Special SKI Report #18
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 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.
Since the last 321gold Update three weeks ago, the gold stocks have basically gone nowhere. They've been linked to a larger-than-average degree to the general stock market. But while the volatility in the broad stock market has finally increased, the volatility in the gold stocks has concomitantly decreased.
It's actually somewhat difficult to write this Update. What new and exciting research or index signal patterns can I describe when nothing has really changed in the past three weeks? Things seem eerily quiet, with a general lack of interest in our goldies. Don't sell a dull market short? I might soon. Time marches by, wearing down everyone's patience and I imagine, causing more people to revert to a position similar to my own: cash. But at some point everyone has to pile in or bale out to provide the power for a move through this 10.5 month trading range since May 2006. With the SKI index signals that are arriving now, that move can commence this week or next week (after the 3-day U.S. holiday weekend; what a great prediction, huh?; they may move this week or they may move next week; the direction isn't specified; hint = SKI/Jeff are in cash; or they may take a month to move!). I hope that I don't offend anyone when I report that I use the word "crapola" with my regular SKIers. Eventually we'll go up, but when? (that's the classic line that guru/prognosticators/newsletter writers use! smile).
I devote about two-thirds of my net worth to precious metals' investments (not including my home). My retirement funds can't participate because they are with TIAA-CREF and they've "resisted" developing any "narrow" investment vehicles such as a gold stock mutual fund (despite my 8 years of once-a-year letters). It's either cash, long gold stocks, or short gold stocks for most of my monies. That's because I don't know how to "predict" anything except gold stocks. And since I've been in cash for many months, the broker isn't happy and the subscribers aren't happy, although the subscribers gradually come around. I've sat through several years of cash positions during the past 23 years and it's okay; the risk is limited while I collect the 5% per year interest. Then the last bottom occurs, I'm scared and buy the signal, and I make 20-50% in 1-2 months. But who knows how long it'll be before that opportunity comes?
In the way of research, education, and analysis, I'll present the cyclical nature of the precious metals' bull market since 2000. This is courtesy of one of my subscribers. I'll brag and tell you that I believe that SKI attracts the most avid students and learners. The website has a Forum that I am proud of. They berate old Jeff endlessly when he makes a poor call; they analyze individual stocks from Canada, Australia, U.S., South Africa, and Europe; they day trade; they present all different views and information in a civil manner (or else Jeff has to "warn them")
Dave states, "I've been keeping track of the significant highs and lows that have been occurring with great cyclicity since the start of the bull market in late 2000.
The months of May and November, or a few days one side or the other, have almost always resulted in an important reversal. Some "anniversaries" have also shown significance.
In fact, the "recurring cyclicity" of these dates prompted me to exit most of my gold stuff on May 11/May 12 last year at the first sign of weakness and also kept me from going long in Nov/Dec'06. So I sit here with a good deal of expectation and some hope that the gold sector is probably setting up to make a significant low again this May or a few days prior or possibly a few days after (say the next 4-8 weeks)... Hopefully any technical signals will line up with some major SKI signal(s). That would increase my level of confidence considerably, and maybe even yours too?" We all need confidence in order to risk our monies and I'm still rather chickenski...
Dave's data are as follows:
LOW November 16, 2000
MAY has certainly been the recurring month of trend reversals in the precious metals. I really enjoy receiving and generating the data, particularly when I'm in cash waiting for the "big buy" signal. But such signals take time to set up. And we humans have limited life spans. Markets require patience...
If you are interested in following and learning more about the SKI indices, I'll write another Report for 321gold in a few 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.
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.
Jeff (STILL trying to maintain patience and discipline; smile; but looking towards the short side; the "dark side")