Special SKI Report #255
Gold Stock Update: Down They Went

Jeffrey M. Kern, Ph.D.
Email: jeff@skigoldstocks.com
USERX | historicals
Written Sunday Jun 20, 2021
Published Jun 21, 2021

Current USERX price = 13.18, Down $1.25 (8.7%) 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 SKI Report, written on 5/30/21, concluded that “I wouldn’t recommend chasing further rises here. Eventually (i.e., sooner or later), there has always been a decline to at least the blue line 16-20 index buy signal and even possibly to the red line 35-39 index. A quick plunge to below all 3 of the regular indices would actually set up the most bullish historical index pattern, but that is UNlikely”. Jeff was in cash after finishing selling during the week of 5/17/21.

During the next 2 weeks, the HUI and GDX meandered lower low from their 5/17/21 closing highs. But gold, GDXJ, SIL, and the Australian XGD (etc.) held up. USERX is the measure that should be most closely tracked due to its broad international holdings that are priced in foreign currencies (the major “commodity currencies” ala the Canadian and Australian Dollars; as opposed to just looking at the U.S. Dollar index that is overly weighted to the Euro).

That was a frustrating few weeks that ended with a special USERX run pattern. USERX dropped 2.5% on 6/03/21 and then rebounded the next 2 trading days to form a potentially somewhat bearish 1 Down and 2 Up run pattern. It then declined for one day (6/08/21) to complete that bearish run, but then rose to a new many-month high over the next 2 trading days. At 14.62, USERX was within 1% of its August 2020 high of 14.76 (By the way, charting services regularly have incorrect historical prices for USERX because they adjust historical prices when USERX pays its December dividend each year; Don’t do that as 4 decades of my research show that “the price IS the price” and should never be changed).

Time was running out for the historically-normal decline to a 16-20 index buy signal (as the current price drops below the prices from 16-20 trading days earlier). It should occur by 16-20 trading days from that 5/17/21 date. When the gold stocks (USERX) meandered lower on 6/11/21 from 14.62 to 14.45, a second bearish 1 Down and 2 Up run pattern completed. That is labeled as a potentially “extra-bearish” Double 1 Down and 2 Up run pattern. And then the decline continued and accelerated into this past Friday (6/18/21).

The decline DID go below the prices from 16-20 trading days earlier on last Thursday (6/17/21). It took an unusually long 22 trading days, 2 days longer than the historical norm. Therefore, the 16-20 index’s buy signal executed the next day, Friday. As of Friday, the decline has almost gone below the prices from 35-39 trading days earlier AND has begun to hit/touch the prices from 92-96 trading days ago.

I will NOT conclude with an explicit prediction because the indices are in flux and the run down has not yet ended via a daily USERX rise. The historical expectation from the prior public report IS in the process of completing. The 16-20 index executed its buy signal on Friday. We will soon see if the 35-39 index will generate its sell signal AND whether the 92-96 index’s sell signal will follow during this coming week on a further decline. If both of those index signals generate, it would be “dangerous” for bulls. But even if that occurs, the 92-96 index could quickly re-buy for a potentially even more bullish outcome (as mentioned in the prior 5/30/21 report)! A new 92-96 index buy signal would occur before the next public report in 3 weeks.

USERX has also rather perfectly declined to below its prices from 218-222 trading days earlier to generate its long-term 221 index sell signal. That index bought on 4/03/2020 at USERX 7.03. That index is “taking its profit” and the sell signal has occurred 219 trading days from the 8/05/2020 mlti-year high. The more index signals that occur together, the more important this technical point will be. You can see the visual representation for all of the SKI indices here. The black dots are the USERX prices. You can see that USERX has dropped to below the blue 16-20 index line and to below the faded purple 221 index line. The decline is almost below the red 35-39 index line and its just hitting/touching the master green 92-96 index line.

A major bearish danger should also be mentioned, but is not “expected”. The current USERX run pattern is 2 Up and 6 Down. Such runs down usually end by Day 5 or Day 6. The run down started from an exact top on 6/10/21 and USERX has averaged a 1.6% drop per day. IF the run down continues AND accelerates into a “strong” run down (exact mathematical criterion reserved for SKIers), it would form a classic “Death Run” top that is quite rare. It would historically-portend a major top that would be measured in years. It’s hard to believe that will occur because it would portend a USERX decline of 50-80% over a long time period.

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 $30 (for a one month subscription) or more ($240 for an annual subscription). I also provide more frequent intra-week daily messages/alerts at a slightly higher price along with access to our informative Forum.

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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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