Special SKI Report #209
Gold Stock Update: Nothing Definitive, But…

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday Sep 23, 2018
Published Sep 24, 2018

Current USERX price = 6.77, Up 14 cents (2%) 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 was continuing bearish as USERX was below all three of the regular 16-20, 35-39, and 92-96 indices since the master 92-96 index generated its sell signal on 8/10/18 at USERX 7.22. The run pattern had become bearish again on 8/27/18 when USERX formed a 1 Down and 2 Up high at 6.86. The run pattern was at 2 Up and 4 Down when that Report was written. A “crash” down would have formed a bullish run pattern at 2 Up and 5+ days Down, but was not expected.

After that report was written, the gold stocks (USERX) did not crash but did continue lower. USERX declined for another 6 consecutive trading days to form a 2 Up and 10 Down run pattern into 9/11/18 at USERX 6.34. The 6.34 was a new multi-year low below the December 2016 low (but above the massive January 2016 low of 4.64).

Whenever USERX forms a 2 Up and 5+ Down run pattern, a major low is likely IF IF IF the decline is “strong”. “Strong” is empirically defined as averaging 2+% down per day. NEVER FORGET THAT SIMPLE HISTORICAL RULE. In recent examples, the 2 Up and 5 Down run pattern into 12/16/2014 averaged 2.4% down per day and marked a significant low. And the 2 Up and 6 Down run into 12/16/2016 averaged 2.4% down per day and marked a major low at 6.47.

The 9/11/18 run down was from USERX 6.86 to 6.34 over 10 trading days. That 7.5% decline averaged ONLY 0.75% per day. Therefore, it was not “strong” (it was “weak”) and wasn’t a clear run pattern buy. It WAS an extremely long run down at 10 trading days and the gold stocks have rebounded decently to USERX 6.80 as of this past Thursday (9/20/18). Note that such a “weak” run down pattern has never (since 1974) yielded a major low. There aren’t any market “guarantees”.

Again, SKI can provide a buy at major lows via a USERX run pattern AND/OR an index buy signal. For example, the 12/16/2014 low was marked by that run pattern buy AND a simultaneous 16-20 index buy signal. The 16-20 index is a contrarian index that buys on declines and sells on rises. In other words, during declines to a major low, USERX rises to a 16-20 index sell signal (going over the prices from 16-20 trading days earlier) and then declines to a 16-20 index buy signal (below the prices from 16-20 trading days earlier).

Conclusion

The current USERX rise has now barely generated a 16-20 index sell signal as of this past Friday (9/21/18). That is first resistance. Since the sell signal has occurred, a decline (likely to a lower low) would generate the 16-20 index’s buy signal. Such a 16-20 index buy signal would turn Mechanical SKI and Jeff bullish as long as the index’s buy signal does not occur IMMEDIATELY after the index’s sell signal.

An “immediate/juxtaposed” 16-20 index buy signal CAN occur here. If USERX declines on Monday (9/24/18) to below 6.74 (just a 4-cent, 0.6% decline), the immediate invalid “buy” signal would generate for probable bearishness. Otherwise, a decline would generate a supportive 16-20 index buy signal OR the gold stocks’ rise would continue to rise into next resistance: The prices from 35-39 trading days earlier.

It’s common for USERX to generate multiple index signals at the same time. Such occurrences support the validity of the indices (cycles) for marking the “technical spot”. The long-term 439-443 index HAS generated its buy signal on this past Thursday, just one day before the 16-20 index’s signal. That’s because it is almost exactly 442 trading days from the December 2016 low at USERX 6.42-6.47 and USERX went below that low and now has risen back above it. The technical point has been marked. Since the 442 index’s back prices are about to skyrocket off of the December 2016 low to a high of USERX 9.00 (where Jeff sold at USERX 8.78) over the next 2 months, it IS possible for a skyrocket to occur. But if USERX fails to rise enough to stay ahead of those rising index prices, that would generate a bearish 442 index sell signal. Look back 439-443 trading days. And this new 442 index “buy” signal CAN/MAY mark a high because index signals mark the “technical spots”, especially when several index signals occur almost simultaneously.

As per the prior SKI Report, Jeff is still adamant that the decline since we sold in the Summer of 2016 is a “corrective decline” from that rise. When the correction ends, the gold stocks (USERX) should do another one of their 100-200% rises over 6 months to 2 years.

Best wishes, 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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