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Special SKI Report #10:
Death of a Bull

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com

USERX | historicals
Oct 3, 2006

Special SKI Report #10

"With significant sadness, and with some remorse for how we interacted with it during its life, we bid "Rest in Peace" to the 2005-2006 bull and pay deference to the bear. A fetal bull is in the gestation period, but the length of the gestation period is currently not known." Jeff Kernski, 9/12/2006

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 and that is what they will continue to do!

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. Although I use 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.

Market analysts' definitions of bull and bear markets are quite varied. The SKI system's definitions are objective and unique, although the system is not perfect (smile; the typical and required disclaimer!). A true bear market is signaled when a true bull market ends! (what a brilliant statement!; sarcasm). We experienced the start of the most recent "true and rare" bull market, according to the SKI indices, on August 9th, 2005 when the master 92-96 index executed its buy signal at 8.07 based upon the price of USERX (the precious metals mutual fund used as a reference for analysis and prediction; it's been the number one performing U.S. precious metals fund for the past two years, the third best fund for several years before that, and perhaps the worst mutual fund over the 32 years of my data analyses!).

Special Report #9 for 321gold on September 4th 2006, described how the bull market was precarious and that prices needed to rise to new century highs quickly or the SKI bull would end. I'm concerned that Special Report #9 "gave away" too much information to non-subscribers, as the market action in the following five trading days should have alerted the diligent but non-subscribing reader that the 92-96 index had sold and that the SKI bull market had ended. People understandably questioned the great bull market buy signal 13 months ago. I understand the SKI indices are uniquely strange, and a specific pattern of index signals is required for SKI to declare a bull market, so it is expected that many investors will be skeptical, even after 21 years of cross-validation, when SKI now declares that the bull market has temporarily DIED (such deaths are by truism always temporary; the issue is how far will prices fall and for how long they will fall during the definition of a SKI bear market).

Yes, for the SKI system, the bull market ended when the 92-96 index generated its sell signal on 9/11/06 (yes, that's 9/11) and executed the sell the next day at USERX 14.85 for an 84% profit over 13 months. SKI SAYS TO BE IN CASH OR TO BE SHORT AS OF THAT DATE. Dr. Jeff, the keeper of the SKI indices, tries to anticipate such important sell signals because such major sell signals occur as prices are falling. Since the gold market (USERX) manifested a dangerous run pattern of 6 consecutive days up into 9/06/06, combined with a 16-20 index sell signal generated on 9/06/06, Jeff wrote to short-term and intermediate-term investors to begin selling on 9/07/06 and then wrote to all readers on 9/08/06 that he was selling all precious metals' investments. Jeff isn't always correct when he anticipates important signals, but the plunge on 9/11/06 generated the SKI bear market pattern. And if you recall my repeated references to the "death run" pattern that occurred in May 2006, the gold bear market decline should be quite meaningful either in time and/or in price. The SKI Special Report on 6/18/06 presented a delayed public introduction of the death run:

"I strongly believe that a massive and lengthy Wave 3 rise lies in front of us, but it's all a question of timing. Wave 3 might commence in about 2 weeks or in 2 years depending upon when the death run is negated. Actually, I usually state that everyone IS a timer; it's just a matter of whether one is a short-term, intermediate-term, or long-term timer. Everyone has to decide on a time to buy and a time to sell and/or go short and then buy back. The "death run" can be negated (in fact, it is always eventually negated!) and is not perfect. For example, when the opposite of the death run occurred at the exact low of USERX 2.94 on 8/31/1998, and prices rose about 50% (not a typographical error) in 5 weeks, that "life run" predicted a rise that would last for years until a "death run" occurred. In hindsight, it was correct (as prices rose over 8 years to 17.96 last month), but prices did decline again in 2000-2001 below that 1998 low subsequent to a SKI Triple Sell index pattern in late 1998 that temporarily but strongly negated the "life run"."

The May 2006 "death run" was confirmed by the recent 92-96 index sell signal. We await the "life run" (definition withheld for subscribers) so as to buy within a day of the major low (oh! Now you have to shell out the big bucks and subscribe! I truly state that with honest expectations based upon the past, but am not allowed to state anything definitively as a learning 9-month old paid "predictor-guru??" website person). Hence, the SKI system is in cash or is short the precious metals from 9/12/06. Publicly stated, for the record.

