Special SKI Report #23
True SKI Buy!

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Jul 15, 2007

Current USERX price = 16.22, UP 10+% since the Buy.

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 last SKI Report on 6/24/07 recounted the difficult nature of the gold stocks over the past year, but that a true SKI buy signal MIGHT occur during the next week. I purposefully bold-faced the key statement in that report stating that "A short to intermediate-term SKI index may generate a true buy signal before the end of this coming week (by 6/29/07)" (and yes, I see that I mistyped the "6" into a "5" and even Barb at 321 gold didn't catch the typo!; smile; I hope that you could tell it was a typo as 5/29/07 had passed a month before!). [Barb's comment: Hope Bob reads that, Jeff, maybe I'll be fired/retired, yippeeeee]

Prices declined strongly in the two days after that Report and the buy signal was generated on Tuesday 6/26/07 for execution the following day. That was basically the first true SKI buy signal in a year, so I sent a special Intra-Week Update to subscribers that afternoon to buy the next day. That Update is reprinted below. Jeff went 150% long using leverage (PMPIX and gold futures) on 6/27/07 for the first time in a year as USERX (the oldest gold mutual fund) dropped to a new low for the year. SKI is supposed to time the market and buy the low to within a day; that is the history and my expectation. SKI did buy the low, but it wasn't the lowest price in the past year, it was the low that MAY have marked the end of the 1-year corrective period.

The gold stocks (USERX) rose for 8 consecutive days off of that buy signal and did generate the next buy signal, an intermediate-term buy, as expected. That last Special Update generated just one new subscriber, demonstrating that almost no one was interested in the precious metals despite my writing that a new buy signal was imminent. Now that the gold stocks have surged 10-12% higher in the 2+ weeks since the buy, the gold articles appear to all be bullish. The traditional technical indicators are short-term overbought, but the weekly and monthly indicators, as well as the ratio between the gold stocks and gold bullion, have all generated major buy signals.

Using a timing service like SKI requires discipline. We wait and wait and wait and fear that we are going to miss the great rise. But the SKI indices keep saying that there isn't going to be a great rise (even as prices rise 10% and then decline), so one stays in cash or short. Then the day comes, after a year, and SKI generates its buy and one is supposed to act. Jeff tried to get everyone to buy via discipline and Jeff went 150% long. I am conservative and folks at www.Kitco.com labeled me as "chickenski" years ago when I was posting for free. I retain that term, but then I try to morph into "lionski" when the buy signal finally comes and I do my rare leveraging/margining/gold futures. Now that most writers are bullish or turning that way, Jeff has sold his excess leverage, taken the 10%+ profit over two weeks, and maintains a conservative intermediate-term long position. And while everyone seems to focus on the bullish general stock market, the gold stocks just produced an 10+% gain in two weeks that exceeds the Dow's rise for this entire year!

You're reading this because you want to know the future. I am constrained in reporting such predictions in deference to my subscribers. However, I am telling you that this is NOT (as yet) a true SKI bull market. People have varying definitions of a bull market, and yes, in a few years from now the gold stocks should be higher than now, but the current bullish phase is "only" an intermediate-term rise. A true bull (according to SKI) is where prices go higher and higher and establish a new and much higher trading range as per the true SKI bull that started in August 2005 (for SKI) and ended in May 2006 and early September 2006 whereby SKI sold long-term at an 84% profit in USERX in a year. Now we have had the short and intermediate-term buy signals and prices should rise over the coming weeks and several months, but it is not a SKI true bull market. It may morph into a true SKI bull via a decline in 6 weeks from now, but the "death run" from May 2006 keeps Jeff skeptical that it will happen. After this intermediate-term rise culminates, we will either get the true bull or we'll get a massive sell pattern that will yield a 30+% decline into a life run final low in 2008. The death run of May 2006 predicted a decline of at least 2 years duration. Elliot Wavers may yet label the SKI buy of 6/27/07 as the end of Wave A down from May 2006, the current rise may end up being Wave B up, and there is still the powerful Wave C down ahead of us. SKI doesn't care; SKI is based upon mathematical indices that bought on 6/27/07 and will generate a powerful sell in several months IF that great final decline is to occur. Otherwise, the next decline should yield a true SKI bull market (again) and confirmation that the largest rise, Wave 3 of 3, has commenced!

