Special SKI Report #92
Jeffrey M. Kern, Ph.D.
Written Aug 28, 2011
Published Aug 28, 2011
Current USERX price = 17.97, Up $1.42
(8.6%) since the report 3 weeks ago.
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 www.321gold.com. 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 36 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 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.
In the last gold stock SKI Report
written on Sunday 8/07/11 I described how the long-term 221 index
had sold on 8/02/11 at USERX 17.91, but that the gold stocks
were falling into index support on the following Monday-Tuesday
(8/08-8/09/11) if the June 2011 gold stock lows could hold.
The June 2011 lows did hold as the general stock market plunged,
gold bullion soared, and the gold stocks were "stuck"
in the middle on that Monday (8/08/11). The gold stocks have
risen since then and common measures of their performance (e.g.,
the HUI and GDX) have now come right back to their 2011 highs,
approaching a potential breakout to the upside.
Although I've continued to focus these articles on my primary
dependent measure, USERX, I've also been calculating the SKI
indices using the HUI for more than a year because SKIers have
been using the formulas and reporting how the application of
the SKI indices to the HUI has added to the information provided
by USERX. The decline on 8/08/11 generated 16-20 index short-term
buy signals on both the HUI and USERX. Therefore, the gold stocks
had the potential to rise to a 16-20 index overbought sell signal
and more importantly, if the rise continued past those 16-20
index resistance signals, the next stop would be the 92-96 index
(the 35-39 index has been on a buy signal since 7/11/11). As
I've tried to describe in the past few articles, if USERX/HUI
rises to a 16-20 index sell signal and then a 92-96 index buy
signal, the gold stocks have always subsequently retreated. In
the current situation, the 92-96 index buy signal would be a
potential true bull market buy signal, but the 92-96 index would
need to avoid selling on the subsequent short-term decline in
order for it to be a bull market.
The HUI generated its 16-20 index sell signal a week ago Friday
for execution the next trading day on last Monday (8/22/11).
Its 92-96 index was also ready to generate its potential bull
market buy signal: If the HUI rose to over all 5 of its 92-96
index back prices on 8/22/11, the 92-96 index would generate
its buy signal. It "just so happened" that the prices
from 92-96 trading days earlier included the 2011 closing high
of HUI 606.28. The HUI closed at 605.04 on 8/22/11, so it "just
missed" generating its 92-96 index buy signal on the day
that it executed its 16-20 index resistance signal. Gold had
risen for 6 consecutive days into 8/22/11 and when that parabolic
rise ended the next day, the gold stocks declined and avoided
the HUI's 92-96 index buy signal.
But now, right now, the SKI indices have generated the important
index signals. USERX rose enough on last Thursday (8/25/11) to
generate its 16-20 index resistance sell signal for execution
on this past Friday (8/26/11) at 17.97. And the HUI needed to
close over 590.18 on this past Friday (8/26/11) to generate its
92-96 index buy signal. The HUI did it towards the end of the
This should be "the" intermediate-term moment. The
USERX 16-20 index marked its resistance for the close of trading
on this past Friday (8/26/11) and the HUI 92-96 index will execute
its 92-96 index buy signal this coming Monday (8/29/11). Therefore,
we've hit resistance as marked by the SKI indices. I do not know
whether "THE day" was Friday (8/26/11) or will be Monday
(8/29/11) because the indices can easily miss "THE day"
by one day. The HUI's index buy signal has always been resistance
under the current index pattern, but if the HUI can avoid declining
enough to sell the 92-96 index, it will be on a break-out buy
signal. If you go back 92-96 trading days, you'll see that the
HUI's back prices are staying in the 578-590 range for the next
two weeks. A decline to below that area would sell the 92-96
index and end this chance at a gold stock bull market. USERX
still needs a 7-9% rise to hit its 92-96 index.
Besides the 16-20 and 92-96 indices, there are several factors
suggesting that the indices are marking a top here: (1) The USERX
221 index is on a sell signal (but a rise to about USERX $18.80
will re-buy that index) and (2) Gold bullion remains heavily
overbought. And yes, I'm still concerned about that apparent
(but not historically validated) Death Run top in SLV at the
May 2011 high that would portend a 50-70% decline.
Thankfully, the gold stocks have not manifested a death run top
and remain very long-term bullish from the 2008 crash life run
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
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 along with
access to our informative Forum and a managed gold futures program.
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
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: email@example.com.
Copyright © 2002-2023 Jeffrey Kern. All Rights Reserved.