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Special SKI Report #6:
So what's ahead?

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com

USERX | historicals
written Sunday June 18, 2006

SKI Special Report #6

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!

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 75%, down from the 123% profit at the 5/10/06 peak, with USERX currently priced at 14.09. 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 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.

Almost 4 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 3 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 2 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 (the gold mutual fund that is my proxy for the precious metals market) 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. About 6 weeks ago, on 5/05/06, in the Fourth SKI Special Report, I reprinted a perfectly-timed sell message from 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?"

And finally, in the last Report on 5/28/06 with USERX at 15.41, I wrote the www.321gold.com article describing the historically rare 2 Up and 8 Down run pattern that has marked the major highs in 1980, 1983, and 1996, as well as the all-time lows in 1976, 1982, 1993, and 1998. Unfortunately, the gold stocks had just completed such a historically bearish run from 5/10/06 (at USERX 17.96) to 5/22/06, and I had missed calling the 5/10/06 high.

So the precious metals had plunged in the historically bearish run pattern from USERX (the gold mutual fund) 17.96 to 14.73 while I watched profits evaporate, but then had rebounded back for two days to 15.41 on the day that the last article was written. What has happened since then?

That 15.41 on 5/26/06 was the wave 2 high on a 1 Down and 2 Up run pattern off of the short-term low. The gold stocks meandered sideways that next week and I sold everything. I had missed calling the top but was selling the first rebound at USERX 15.36, 15.40, and 15.24 that week after writing the article. The bearish run (or the "death run" as I call it) had occurred but prices had risen nicely in the 2 days prior to that Special Report and I sold for safety. In fact, when prices fell through the short-term 16-20 day SKI index on 6/06/06 (did the 6-6-6 date cause it? smile), breaking through to the downside, I initiated short positions in gold futures. I haven't mentioned it before in these articles, but I do offer a yoked/managed futures subscription, added onto the normal SKI subscription, that initiates futures trades in your account as I initiate them in my account. And if you don't need/want a "yoked" account, preferring to trade yourself, my intra-week messages report my futures trades as they are being executed. I do it conservatively and have only initiated two trades since the website opened (the following figures are rounded, not exact): Buy 3/23/06 at $550, sell 4/19/06 at $630, and then sell 6/07/06 $631, cover shorts 6/08-6/09/06 at around $617, trading 1-2 contracts per $15K equity (while people became upset that I missed the rise from $630 to $730 - too dangerous for Jeff - and the fall from $730 to $630). The account has therefore more than doubled its equity in 5 months with minimal market exposure. I don't "enjoy" taking on market risk and seek to be patient so as to execute at high probability times.

So what's ahead after this second plunge down, a wave 3 decline that saw USERX fall from 15.39 on 6/02/06 to 13.20 on 6/13/06 in another classic 1 Up and 7 Down run before rebounding nicely the rest of last week back up to 14.11? I cannot provide definitive public predictions because I must maintain the privileges of paid subscribers (and for days, weeks, or even a few months at a time, it is perfectly feasible for SKI to provide ZERO high probability predictions). 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). When USERX dropped to 13.20 last week, prices actually hit final support, touching the master bull market 92-96 index at its prior peak from 92-96 trading days ago on January 31st-February 1st at 13.33-13.41. That isn't a coincidence. That's how the indices work year after year. Since the SKI bull began last August, I've always written that "eventually prices will fall to touch the master 92-96 index"

I strongly believe that a massive and lengthy Wave 3 rise lies in front of us, but it's all a question of timing. Wave 3 might commence in about 2 weeks or in 2 years depending upon when the death run is negated. Actually, I usually state that everyone IS a timer; it's just a matter of whether one is a short-term, intermediate-term, or long-term timer. Everyone has to decide on a time to buy and a time to sell and/or go short and then buy back. The "death run" can be negated (in fact, it is always eventually negated!) and is not perfect. For example, when the opposite of the death run occurred at the exact low of USERX 2.94 on 8/31/1998, and prices rose about 50% (not a typographical error) in 5 weeks, that "life run" predicted a rise that would last for years until a "death run" occurred. In hindsight, it was correct (as prices rose over 8 years to 17.96 last month), but prices did decline again in 2000-2001 below that 1998 low subsequent to a SKI Triple Sell index pattern in late 1998 that temporarily but strongly negated the "life run". The same thing can happen here, in reverse, after a death run. I am always flexible, awaiting the next SKI index signals and run patterns that denote a change in market direction.

I provide short, intermediate, and long-term timing calls based upon the SKI index signals, run patterns, and my 21 years of gold experience. That is only half of the ball game. Some subscribers have made enormous profits while others, reading the same SKI Updates and intra-week messages, have lost considerable amounts. That's partly why there is the "managed" futures program and probably a managed gold stock program coming in the future. This market is extremely volatile, one is going against many of the smartest people in the world employed by large entities with significant resources (central banks?), and one has to deal with the powerful emotions of fear and greed. Two days before the 5/10/06 top, I had 2 brand new subscribers (having subscribed for just 2 days), ask to cancel their subscription because "I don't need a timing service, I am going to buy today and hold". I wrote how they would probably soon learn differently, a quite prophetic statement that even I didn't heed until after the 8-day "death run". Patience is always required, as there will always be another buy signal and another sell signal. If you expect me to make you a fortune in a month, you'll either get very lucky to pick the exact opportune SKI moment to subscribe, or you'll be disappointed. If you are inexperienced, take some time to paper invest or follow the market (perhaps along with SKI and Jeff).

I'll write another Report for 321gold in a few weeks (but I won't report that the "death run" has been negated until well after-the-fact) 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 1100 Skiers, most of whom have been reading me for years; see the SKI website rankings rising at Alexa.

Best wishes, Jeff
06/18/06

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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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Copyright © 2002-2019 Jeffrey Kern. All Rights Reserved.


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