 Special
SKI Report #17
Gold's Technical Status
Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX
| historicals
Written Sunday, March 11, 2007
Published Mar 12, 2007
Special SKI Report #17
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 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.
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.
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:
If you're taking the time to
read articles such as this one, you're probably bullish on the
precious metals' stocks and gold/silver bullion (or perhaps you're
invested and nervous?). In a multi-year time frame, I'll join
you on the bullish side. However, the indices that I rely upon
still do not provide much, if any, support for the beginning
of the next major 1-2 year rising phase. The gold stocks have
been in a wide trading range for the past 10 months (since the
May 2006 high). USERX, the mutual fund that I use as an index
for the sector, peaked at 17.96, fell to a low of 13.20, and
is currently at 15.08.
The last SKI Report for 321gold
(http://www.321gold.com/editorials/kern/kern021907.html)
described that the time was ripe for a sell signal on the last
SKI index that was still bullish: the "221" index.
That long-term index compares the current price to prices from
222, 221, 220, 219, and 218 trading days earlier. I described
how that index acts like "a magnet" and I provided
the 2001-2006 history of that long-term index. The 221 index
has been on a buy signal since 6/06/2005 at USERX 7.20. The
12% one-week decline during the first week of March 2007 sold
that index at USERX 15.26 on 3/07/07. Although that signal
often marks short-term lows, in the bigger picture, SKI can't
get a new bull market phase until that index is on a buy signal.
I have simply been in a "boring"
cash position for many months now, racking up an "exhilarating"
4.8% annual money market yield, awaiting the signal for the next
impulsive rising phase. I still don't have such a signal. Obviously,
the 10-month trading range in the gold stocks will eventually
come to an end via a major leg to the upside or downside. Here
are the reasons that I expect the break to eventually occur to
the downside, setting up one of the better buying opportunities
of my 21 years with the gold stocks. Note that none of the reasons
listed are fundamental reasons because SKI is purely technical
and mathematical. I've reported many of these reasons as they
have occurred over the past 10 months (albeit in a delayed manner
in deference to SKI subscribers; I hope that you can appreciate
the difficult fine-line that I have to walk in providing information
to the general public while maintaining a subscription-based
website). In chronological order:
1. In May 2006, USERX provided
the "death run" starting at the high (the sell point
was 5 trading days after the high). Such death runs have marked
all of the very major highs since 1974. I've described this in
prior Special Reports archived on 321gold. The bottom has always
been formed via a "life run". The life run pattern
has not occurred, as yet. It may be different this time, but
that's what has happened in the big picture from 1974-2007.
a
2. SKI bull markets are marked by a 92-96 index buy signal. The
2005-2006 bull market phase, for this master SKI index, ended
in early September 2006. The 92-96 index had initiated the bull
market phase in August 2005 at USERX 8.09 and ended it with an
84% gain (as previously reported).
a
3. The gold stocks had a chance at a new 92-96 index bull market
in the November to early December 2006 period. The 92-96 index
gave a new buy signal on 11/28/06 at USERX 16.17. I was skeptical
that the signal was correct due to #1 above. Although prices
rose immediately after that signal, the new bull was stopped
out by mid-December. The point is that a failed true bull signal
is historically bearish.
a
4. The 221 index has now sold in early March 2007.
a
5. As other writers have reported, note how the smaller stocks,
exemplified by a "sister" mutual fund (UNWPX),
have been outperforming USERX since the October 2006 bottom.
However, I'm actually not clear as to whether such relative movements
are predictive (indicative of speculative froth?) at this particular
time.
Please don't use the above
"bearishness" (or at least "patience") to
conclude that SKI is expecting some immediate and large decline.
But the major bottom that has always followed the above indicators
has not, as yet, occurred. Such gold stock bottoms, interestingly,
are often accompanied by significant selling in the general stock
market. I read the gold-bullish articles based upon fundamentals
and agree, but the time does not yet appear to be ripe for the
next great 1-2 year rise that will cause most gold indices to
more than double or triple again.
If you are interested in following and learning more about the
SKI indices, 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. 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.
Best wishes,
Jeff (trying to maintain patience
and discipline; smile)
 SKI archives
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.
Copyright © 2002-2024 Jeffrey Kern. All Rights Reserved.
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