 Special SKI Report #37
Life Run Gold Stock Low?
Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX
| historicals
Written May 11, 2008
Published May 12, 2008
Current USERX price = 16.65,
Down 5.5% 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 the most informative gold site, 321gold,
since its inception approximately seven 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 34 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:
In the last gold stock SKI
Report on 4/20/08,
I described how the SKI indices were (1) prognosticating a decline,
(2) were marking a pending head-and-shoulders top formation that
would be activated when USERX closed below the 16.89-16.95 area,
and (3) might generate a true buy signal on such a decline if
prices remained flat for another 5-6 trading days. This current
report is rather detailed and technical, so I don't know how
many people will want to "suffer" through it, but I
love these precise and important details because SKI depends
upon them. In any case, what happened after that 4/20/08 report?
Prices went straight down.
Therefore that possible index buy signal did not occur as prices
fell from USERX 17.68 on 4/19/08 straight down to 16.35 on 4/24/08,
and then went down again to 15.54 on 4/29/08. Of-course gold
and silver bullion tumbled along with the gold and silver stocks.
But the decline occurred via a special SKI run pattern
(see the introductory material above or the website educational
material at http://www.skigoldstocks.com/about.php
for a definition of "run patterns"). The last Special
Report for 321Gold also described how I was looking for a rare
and special run pattern to mark a major low in the gold stocks;
a run that I refer to as a "life run" low that parallels
the May 2006 "death run" high. Life runs and death
runs are identical, but the death run occurs at a major high
and the life run occurs at a major low. Both run patterns are
defined as requiring two consecutive days of higher closing prices
followed by five or more consecutive days of declining prices
that average at least 2% per day. Historically (since 1974),
it has always taken at least two years to obtain a life run low
after a death run high. Since it is almost two years since the
May 2006 death run high, I wrote how the time window was now
opening for the life run low.
The gold stocks rose for exactly
two consecutive days on 4/15/08 and 4/16/08 to form the high
that I wrote about in the last report. They then had declined
for 2 consecutive into the weekend when I wrote that report (4/20/08).
PRICES THEN WENT STRAIGHT DOWN FOR ANOTHER FOUR CONSECUTIVE
DAYS. Therefore, the run pattern was 2 Up and 6 Down!
Was that the life run low?
Prices have certainly been rising in the last two weeks, but
the run pattern just missed meeting the required definition.
I didn't develop that definition based upon a theory. I discovered
it empirically. When I examined every possible run pattern,
I found that when prices go two days up and a long hard run down,
when the down run ends, an important bottom has occurred. That
6-day run down WAS long enough, but it wasn't severe enough to
meet the definition. USERX fell from the high of 18.34 on 4/16/08
to 16.35 on the sixth day down on 4/24/08 before having a small
up day on 4/25/08. 18.34 down to 16.35 is a decline of 10.85%.
Therefore, the average daily decline was "only" 1.81%.
Your reaction may be the same
as some subscribers who kept emailing me that 1.81% is close
enough to 2% and that nothing can be that precise in regards
to the markets and human behavior. However, there have been
many 2 up and 5+ down runs averaging 1.8%. They have not marked
the major bottoms. In fact, the most common pattern after such
a 1.8% down run is for prices to rise for 1-2 days and then fall
4-8% in the next 1-2 days to mark a low. That IS what happened
as prices rose for one day and then fell from USERX 16.42 to
15.54 (5.4%) over two days into 4/29/09. Gold bullion, which
is often even more psychologically perverse than the gold stocks,
made its low on 5/01/08, but the gold stocks held above that
15.54 low.
Please understand that "run
patterns" provide probability statements. The only run
patterns that have been 100% correct (to date) have been the
rare and very long-term death and life runs. They've only occurred
8 times since 1974. Therefore, although that 2-day plunge had
an approximate 80% probability of marking a low, conservative
Jeff (that's me) could only write that it would be prudent to
close any short positions. I didn't buy, but some readers who
are more risk-tolerant, certainly bought that oversold condition.
Conclusion:
The run down several weeks
ago did not meet the criteria for a life run low, but the subsequent
2-day plunge was historically consistent with "some type"
of low. When SKI index signals coincide with the due date for
these Special Reports, I am in somewhat of a quandary because
I have to respect the rights of the subscribers. That's what
occurring again now. Hence I can't provide the SKI directional
call at this time (of-course this type of situation appears to
be rather self-serving since it encourages subscriptions; meek
smile). I can reiterate that we experienced a low several weeks
ago as gold fell to test its long-term breakout point at $850
and that we have not, as yet, obtained a true life run low.
The next important confluence of Time X Price according to the
index back prices depends upon the magnitude of this coming week's
price movement, but as of today, it appears to be setting up
for 7-10 trading days from now. The prior Special Report described
the term "confluence" via the high from 4/16/08, but
a "confluence" can occur at either a high or a low.
Have a warm interpersonal Mother's
Day, best wishes, Jeff
P.S. My 2 sons are coming
over to swim and eat for Mom's Day, so I've got to stop writing
and start cooking. It's a gorgeous day in Las Vegas!
If you are interested in following and learning more about the
SKI indices, I'll write another Report for 321gold 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. 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.
 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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