Third Special SKI Report:
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 86%, with USERX (the U.S. precious metals mutual fund) priced at 15.05. A more comprehensive description of these mathematical indices and their history is here. Although I use 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.
Since the last article one month ago, USERX rose for seven consecutive days into 3/17/06 (price = 13.30), before falling for two days to 12.97 on Tuesday (3/21/06). That was THE critical point in time and price. Here's the important excerpt from my 3/18/06 subscriber weekend Update that outlined 2 possible scenarios for that coming week. Note that the mechanical SKI system simply remained long and continues to remain 100% long from August 2005, but JEFF (that's me) tries to avoid the corrections and was only 25% long as of that weekend. The situation was uncertain. Remember, going into that weekend the gold stocks had risen for a "run up" of seven consecutive days:
1. The run ends soon and we get a few down days to hit the 35-39 index, but then just keep going up, as the next major up-leg of 50%+ has begun. The 3 Down and 7 Up run marked a low, but not a high. We are breaking through the last 16-20 index sell signal from 8 days ago. The large rise that continues for 3 months will then end the bull market for many months. This scenario received a boost in probability on Friday's down close in gold bullion. If gold had closed up, it would have been 5 straight days up (dangerous for bulls), but it closed down.
2. Prices literally collapse any second now and certainly by Tuesday. Such a sharp decline, with USERX having to fall below 12.92 by Tuesday (3/21/06) could still cause tied bullish signals between the 16-20 index and the 35-39 index! I am not making up that 12.92 price! That 12.92 IS the price that the 16-20 index executed its sell signal at 8 days ago on 3/07/06. Moreover, on Tuesday, the highest back price from 16 thru 20 trading days ago "just happens to be" to be 12.92! If prices could fall below 12.92 by Tuesday's close, the 16-20 and 35-39 index signals could still tie with a further fast and hard decline. Tuesday will also be the half-cycle day, 10 trading days after that 16-20 index sell signal (General rule: If prices are higher than the sell price, 12.92, at half-cycle, prices are breaking through to the upside). Therefore, if the intermediate trend is down, prices should be below 12.92 by Tuesday's close (don't bet the farm on the half-cycle theory, it can be off by a day or even two, meaning that if prices are a little above 12.92 on Tuesday, that doesn't guarantee that prices have broken through to the upside, but they are getting close!).
So what happened? Prices dropped that Monday to end the run up and continued down on Tuesday 3/21/06, half-cycle day. It looked like USERX was going to close right at the critical price of 12.92! A close below 12.92 would have initiated an instant plunge, but USERX closed at 12.97. It had held above 12.92 on the critical day! Prices could still have fallen the next day, but they didn't, so I wrote the following intra-week message to premium subscribers (who pay a princely sum of $350 a year):
"I am buying and going back to my comfortable 50% long position today. The gold stocks are, at this point in the day, rising and avoiding scenario #2. and appear to preparing to break through the 16-20 sell signal from 11 days ago. Further confirmation of the upside breakout will be close over USERX 13.30 (the end of the run up). USERX currently looks to be up 1%. Since it is a bull market, I don't want to be out of the market at this juncture."
The next day, Thursday (3/23/06), the following morning message was sent to premium subscribers:
"With gold futures down today and the gold stocks rising, I initiated purchases of April gold at 549.70. USERX is threatening 13.30 this morning, up 1.5%. Jeff is increasing gold stocks to 75%. I wonder if USERX will make it over 13.30 today."
And then that night of Thursday, 3/23/06, after USERX closed over 13.30 at 13.32, the following BUY Update went out to all subscribers:
SKI BUY Update
Everything that I have is now bullish. JEFF IS AT LEAST 100% LONG. The intermediate-term trend is supposed to be now be Up. The critical test of 12.92 was tested and held on Tuesday (3/21/06), the 10th day (exactly at half-cycle) from the last sell at 12.92. USERX closed above 12.92, at 12.97. The half cycle is over and prices are above 12.92, and we have just broken out over the top of the last run at 13.30 (today's close at 13.32). I sent a buy message to "alerters" on Wednesday (3/22) saying that I was going back up to 50% long (because 12.92 held on Tuesday) and then another message was sent this morning saying that I was going to 75% long. I actually went to 100% long by the close, initiated gold futures when they were down this AM (as reported), and have purchased more longs as they are down tonight. I am now supposed to be done issuing frequent updates/alerts/messages. The intermediate trend is supposed to be up for the next major leg of the bull. We've apparently broken through the 16-20 (15-19, composite) index sell signals from 3/6-3/7/06. After USERX goes to new highs shortly, there will always be a down day or two."
I make mistakes (see the last SKI Special Report) but this was my big call for the first half of 2006 and it was another instant BINGO hit. (That's why I have about 1000 long-term subscribers since the website started 3 months ago and only one cancellation; we wait and wait, I hedge and fret, and then the moment of index clarity occurs and one has to act instantly after months of waiting). Prices instantly rose. The SKI futures program is ahead well over 40% in less than 3 weeks using a very conservative 1-2 contracts per 15K in equity. USERX has risen from 13.32 to 15.05 in 12 trading days.
OOPS, I see that USERX has plunged today (4/12/06) to 14.74 after a rather dismal day yesterday when gold futures roared ahead $10 and the gold stocks barely rose (so I sold some June futures last night at $603.80). And gold just crossed the $600 level amid media bullishness. Was that a perfect and important high that occurred on a classic run of 4 consecutive days up in USERX into 4/06/06 (at USERX 15.18, a new century high)? Or will this Third Special SKI Report somehow mark its third consecutive low? (and what's going on here? Does the 11th of each month mark a low?! Smile). Remember, bull market corrections are hard and fast, and SKI is a super bull for now.
You'll learn the answer in hindsight in a month, 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. 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 email@example.com.
P.S. My wife of 30 years, Lisa, wants to spend some of those profits. She says, "You deserve it Jeff. We didn't have a vacation last year. So she's planning a South African safari. (Should I take a side trip to a gold mine?). When the travel agent asked what our budget was (remember that $5000 bed she bought two years ago?), she replied, "I am willing to pay whatever it takes to have a wonderful vacation."
This is conservatively aggressive, cheapie JeffSKI, sighing and smiling/signing off.
[Editor's note: Oy... no time for 'olidays now you've got an important interactive website, mush!]
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: firstname.lastname@example.org.
Copyright © 2002-2006 Jeffrey Kern. All Rights Reserved.