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Special SKI Report #5:
I know my critical points...

Jeffrey M. Kern, Ph.D.
USERX | historicals
written Sunday May 28, 2006

SKI Special Report #5

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 work. 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 five 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 and that is what they will continue to do!

Almost 3.5 months ago, on 2/11/06, I posted an article entitled "Special SKI Report: Bull Market Corrections." That article emphasized that bull market corrections are "Hard and Fast". And the first low of that corrective period ended the next day.

About 2.5 months ago, on 3/11/06, I wrote the second SKI Special Report for 321gold, again emphasizing that bull market corrections are "hard and fast", posing the question, "Did yesterday mark the low?" That article was written one day after the low.

About 1.5 months ago, on 4/11/06, in the third Special SKI Report, I wrote "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? ". That was timing bingo #3 on these Special Reports as the metals' market bottomed that day for another explosive month yielding large new highs for the century.

And finally, about 3 weeks ago, on 5/05/06, in the Fourth SKI Special Report, I reprinted a perfectly-timed sell message for 4/19/06 and portions of my weekend SKI Update that contained such ebullient statements as "SKI is on predictive fire!". The conclusion section of that fourth report on 5/05/06 posed the question, "So is this Update just happening to mark a high?" I cannot provide definitive public predictions because I must maintain the privileges of paid subscribers. Therefore, this current SKI Report continues to provide additional post-hoc (after-the-fact) SKI data to non-subscribers (and a little information about future possibilities).

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 91%, down from the 113% reported in the prior 321gold SKI Report due to the recent severe decline, with USERX (the U.S. precious metals mutual fund) priced at 15.41. 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.

In addition to the truly unique SKI indices, I also use "run patterns" to guestimate 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.

The chart above shows a run pattern of historic importance, the classic 2 days Up and 5-or-more days Down run that averages a drop of 2 or more percent per day. It's a killer of a run down that has occurred during all of the prior precious metals' bull markets, but it is a rare phenomenon. This recent run down lasted an unusually long 8 consecutive days, with USERX dropping almost exactly 16%. Of-course gold dropped about $100 during this decline.

Since the last SKI Report on 5/05/06, the gold stocks have experienced a significant decline. Perhaps you're expecting me to now write that I sold the exact high and had "another SKI bingo" because I posed that "Is this a high?" question at that time. Unfortunately, the other "bingos" that I've reported for months were real, but this time it was a SKI "strike-out". I did sell some on Friday, 5/05/06, the day of the last Special SKI Report because gold was on a run of 6 consecutive days up. But then when prices only dropped about 1% on Monday (5/08/06) I re-bought to participate in another 2-day explosion into the century high of USERX 17.96 and gold at $730 on 5/10/06. But possibly due to the remarkable timing calls over the prior many months and the overconfidence exuded in my prior 321gold SKI Report, I didn't sell at that top. I did, however, refuse to maintain margin/leverage/futures long since the call of the high on 4/19/06.

USERX is still 16% below its century high. Gold is still $80 below its century high. And most importantly, the gold stocks have generated the historic run pattern of 2 Up and 8 Down. Such runs mark all types of massive market turning points throughout the past 32 years. The all-time lows in 1976, 1982, and 1998 were marked exactly by such run patterns. The massive highs in 1980, 1983, and 1996 were marked exactly by such runs. Such runs have also marked very important intermediate (multi-month) turning points. The "meaning" of this run pattern depends upon several factors: (1) the position of the SKI indices (currently still in a true and rare bull market), (2) the behavior immediately after the run ends (in the current case, 1 Up day (5/23/06), 1 spike Down day to within one penny of the 35-39 index (5/24/06), and now m2 days Up, and (3) the SKI index pattern that follows shortly after these runs are completed. Again, I cannot disclose all of this information in deference to my website readers. In fact, although I am confident about my current short-term (weekly) call on this market (short-term calls are usually harder than longer-term predictions, but not currently), I am currently less confident regarding the intermediate (monthly) and longer-term (many months) predictions. I can tell you that we appear to be approaching a very SKI-critical moment in approximately 2 weeks. I know my critical points, but I am not perfect!

The SKI indices should have the market "boxed in" in about 2 weeks
in order to make a very high probability call regarding the very important monthly and multi-month trends. You'll learn the answer in hindsight in the next SKI Report, 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 jeff@skigoldstocks.com. Note that I don't provide "free trials" or "prorated refunds": (1) the website provides many many free samples of SKI Reports, (2) I won't cater to folks who want free info and then leave, but will give discounts to people who need them, and (3) It takes time to learn and judge a timer whom you haven't been reading for a long time (there are currently over 1000 Skiers, most of whom have been reading me for years; see the SKI website rankings rising at Alexa.

Best wishes, Jeff


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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