Special SKI Report #63
Short-term Gold Stock Update

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Dec 6, 2009
Published Dec 7, 2009

Current USERX price = 16.25, Up another 3.8% 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:

In the last gold stock SKI Report written on Sunday 11/15/09, with the drab title “Gold Stocks: Long-term and Short-term Update”, I ended the body of the article with the conclusion that the rise on 11/03/09 had:

“moved prices back over the 35-39 index and generated a new buy signal on 11/04/09. Therefore, the 35-39 index sold and then quickly re-bought. That is a classically bullish pattern, somewhat similar to the bullish 35-39 index sell and re-buy on 8/20/09 and 8/26/09”

I then concluded with:

“Currently, the 35-39 index gave its new buy signal and then prices immediately rose to the short-term index sell signals… We do have the opportunity to rise through these new short-term sell signals because of that new 35-39 index buy signal”.

And now I’m supposed to note how “correct” the predictions were because gold is still $50 higher than 3 weeks ago and the gold stocks (USERX) are 4% higher despite Friday’s (12/04/09) plunge. The 11/15/09 Update also implied that the prior Update, from 10/25/09, was “correct”. I wrote, “Upon rereading that last Update [10/25/09], I see that I had refrained from stating that historically, that’s what had always occurred with that index pattern”.

All of the above statements are accurate, but if I may, I’d like to disclose that it’s difficult for me to write these public Updates. It was a lot easier to write the Updates during the years when I just wrote for informational purposes and didn’t have a responsibility to “subscribers”.

I continue to really enjoy providing the indices to everyone, but for the past 4 years I’ve felt like I have to “hold something back” for “subscribers only” while also trying to provide useful information. Finally, these public Updates are a form of advertising (my only form). I therefore feel the need to show that SKI was “correct”. But there are the times when I describe how Jeff made an emotional mistake executing SKI.

In any case, since the 11/05/09 35-39 index buy signal and the 11/15/09 Update, prices have risen through those short-term index sell signals. That has happened 18 out of the past 18 times over the past 35 years when the 35-39 index bought like that and prices rose into the short-term index sell signals. That’s the probability statement that I did not include last time.

Now the question is, “After Friday’s (12/04/09) plunge, what’s next SKImanJeff?” And the answer is, “The SKI indices don’t always have something that is ‘supposed to happen’ or is ‘required’. The gold sector has been obviously very overbought for weeks but had continued to rise despite the overbought state. Last Friday’s (12/04/09) plunge didn’t affect any of the SKI indices, but quite a few traditional technical indicators (e.g., simple MACD) are indicating that the momentum is swinging to the downside on at least a short-term basis (multiple days to a couple of weeks). Most of the SKI indices are below the current price, so some further decline won’t affect the indices. But I can say (with true hesitation/fear) that SKI remains on its 35-39 index buy signal and prices are not supposed to “crash” for a while. And then there is one remaining index (the 443 index) above the market that may serve as a potential upside target in the USERX high $17 to $18 area.

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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