Special SKI Report #103
Long-term Cycles

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Apr 29, 2012
Published Apr 30, 2012

Current USERX price = 11.91, Up 22 cents 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 4/08/12, described how the long-term SKI indices (cycles) were coming into play: The gold stocks (USERX) had fallen below all of the regular indices (i.e., the 16-20, 35-39, and 92-96 indices) and had even declined below the long-term 663 index’s 3/20/12 buy signal to generate an 884 index buy signal for that coming Monday (4/09/12). That Monday was also being marked with the long-term 442 index signal on the HUI. Although even longer-term cycles should exist, I don’t have enough data (only 38 years) to really validate anything longer than an 884 trading day cycle and even that index is considered to be “experimental”. Therefore, the conclusion of that SKI Report was that a continuing “plunge or disaster” could still occur in the gold stocks.

Since that Report, the gold stocks declined a little on that Monday (4/09/12), but the index signals had marked yet another short-term low at USERX 11.63 on 4/09/12. The ensuing 3-day rise filled the open down-gap from 4/03/12 and rebounded back over the HUI’s prices from 439-443 trading days earlier (the 442 index). That HUI 442 index signal missed the short-term high by a few days (executing on 4/18/12) and then the gold stocks declined to yet another new low for the year. You may have noticed that on Friday, 4/20/12, USERX closed 1-penny below the 4/09/12 low. That failure was followed (not unexpectedly) by a sharp decline on last Monday (4/23/12). That decline went back below the HUI 442 index yet again and the index signal executed the next day. And once again, that index signal marked another exact low as the gold stocks have rebounded nicely from the low on 4/24/12!

Conclusion:

In these delayed SKI Reports, it’s always easier to describe what’s happened to the SKI indices than it is to live through it as it’s happening and to make predictions. Retrospectively, the indices have marked almost every short-term high and low for the past several months. I bought more physical gold for my core holdings at $1550 and some gold stocks at USERX 12.46 one day after the December 28th 2011 low because the USERX 663 index support was hit on 12/28/12 (exactly). I’ve written repeatedly since then that the December 2011 low was potentially THE low. It has been THE low so far in gold bullion, but I sold those gold stocks right near the early February high (but never the gold) and became bearish due to the index signals. I bought more physical gold at $1650 and the gold stocks for a long-term hold on the 663 index’s true buy signal at USERX 12.41 on 3/20/12 and have not sold. Each subsequent low has been marked exactly (i.e., to the day) by index signals, but those signals were not clear buy signals. Last Monday’s (4/23/12) “mini-plunge” gapped below the USERX long-term chart support line connecting the lows for the past 15 months (see chart from Image Shack), but USERX immediately rebounded back above that support line for a weekly “key reversal higher” (that’s traditionally and rather classically bullish). Note that the chart support line is declining, so a decline to yet another lower low cannot be ruled out. And last week’s HUI 442 index signal marked an exact (to-the-day) low again.

That HUI 442 index has now generated yet another signal that executes tomorrow (4/30/12). The last two such signals have marked highs. And USERX (as well as the USERX run pattern) may hit first resistance during this coming week. Therefore, I still cannot rule out one more decline in the gold stocks after a rise during the early portion of this coming week, but SKI is long-term bullish and Jeff is remaining long and will leverage long soon if/when there is a SKI regular system buy signal (there haven’t been any since selling in September 2011 at a quick but meaningful loss). That would cause both the regular and the long-term SKI systems to be bullish and that IS expected (smile, after the nausea of the past few months in the gold stocks, but gold just keeps looking “good”). When the gold stocks “go”, they ARE going to “go”.

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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