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Special SKI Report #2:
Gold Market Corrections

Jeffrey M. Kern, Ph.D.
USERX | historicals
March 11, 2006

Second Special SKI Report:

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 work. 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 five years ago.

One month ago, I posted an article entitled "Special SKI Report: Bull Market Corrections." That article emphasized that bull market corrections are "Hard and Fast". I have been in a quandary regarding how to provide free internet postings while maintaining the privileges of paid subscribers: I cannot provide free information while charging subscribers, but I cannot provide assistance to more people and gain greater notoriety without providing free advise to new readers! The only apparent solution to this dilemma is to provide post-hoc (after-the-fact) SKI data to non-subscribers (and a little information about the future). Therefore, this article describes what has transpired since the prior article one month ago. I anticipate writing such "this-is-what-happened" articles approximately once per month. The last one was written on 2/11/2006, so it's that time again. And what a month it's been!

The SKI indices contain short-term (16-20 trading days), intermediate-term (35-39 trading days), and long-term (92-96 trading days) indices. The long-term 92-96 index remains on its true and rare bull market since 8/09/2005 at USERX (the gold stock mutual fund) 8.07. As I've written since that date, the precious metals are expected to rise over many months and years until that index sells. That primary index currently sits at a profit of 57%, with USERX (the U.S. precious metals mutual fund) priced at 12.65. A more comprehensive description of these mathematical indices and their history is at http://www.skigoldstocks.com/about.php.

The last article, written 8 trading days after the 2/01/06 high was supposed to be hinting to you that the precious metals market was bottoming: hence the emphasis on "Hard and Fast" corrections. USERX had just fallen 9%, from the 13.41 high on 2/01/06 to 12.18. In fact, the precious metals bottomed the following day, on Monday 2/13/06, with USERX dropping to 11.72. SKI short-term indices generated their buy signals two days later on 2/15/06. Look at some charts of USERX, the HUI, the XAU, and of-course, gold and silver. The article and the indices marked a low. But in all honesty and to show that I am fallible (that's a certainty), I was unable to buy that low due to personal circumstances (that you can read about in my website archives). Prices rose for several days into the short-term sell signal on 2/22/06 (USERX=12.82), before falling back into buy signals on 2/27 and 2/28/06 at USERX 12.61-12.63. I DID buy those short-term signals and prices instantly exploded up to USERX 13.54 on 3/03/06. USERX ROSE TO A NEW HIGH FOR THE CENTURY! Silver, in particular went bananas to the upside. Short-term sell signals were then generated on the high of 3/03/06 and on 3/06/06. The following chart depicts that short-term market action over the month since the last Special Report:

Again, in complete candor (as trust and honesty are the most important characteristics of any writer), I initially wrote that the rise was a break-out based (in retrospect) on stupid emotionality, but I immediately corrected myself (one day later) to write on Saturday (3/04/06) that the SKI patterns and index signals were indicative of a high, and therefore, I recommended selling short-term holdings immediately (which I did on Sunday night in overseas gold markets, and on Monday, 3/06/06). But long-termers were supposed to hold. The plunge ensued! The XAU and HUI, as well as gold, fell to lows that were lower than when I wrote the last article a month ago.

The most interesting feature of the past month has been the rise in silver stocks and in broad measures of the precious metals (e.g., USERX), while the narrower measures of the XAU and HUI, failed to make new highs for the century. I continue, and will always recommend, that you hold a diversified basket of small and large gold and silver stocks, as exemplified by mutual funds such as USERX. SKI is a timing service, not a stock-picking service (although stock picks are stated by knowledgeable subscribers on our Forum).

Yesterday, on Friday 3/10/06, as gold plunged $13 in the morning, the precious metals stocks dropped and then recovered to close higher. The gap at around XAU 122 was finally filled. Was that the low? I am not allowed to tell you, but I can hint that my free articles will not necessarily be written to mark each low and high. Sometimes yes, sometimes no. I can say that SKI is extremely long-term bullish, as or more bullish than at any time in the past 32 years. I know that the XAU has dropped almost 20% from its 2/01/06 high, but silver, silver stocks, and USERX have dropped less than half that percentage amount. Using appropriately broad dependent measures, the high in the precious metals arena occurred just 5 trading days ago. REMEMBER, BULL MARKET CORRECTIONS ARE HARD AND FAST.

The Special Report that I wrote one month ago is still available on my website and the data have not changed. In fact, the data from the past 32 years have once again been re-validated! The Special SKI Report, as well as my regular 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. And if you remember, I don't want a subscription cost to deter "the small investor" or "the person with special circumstances" from subscribing/profiting. Seriously, if the above applies, write to me at jeff@skigoldstocks.com. I have also initiated a SKI Futures program that is conservatively investing in gold futures as soon as I am certain that the corrective phase has been completed (and I regularly write that the SKI indices will mark the bottom to within one day). I have the largest account in that program: Take some confidence in the fact that I always trade almost all of my net worth based upon the indices. Personally, I barely diversify across asset classes but DO diversify heavily across the precious metals arena.

Best wishes,

P.S. The website has moved into the top 5% of ALL 17 million internet websites based upon Alexa "hit" numbers in a span of less than 2 months. That has occurred despite some of my mistakes, primarily because the indices are so powerfully accurate that they correct my human errors and because once readers start skiing, they stay! Correction periods are emotionally trying.

Be a LIONSKI. And, again, I apologize for having to partially be a "salesperson".

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 certified 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.

Copyright © 2002-2006 Jeffrey Kern. All Rights Reserved.

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