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

***

"SKI Intra-Week Update 6/26/07

6/26/07 4 P.M. PST

USERX = 14.50, Down 39 cents

THE 16-20 INDEX BUYS TOMORROW'S CLOSE; JEFF WILL BUY

Although there are never any guarantees (that caveat is always required), the 16-20 index generated its buy signal today (a day earlier than expected) and the SKI System officially covers its shorts from December 2006 at 15.73 and goes long USERX as of the close tomorrow (6/27/07). The market is supposed to decline strongly into such a buy signal and that is a BINGO so far! The run pattern into such buy signals is supposed to be at least 4 days down in a row, so expect and pray/hope for another decline tomorrow because today is just 3 days down. Everything looks correct except for the run pattern that should go to at least 4 days down (and will be OK if USERX closes down tomorrow). It does look like this buy signal may be a day early since a run of 5-6 days down would be better, but the index is buying. BUY TOMORROW'S CLOSE AND CLOSE YOUR EYES or try and beat the index by hoping for a possible continuation down day the following day or two. An up close tomorrow would not be encouraging, but the index buys tomorrow whatever happens.

My colleague buys 100% at tomorrow's close. Jeff will go to over 100% long at tomorrow's close, and will save a little to buy any down movement on Thursday. Traditional technical indicators are not quite yet oversold (see: http://stockcharts.com/h-sc/ui?s=$XAU&p=D&b=5&g=0&id=p23810285790) but will be close to oversold if prices decline again tomorrow. Therefore, I am expecting some down to sideways action after the buy signal to form the bottom. YOU WON'T GET RICH IN A DAY OR A WEEK AFTER THIS BUY SIGNAL, but it is a buy signal.

There is no price stop on this buy. It's unlikely, but we could lose. The stop will be in terms of time (time is more important than price; but really it is the interaction of time by price that matters for SKI). The statement here is that within one-half cycle (half of a 16-20 index cycle is half of 19 trading days = about 10 trading days; I've seen it take the extra 1 day for 11 trading days) prices must be higher than the USERX buy-in price at tomorrow's close.

Go into suspended animation and hope that the first true buy signal in a year is correct. It should be (97+% probability!), but we do NOT know the extent and duration of the ensuing rise. It is not a bull market, at least not yet. Prices will HAVE to rise to at least over USERX 15.00 (really higher than that) to generate a 16-20 index sell signal within the required 16-20 trading days after the signal. That is the way it is supposed to be. That may only be a 5% rise/profit, but it could be a lot more. We cannot predict the exact future. The prediction is that prices are bottoming and that prices will rise into a higher-order buy signal. That buy signal will NOT be XXed Out, so prices can then continue to rise. Buy in the next day or three (by the end of this week) so that you can decide to sell (all or a portion) on a rise and make money via this SKI buy signal. This may be the only true buy signal this year and SKI is supposed to make its yearly money on this signal.

Long-termers: The May 2006 death run still says that much lower prices will occur in the future (we are at 13 months after the death run and the shortest time in history to the life run is almost 2 years), but we have our buy signal at the USERX lows for the year (so far). I've kept saying to sell for 9 months now, but please buy now. Long-termers may need to sell in a few weeks or months and become intermediate-term traders here, but I cannot predict the future. The index says buy and according to the index, this could be the low for this year. If you buy now and prices rise, you will be sitting in a position of strength. Again, I do NOT believe that this will yield a true SKI bull market (a 92-96 index buy signal on the Path) or that we will hold a long position for a year or longer, but who knows?

ALL I KNOW IS THAT SKI IS BUYING TOMORROW'S CLOSE. We wait and wait during corrective periods and bear markets and then we are supposed to buy.

Personal: My wife had minor surgery this morning and is taking Lortabs for pain. Have your own supply of "suspended animation" drugs because we could sit in pain after buying. If prices decline after the buy signal tomorrow, DON'T WATCH (sure Jeff; sarcasm).

I am Lionski (not really, but I am supposed to be a lion after tomorrow so as to prevent you from selling at a loss if prices decline for minutes or hours or a day or two after the buy signal),

Here we go, Jeff

End of 6/26/2007 Update"

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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.

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

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