Special SKI Report #136
Gold Stock Update

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Apr 20, 2014
Published Apr 21, 2014

Current USERX price = 6.60, Down another 22 cents (3%) 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 gold stock SKI Report, written on Sunday 3/30/14, concluded that:

“History continues to adamantly predict that the gold stocks WILL generate higher-order index (35-39 and/or 92-96 index) sell signals. The 35-39 index’s back prices are rising, so it’s very likely that the index signal will occur within the next couple of weeks. At that point, the SKI Path of Trades will re-open and SKI would buy on a new buy signal, but there will be two scenarios. The first scenario is that the gold stocks will avoid a new buy signal and decline to the 92-96 index. The 92-96 index’s back prices are descending towards the 2013 low. Therefore, the first scenario will be a rather horrendous decline down to the 92-96 index that tests or exceeds the 2013 low. The alternative scenario is that the gold stocks will go “sideways” or “sideways-to-higher” into multiple index signals to mark lows and highs every few weeks or each month. In other words, the market would go up and down, down and up, in a sideways manner until the 92-96 index’s back prices rise back up into this price area.”

Since that 3/30/14 Report, the 35-39 index DID sell. That was pretty much a “given” based upon history (normal market behavior). The USERX 35-39 index executed its sell signal on 4/07/14 at 6.90. The HUI executed its 35-39 index sell signal the next day, on 4/08/14 at 231.57.

When the gold stocks rose on 4/08/14 and 4/09/14, and then declined the next day (on 4/10/14), the run pattern was a bearish 1 Down and 2 Up run pattern. Such run patterns often mark some type of high. And on 4/10/14, the gold stocks declined while NY COMEX gold rose $14.60. That “negative divergence” (USERX Down and gold Up) also suggested that a short-term rebound top had occurred that was marked by the 35-39 index sell signal (the index missed the rebound high by being 1-2 trading days early in selling).

Conclusion

The gold stocks have declined in the expected manner since the last SKI Report three weeks ago. The conclusions of that Report remain in effect: (Scenario #1) A continuing rather horrendous decline to the 92-96 index at/below the 2013 lows, or (Scenario #2) A sideways down-and-up-and-down-and-up period until the 92-96 index sells. The market has so far behaved as if the decline will continue. Look back 92-96 trading days and see how those back prices for the gold stocks are approaching their December 2013 lows.

The first sign that this downtrend is ending (to begin Scenario #2) will occur when the gold stocks (USERX) are able to get over their prices from 16-20 trading days earlier, thereby generating a 16-20 index sell signal. Yes, that will be resistance again, but a subsequent quick decline would generate a 16-20 index Mechanical SKI (and Jeff) buy signal. Such a buy signal would likely mark the Right Shoulder (final bottom) of a one-year Head & Shoulders bottoming pattern.

USERX was within .5% of the 16-20 index on this past Wednesday (4/14/14), so the immediate strong decline on the next day (4/15/14) was further evidence of the 16-20 index’s resistance and the very real scenario that the gold stocks are going to decline to challenge or exceed the 2013 lows.

The trend remains down and SKI remains on a sell signal. That trend CAN change in just a week or two via a rise over the 16-20 index and then a buy signal on a quick decline below the 16-20 index. And please remember that real bullishness needs a long-term 218-222 index buy signal (see the prior SKI Report). IN LESS THAN 3 WEEKS FROM NOW, THE 221 INDEX’S BACK PRICES WILL BE BOTTOMING AT THE JUNE 2013 LOW OF USERX 6.27 – 6.63. 

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 messages/alerts at a slightly higher price along with access to our informative Forum and a managed gold futures program. 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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