Special SKI Report #20
Another Critical Juncture

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday, May 13, 2007
Published May 14, 2007

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.

New Material:

It's Mother's Day in the United States. Mothers are the most important people in the world. But they need new shoes too. So, turning to money and gold, it's the rather miserable one-year anniversary of the major high in the precious metals' market from 5/11/06. In the last Update for 321gold (see http://www.321gold.com/editorials/kern/kern042207.html), I reprinted the Special Update sent to subscribers that declared the end of the SKI bull market at that time due to the rare "death run" and 321gold has been kind enough (and honest enough!) to continue to allow me to post rather bearish articles for the past year (other gold websites ban me because SKI does change from bull to bear and vice versa). The very special and rare "death run" completed at USERX (the gold mutual fund) 15.54 in May 2006. As of Friday (5/11/07), USERX closed at 15.57. Although many small gold stocks have exceeded the levels of 5/11/06, the broad complex has been UNCHANGED. The best position has been cash, unless you are an excellent stock picker (I am not an excellent stock picker; I am a market timer). I haven't gotten many new subscribers based upon my bearish position, but it's not MY position; MY view is based upon the 33-year history of run patterns and index signals. AND THE SKI INDICES ARE NOW, AGAIN, AT A MOST CRITICAL JUNCTURE. I try to avoid hyperbole, but the precious metals' market has truly reached another critical point.

The last SKI bull that began on 8/09/05 at USERX 8.07 ended via that death run pattern at 15.54 and then ended again in early September 2006 via a 92-96 index sell signal (selling at an 84% one-year profit). True bull market periods (where prices rise and rise and settle at a substantially higher level) are defined as 92-96 index buy signals that are on the SKI Path. A mere rise above the prices from 92-96 trading days earlier does NOT mean it's a true SKI bull. Nature is more complicated than simple moving averages. True bull market phases have ALWAYS (yes, that IS "always") required special SKI index set-ups. WE HAVE THAT SPECIAL OPPORTUNITY RIGHT NOW.

The special set-up requires that prices rise over the prices from 96, 95, 94, 93, and 92 trading days earlier (to generate a 92-96 index buy signal), then prices fall below the prices from 92-96 days earlier, and then rises back above the 92-96 back prices. This past week, prices barely rose over those back prices to generate the 92-96 index buy signal (NOT a time to buy; just the first part of the "set-up"). On 5/11/07, prices needed to rise to USERX 15.58 to avoid falling back below those back prices. USERX closed at 15.57 on 5/11/07! You probably don't believe this, but the indices are accurate to the penny. The 92-96 index generated a sell signal on 5/11/07. Therefore, we have the first two parts of the set-up for a true SKI bull market.

The final and most important part of the set-up now requires that prices quickly generate a new 92-96 index buy signal. That has NOT happened yet. But it could happen within 1-7 trading days. Jeff (that's me, the keeper of the SKI indices) believes that it won't happen because the 2006 "death run" has not been negated. Prices should move down in a dramatic manner over the coming several months and provide a "life run" plunge that allows me to buy (and leverage) within one day of the multi-year low. But if a new 92-96 index buy signal occurs here, SKI will give its next great bull market buy signal, Jeff will buy, and those death run concerns will have to be written off as "This time it is different". I don't believe that the true bull market signal will occur or that "This time will be different" from the last 33 years, but the set-up is here and now.

The "death run" from one year ago predicted a major decline in the precious metals. But the SKI indices are now set-up for the next bull. I am not trying to confuse you, nor am I trying to hedge the prediction. The prediction, that has always been correct in the multi-year sense, is that a major decline still awaits. But the SKI indices are now open to the next great bull market rise. The next 1-2 weeks WILL show the answer. Cash and/or short positions are still recommended as of the close of Monday (5/14/07). The next buy should yield at least a yearly triple (300% gain) in USERX without leverage. That will happen, but only once SKI goes into "buy mode".

No one should believe the above, rather definitive statements, without having followed them for many bull and bear market cycles. I've posted SKI reports for years and I've cross-validated the indices for 22 years. Frankly, they've always been correct in a multi-year time frame (my short-term predictions are often incorrect, but the long-term index and run pattern calls have always been correct). The true bull is not expected here but can occur within 1-7 trading days. PLEASE BE SAFE UNTIL THE BULL RETURNS.

If you are interested in following and learning more about the SKI indices, I'll write another Report for 321gold 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.

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.

Best wishes,

Jeff (Yes, I am STILL trying to maintain patience and discipline after one long year from the highs)

SKI archives
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.

Copyright © 2002-2023 Jeffrey Kern. All Rights Reserved.

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