. I hope that you understand. With every index in play, this IS quite the gold stock juncture. And of-course, all index signals are simply high-probability situations; nature and the markets cannot be guaranteed, but SKI avoids significant losses (in both long and short positions/predictions).

My very best wishes, Jeff

If you are interested in following and learning more about the SKI indices, I'll write another Report for 321gold 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 messages/alerts at a slightly higher price along with access to our informative Forum. The precious metals are in a very long-term (decade+) up-trend but are the most precarious, volatile, and psychologically difficult market in the world (in my opinion). That's the way it's always been.

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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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