Special SKI Report #206
Gold Stock Update: Marking Technical Points

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday Jul 22, 2018
Published Jul 23, 2018

Current USERX price = 7.56, Down 8 cents (1%) 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 (written on 7/01/18) described how the SKI master 92-96 index had executed a potential bull market buy signal on 6/18/18 at USERX 7.59. The gold stocks then did the expected/normal declines into a 16-20 index supportive buy signal that generated at USERX 7.51 and then another decline back to 7.51 that generated a 35-39 index sell signal. Such 16-20 and 35-39 index signals usually mark the short-term bottoms at the beginning of a bull market. What was needed was a new 35-39 index buy signal. The 35-39 index’s back prices “just happened to be” (that’s sarcasm) at the 5/10/18 intermediate-term high of USERX 7.80. Therefore, a rise over 7.80 would generate a potentially bullish “break-out” 35-39 index buy signal.

The gold stocks then rose and USERX closed at 7.81 on 7/05/18 doing its typical 1-penny break-out. The continuing rise to 7.88, 7.90, and 7.91 generated a first resistance 16-20 index sell and the next day (that’s normal too) a new 35-39 index buy signal. That index pattern is not “explosive”. It either marks the confirmed bullish break-out OR a high. The SKI index signals mark technical points, often to the exact day, but statistically within 1-2 trading days.

After rising for an extended 5 consecutive trading days into 7/10/18, it was normal for USERX to decline on 7/11/18, but that 3% decline was disconcertingly large (for the bullish break-out scenario). With the benefit of hindsight, the index signals marked the technical spot and it was a high.

The ensuing decline from 7/10/18 has generated another 35-39 index sell signal and 16-20 index buy signal as USERX dropped to 7.51 AGAIN (for the 3rd time) on this past Thursday (7/19/18). The index signals are again marking the technical spot for either a low OR a break-down.

Conclusion

Yes, gold/silver and some of the limited measures of gold stocks (e.g., the XAU limited by it heavy weighting of copper/FCX) have broken to new 2018 or multi-month lows, but USERX has only fallen back to that repetitive 7.51 price into multiple index signals to mark this spot. The SKI indices are not “broken” until/unless they fail to mark the technical spots but: (1) The 6/05/18 16-20 index buy signal came just one day and 1-penny after an exact low, (2) The 6/13/18 16-20 index sell signal marked an exact high, (3) The 6/21/18 16-20 index buy signal executed 1 day after a low, (4) The 6/28/18 35-39 index sell signal executed 1 day after a low, and (5) The 7/06/18 and 7/09/18 16-20 index sell signal and 35-39 index buy signal came within one day and 1-penny of marking a high.

And the potential bull market 92-96 index buy signal from 6/18/18 at USERX 7.59 also has not been “broken”. The investment approach is to buy such buy signals for potential 100+% gains and take the loss if they fail via a decline to below the prices from 92-96 trading days earlier. That index’s back prices are still below USERX 7.00 and will need another month to rise into a price area that would yield the normal 2-5% loss IF the potential bull market was failing. That is perfectly feasible, but just a small rise now will generate a new 35-39 index buy signal to mark the next technical spot: A second potential “break-out” or another high. The best scenario for the bullish case is if USERX languishes for a few more days and then goes above the prices from 35-39 trading days ago. We’ll soon see, and there aren’t any guarantees, but a bearish failure isn’t likely for another month and another 35-39 index buy signal during the next week would maintain the bullish possibility. Follow USERX with its international gold stocks holdings (look at the Canadian, Australian, South African, etc. gold stocks), U.S. gold stock holdings, and its dependence on foreign currencies. It’s a one-of-a-kind dependent measure since 1974 that SKI depends upon….

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.

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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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