 Special
SKI Report #21
Gold Bull Restarted?
Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX
| historicals
Written Sunday, Jun 3, 2007
Published Jun 4, 2007
Special SKI Report #21
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 at http://www.skigoldstocks.com/about.php.
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 prior SKI Report on
May 13th 2007, reported that prices were at a critical juncture:
A small price rise at that time would have generated a true bull
market as defined by the SKI indices. However, based upon other
information, it was expected that prices would decline and avoid
that bull market buy signal. And prices clearly declined over
the three weeks subsequent to that last report, but late last
week (i.e., 5/31/07 and 6/01/07), the gold stocks and the precious
metals surged higher. Was that the beginning of the next true
SKI bull market phase and the final low-point in the sideways
movement that has frustrated many gold stock investors for the
past year (including me as I sat around in cash or recommended
short positions for more aggressive folks)?
As I've described many times
before, 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. 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 rise back above the 92-96 back prices.
At the prior Report, prices
HAD risen above the back prices AND then fallen below them. The
start of a bull market was awaiting a rise back over those back
prices. It did NOT happen because prices declined as expected.
BUT SOMETHING ELSE THAT IS QUITE SPECIAL DID HAPPEN: Instead
of rising over the prices from 92-96 trading days earlier, on
5/23/07 the market did not FALL fast enough and the prices from
92-96 days earlier (from the January 2007 bottom) fell UNDER
the current prices. Therefore, on 5/23/07, the 92-96 index generated
its buy signal marking a potential 95-day cycle low. Buy signals
are generated a day before they are to be executed so that one
always obtains one day's warning before executing the index signal.
The master SKI index therefore
bought at the close of 5/24/07.
I often write that the indices and/or run patterns are supposed
to buy within one day of the low. Prices declined significantly
on 5/24/07 and USERX (the gold mutual fund) closed at 14.87.
THAT HAS BEEN, TO DATE, THE LOW CLOSING PRICE. The market then
came within one day of generating a rapid master 92-96 index
SELL signal last Tuesday-Wednesday (5/29/07-5/30/07). The 92-96
index came very close to selling. Technically, the market needed
to rise immediately to avoid the sell signal. IT DID IT! It rose
on cue. As a pure technician, I would have to say that the announcement
of decreased central bank gold sales over the next few months
was timed perfectly to maintain the buy signal from a week earlier
(smile)!
So, has the bull returned?
SKI is on its master 92-96 index buy signal and the gold stocks
appear to have completed an ABCDE Elliot wave corrective triangle
that started in early December 2006. There are no guarantees.
That Elliot Wave triangle appears to have bottomed, but after
a rise, there is no guarantee that prices cannot fall through
the bottom of the triangle and initiate a major decline down
to longer-term support at USERX 10.86 and $540 gold. There also
is no guarantee that the 92-96 index will not sell. Prices
MUST continue to rise over the next few weeks to avoid a 92-96
index sell signal that should prove to be quite bearish, should
it occur.
Perhaps I am part of the required
"wall of worry" during bull markets, but I am skeptical
for several reasons. The one that I've repeatedly written about
for one year is the "death run" pattern that occurred
at the top in May 2006. That "death run" predicted
a major decline that should be completed via a "life run"
plunge. And the "life run" should provide a buy signal
within one day of the final low. The market has not, as yet,
provided that "life run". Furthermore, confirmation
of the true bull has not yet been obtained via other SKI indices.
To conclude, this SKI bull
signal is precarious and requires continuously higher prices
so as to stay perfectly above the rising back prices from 92-96
trading days ago. Prices need to follow those 92-96 index back
prices higher in an exact mathematical manner or the market will
experience a significant decline. I believe that the last sentence
reads as an un-hedged statement. Therefore, it is important to
maintain a stop loss (actually now a "stop gain") and
I am adamant that a 92-96 index sell signal is the correct
stop on long positions (and a likely point to go short for
more aggressive folks). Unless and until that happens, SKI will
remain on a 92-96 index buy signal.
Surprised that the persistently
bearish SKI has finally recommended closing short positions and
suggested long positions on 5/24/07 using a 92-96 index sell
stop? 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,
Jeffski
 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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