Special SKI Report #118
Completed Gold Stock Armageddon?

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Mar 17, 2013
Published Mar 18, 2013

Current USERX price = 9.96, Up 3 cents (.3%) 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 gold stock SKI Report, written on Sunday 2/24/13, described how the “Armageddon-type” decline in the gold stocks had hit/touched the final index support (the HUI’s 884 index) on 2/20/13, along with a run pattern that suggested at least a brief rally, but that the decline had only reached the minimum level of prior historical “Armageddon-type” declines. That Report concluded that a decline to new lows would be a continuation of the decline from the very bearish Double Sell index pattern that generated on 1/23/13.

Subsequent to that SKI Report, the gold stocks (USERX) rose for another two trading days. That yielded a USERX run pattern of 8 Down (into that 2/20/13 low) and 4 days Up. Such a run pattern is historically rare, but unfortunately for the bulls, had never risen for more than 4 consecutive days) and had always marked some type of high. Once again, the run pattern marked that high on 2/26/13.

“Armageddon” then continued as the gold stocks once again declined to new multi-year lows. That decline, however, was sufficient to actually generate the HUI’s 884 index support signal on 3/04/13 for execution the next day (the prior decline had only hit/touched that index). Therefore, the index marked 3/05/13 as the potential low.

That decline also manifested a classic run pattern of 2 Up and 5 Down days for the HUI. Recall that the last SKI Report had described how USERX had manifested a classic 2 Up and 8 Down run pattern into 2/20/13. The HUI’s run down involved a drop of 7.5%, an average of 1.5% down per day. Once again, that run pattern is indicative of some type of low, but it isn’t a Life Run because it was too weak (less than 2% per day).

The HUI’s supportive 884 index signal and the classic run pattern prompted Jeff to send yet another Intra-Week SKI Update on 3/05/13. The gold stocks then rose, with USERX rising for 6 consecutive trading days into 3/12/13. USERX manifested a run pattern of 4 Down and 6 Up. That was yet another historically classic run pattern. Such run patterns have only occurred 12 times since 1974, but every one of them (100%) has marked a low and/or a high. Therefore, the top of the run on 3/12/13 may have marked yet another high and the gold stocks are still lower than they were on 3/12/13.

Conclusion

The 884 index’s supportive signal has marked the exact low-to-date on 3/05/13. Its prior support signal occurred on the low in 2008. If you know of any other mathematical (objective) measure that marked 3/05/13, please email me. It’s the final SKI index and there isn’t any other index support below. Therefore, 3/05/13 may very well have been THE multi-year low, but the gold stocks have now risen to hit/touch USERX 16-20 index resistance and yielded another potential run pattern top. The 16-20 index has stopped every rise since the September 2012 high. We are at first resistance! Jeff’s planning to buy the gold stocks that were sold on 1/23/13-1/24/13 (the beginning of “Armageddon”) IF USERX can break out above this resistance and that had better occur before the next SKI Report in three weeks.

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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