Special SKI Report #205
Gold Stock Update: Potential Bull Market

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday Jul 1, 2018
Published Jul 2, 2018

Current USERX price = 7.64, Up 3 cents (0.4%) 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 SKI Report included a visual presentation of the regular SKI indices to show how the 16-20, 35-39, and 92-96 indices were all converging on 6/13/18 to mark a technical point that had been observable weeks earlier. That date “just happened” (smile; Jeff does not believe in coincidences when dealing with markets) to coincide with the next U.S. Federal Reserve announcement. The indices were (with 100% mathematical certainty) going to generate one or more index signals during the coming week. Most importantly, if USERX could stay over its master green line 92-96 index, the 92-96 index’s buy signal would signal a potential bull market. The explosive bullish scenario (ala January 2016) would occur if USERX declined during the early portion of that week and then rose over the plunging green line. Bears would have been best served if USERX declined, and kept declining, to stay below the green line. This was the time to be on “hyper-alert” despite the apparently boring sideways action in the gold stocks.

The gold stocks then edged higher on the Monday and Tuesday (6/12/18) leading into the technical point. That eliminated the possibility of an explosive bullish index pattern. It also went over the chart’s blue line to execute a resistance 16-20 index sell signal on 6/13/18 at USERX 7.69 (ending its buy signal from 6/05/18 at 7.57). The HUI’s 16-20 index executed its sell signal the next day as the HUI rose to 182.15 even as USERX dropped a penny. EACH OF THOSE INDEX SIGNALS MARKED EXACT HIGHS-TO-DATE. But USERX would have had to then plunge to avoid being over its 92-96 index green line.

Such a plunge WAS possible. Gold did plunge the next day, down $30 on 6/15/18. But, to Jeff’s surprise, USERX only dropped 1% as the HUI dropped 2.3%. The USERX 92-96 index was about to execute its potential bull market buy signal.

That USERX index pattern (a 16-20 index resistance sell signal quickly followed by a potential bull market 92-96 index buy signal) had historically always been followed by a decline or “draw-down” from the 92-96 index’s buy signal at 7.59 on 6/18/18. Obviously, despite the bull market buy signal, a continuing decline had to be predicted. Such “draw-downs” have always (historically) taken USERX down to its 16-20 index first support OR down to the second support 35-39 index. In fact, the most powerful bull markets since 1974 (ala 1979 and the 12/06/2001 bull market that yielded a 300% USERX rise in 6 months) have started with declines down to the 35-39 index. In essence, those findings fit the old adage of the “bigger the initial pain, the bigger the gain”. As long as USERX remained above its prices from 92-96 trading days earlier, the potential bull market would remain alive.

Of-course, gold has just continued to drop and the HUI has fallen to new 2018 lows. But have you, as I always recommend, been following USERX with its basket of world-wide gold stocks?

USERX declined to a low of 7.51 on 6/18/18. That was enough to generate the first support 16-20 index buy signal and USERX promptly rose back up to 7.67 (but not over that 7.69 prior top). A brief further rise would actually have been bearish by giving a 16-20 index sell signal followed by a 35-39 index sell signal. But during this past week, USERX declined to avoid that 16-20 index sell signal, back down to 7.51 (on 6/28/18) into its second support 35-39 index “sell” signal before popping back up on Friday to 7.64! I know that the word “sell” implies bearishness, but since the “sell” signal comes AFTER a 16-20 index buy signal, it has always marked support during master 92-96 index buy signals. It is the pattern of index signals that is most important, just as a 92-96 index “buy” signal that comes right AFTER a 16-20 index sell signal yields declines. It’s actually not particularly complicated.

A bull market launch has always historically occurred when the 35-39 index re-buys. With the rise on this past Friday, the 35-39 index is already close to re-buying. A USERX rise to over 7.80 on Monday (7/02/18) would generate such a buy. It “just so happens” (smile) that the 35-39 index’s back prices are at that 5/10/18 intermediate-term high of 7.80 (go back 35-39 trading days and see for yourself), so a rise to a new high would also fit with a bullish break-out. I can give that information away without angering subscribers because that is extremely UNlikely to occur: Even if the HUI rises nicely on Monday to begin catching up to USERX, the closure of the Canadian market on Monday will mute the movement in USERX.

Conclusion

The expected decline from the potential bull market 92-96 index buy signal at USERX 7.59 has yielded supportive 16-20 index and 35-39 index signals each time that USERX has dropped to 7.51. Historically, the new 35-39 index signal can mark an exact low OR it can yield an intermediate-term bottoming process that can persist up to 35-39 trading days before the 35-39 index re-buys for a likely impulsive rise. The master 92-96 index’s back prices will take about 2 months to rise to the current price area, so if the 35-39 index does not re-buy during the normal 35-39 day time period, the bears will get the 92-96 index’s sell signal.

We’re actually very close to a new 16-20 index resistance sell signal. A brief decline would then just generate another supportive 16-20 index buy signal. In fact, such a 16-20 index sell signal and buy signal can be followed by a rather explosive 35-39 index buy signal (BEFORE the next 16-20 index sell signal) within about just two weeks.

Cheers, 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 daily messages/alerts at a slightly higher price along with access to our informative Forum.

###

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.

321gold Ltd