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Special SKI Report #129
"Still a Very Bullish Possibility"

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

USERX | historicals
Written Nov 17, 2013
Published Nov 17, 2013

Current USERX price = 6.62, Down 58 cents (8%) since the last 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.

New Material

The last gold stock SKI Report, written on Sunday 10/27/13 (http://www.321gold.com/editorials/kern/kern102813.html), described how the gold stocks had risen to the first resistance 16-20 index sell signal that was executing on the coming Monday (10/28/13; the 16-20 index sells on rises and buys on declines) and that the SKI indices appeared to be set up for a potential bull market 92-96 index buy signal on a brief further rise OR a new 16-20 index buy signal if prices declined. In other words, it appeared that either a rise or a decline would generate some type of index buy signal.

Subsequent to that SKI Report, the gold stocks rose on 10/28/13 into the 16-20 index's sell signal and that was the exact high. The gold stocks "played around" for 2 more trading days and began to hit/touch the 92-96 index (the bull market index), but then began to decline to avoid the 92-96 index's buy signal.

That decline was expected to generate the 16-20 index's buy signal, but the market rose just enough on certain days and did not fall enough on other days to generate that buy signal despite the downward trend. It was rather amazing to behold, with USERX rising 1 penny too much on certain days and not falling enough on other days. Meanwhile, the 92-96 index DID generate its buy signal as USERX barely held above the prices from 92-96 trading days earlier (the June 2013 low). The last SKI Report also described how 92-96 index buy signals are the way that major bull markets begin, but that most 92-96 index buy signals fail and sell in about a week after buying.

The avoidance of the 16-20 index's buy signal caused Jeff's experienced eye to perceive that the 92-96 index buy signal (that executed on 11/06/13) was likely to fail: The market could have generated a simultaneous 16-20 index buy signal along with the 92-96 index's buy signal to form a beautiful Double Buy index pattern, but didn't do so, suggesting that a further decline into a 16-20 index buy signal and a 92-96 index sell signal was likely.

The gold stocks then continued to decline last week and did sell the 92-96 index at the normal 3% loss seven days after it had bought. But that decline also finally generated the desired 16-20 index buy signal. The index signals generated simultaneously (on the exact same day last week). That's classic historical market and index behavior. Such tied signals "can" (not "will") mark a low. But a decline below that 16-20 index buy signal should initiate another major decline ("Armageddon"). Therefore, SKI and Jeff could not initiate new long positions last week, BUT THE BULLISH POSSIBILITY HAD NOT YET DIED despite the market's perfect prior avoidance of the clearly bullish index buy signals.

Incidentally, the HUI executed its 92-96 index buy signal on the same day as USERX (11/06/13), but has NOT sold. It also generated its 16-20 index buy signal last week. Therefore, the HUI IS manifesting index signals that characterize the beginning of major bull markets. The HUI now needs to generate a 35-39 index buy signal to complete a Triple Buy index pattern. It IS close to doing so. That would be most bullish pattern possible and is most encouraging, but Jeff will always place primary emphasis on the SKI indices' signals for USERX. The USERX prices were used to develop the indices and they have established their validity over 3.5 decades.

Conclusion: Bears perceive that gold and the gold stocks have been forming a Head & Shoulders topping pattern over the past 5 months since the June 2103 low. Bulls perceive those same charts as being a basing pattern for a significant long-term rise. As of the prior SKI Report on 10/27/13, SKI appeared to be ready to buy on either a rise OR a decline, but the last 16-20 index sell signal marked the exact 10/28/13 top and the gold stocks (USERX) adroitly avoided the expected 16-20 index buy signal on the decline. The simultaneous index signals that generated last week have often marked a low, but did not constitute a buy signal. Therefore, as of today, the SKI indices are agnostic. The SKI run patterns are all long-term and intermediate-term bullish. MOST IMPORTANTLY, the master 92-96 index for USERX is once again extremely close to a beautifully bullish buy signal. And Jeff will buy such an index signal with leverage. Such a buy signal would be "classic" bullish index/market behavior because the 92-96 index would be re-buying quickly after its quick expected failure during the past two weeks. SKI strongly suggests that any bullish case requires a major sustained rise beginning from last week: Even if the 92-96 index buys and the 35-39 index then buys a few days later, a failure to maintain the 92-96 index's new buy signal should result in another "Armageddon". The last such failure of a 92-96 index + 35-39 index Double Buy generated on the day of the 2008 top in gold (3/18/2008), but Jeff has multiple reasons why such a failure should not occur this time if the buy signals generate (literally, any day now).

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 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 been.

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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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