My colleague, the statistician, likes to spend time running programs. After the 92-96 index sell signal, he ran the basic and conservative SKI program that updated the gains/losses from 1974 to the present because he viewed the 92-96 sell signal as marking the end of a "period". That basic conservative system doesn't use run patterns (and therefore doesn't buy at all-time lows via "life runs") and does not go short. It even doesn't buy on any 35-39 index signals. It simply buys on two conditions: (1) Drops into short-term index buy signals (that are not XXed Out) during bearish periods (like now) and then sells on the short-term index sell signal, and (2) Buys on true 92-96 index bull markets (that are not XXed Out) and sells on the 92-96 index sell signal. Given this recent bull market gain of 84%, the compounded annual rate of return using USERX was a little over 20% WITHOUT including any money market interest gains or dividends (Warren Buffett, I believe, is famous for having earned 22% per year for XX years). Since this basic system was out of the market for more than half of the past 32 years, the inclusion of interest gains would have caused the number to rise significantly (an understatement). However, such an incredible gain is then offset by income taxes (and a little by transaction costs). Also be aware that USERX had an initial price in 1974 of 4.84. It had a 10 for 1 reverse split in 1998, so it actually started at 48.40. The current price is 13.58, representing a loss of 72% (not including dividends) if one bought and held over the past 32 years! Although a buy-and-hold strategy looks like it'll be fine during this decade (in my opinion), I do NOT have enough faith in anything or anyone but my SKI indices to simply keep most of my hard-earned money at risk during a 92-96 index sell period. Prices should eventually plunge. I have to go on public record as saying that prices will go lower than the June 2006 low, but how much lower cannot be predicted at this time. Prior "death runs" and 92-96 index sell signals have yielded decline of between 30-90% over years. That does NOT mean or guarantee that prices will fall 90% or take years to do so. SKI simply awaits a significant plunge in a specific run pattern to buy a day after the major low, via a "life run", whenever it occurs.

I am obviously writing this Special Report to entice you to become a long-term SKIer. But the information presented is accurate and is not "hype". Since I am so bearish, prices may rise in the short-term, but continue to monitor the accuracy of the above statements, as they are, as always, on public record as per the last 6 years. Although there are never any guarantees, I strongly believe that history will repeat itself and that SKI will be issuing a buy within a day of the low (lower than now), and that this one buy will pay for years of SKI subscription costs within a few days. Please do not follow the crowd and subscribe to SKI as prices are skyrocketing (that's not going to happen right now!), months after the low. My website is relatively new, and although I've written publicly for 6 years, I've already learned that subscribers typically subscribe well after the bull has begun. I've made the MISTAKE of recommending that new subscribers "buy" when they subscribe during bull markets because that is why they are subscribing while the SKI indices are bullish. I don't plan to repeat that mistake. I strongly recommend subscribing while prices are falling and I am making the rare public statement that SKI run patterns can buy at within one day of a major low ("catch-the-falling knife"). After the buy pattern has initiated, I will tell new subscribers that they should wait for the next buy, so please subscribe to some gold service as PRICES ARE FALLING. TAKE INTEREST AS PRICES ARE FALLING EVEN IF IT MEANS WASTING SOME MONEY WHILE WE AWAIT THE FINAL LOW.

I'll write another Report for 321gold in a few 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.

All of my Best wishes,
Dr. Jeff shortski Kern
(in total seriousness, as I also manage other people's money and my sarcasm and smiles are meant to convey sincerity because I am, above all things, honest; that's my single-most important personal criteria for investing with anyone).

P.S. I've tried to wait until our goldies are rising to post this report; hence it was delayed a little beyond my typical 3-week free posting period, but with today's plunge I better not wait any longer because prices will be even lower. SKI is bearish on the PM group (the only group that I analyze and invest in) in a meaningful manner via Price and/or Time as of 9/11-9/12/06.

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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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Copyright © 2002-2019 Jeffrey Kern. All Rights Reserved.


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